Context
Despite being the fourth EU country that decreased its energy imports dependency the most since 2000, Portugal still imported almost 74% of its energy mix by 2019, above the EU average of 60.5% (that has, on the other hand, increased since the start of the century). By the end of the past decade, around 70% of the Portuguese energy mix relied on oil, gas, and coal (the latter having been phased out by the end of 2021).
The Russian invasion of Ukraine puts into question the security of energy supply to the European Union (EU). Russia is the historically biggest supplier of natural gas to Europe – in late January and early February, Liquefied Natural Gas (LNG) coming mostly from the US represented the biggest share of the energy mix, with Norwegian gas coming in second. In fact, if Russia halted all of its gas production, there would not be enough in the world to match the European demand. In addition, the possibility of a long-lasting war could severely hamper the gas flow from East to West that transits through Ukrainian territory. Portugal is one of the Member States impacted the least by a possible interruption of Russian gas to the EU. While indirectly affected by an eventual rise of the price of gas in case of a disruption, Portugal has a relatively low share of Russian gas in its energy mix in 2021 – 10.2%, while more than 40% EU-wide came from Russia in 2019 –, and the last time it imported from Russia at all was last October. Natural gas reaches Portugal via two main routes: by land, through Spain, or by boat, receiving American and Nigerian LNG at the terminal located in Sines (160km south of Lisbon).
Portugal is not as exposed to Russian natural gas as the other Member States for two main reasons; the first is that it is the furthest country from Russia on mainland EU. The second is the lack of electricity interconnectivity between the Iberian Peninsula and the rest of the Union. Already back in 2014, the conclusions adopted by the European Council (EUCO) 169/14 stated the urgency in achieving a “minimum target of 10% of existing electricity interconnections”, setting the timeline for 2020 “for the Member States which have not yet attained a minimum level of integration in the internal energy market, which are (…) Portugal and Spain”. Regarding electricity alone (one of the components of the total energy consumption, the other two being heating and transport), more than 50% comes from low-carbon sources – highlighting the lower dependence on foreign gas for the functioning of the country.
The Madrid Declaration from 2015 meant an increase in ambition to push for a 15% interconnection level by 2030 and, at the 2018 II Energy Interconnections Links Summit (Madrid 2015 was the first), the 10% by 2020 and 15% by 2030 targets were again recalled. However, four years later, little progress has been made to meet them.
Big expectations, small implementations
As of 2022, all of the planned interconnection projects are yet to become completed. The Biscay Bay, also known as Biscay Gulf, is predicted to be commissioned only by September 2027, and the Pyrenean crossing lines 1 and 2 will not become operational until 2029 and 2030, respectively. Regarding the PT-ES interconnection, which route goes from Beariz (ES) to Fontefría (ES) to Ponte de Lima (PT) to Vila Nova de Famalicão (PT), the commissioning date is set to December 2023. This means that the 2020 target ended up not being reached.
Last November, Portugal, Spain, and France signed a declaration highlighting the role of energy interconnections amid the current global price hike, renewing their commitment to completing the Biscay Gulf project to double the current interconnectivity between France and the Peninsula. Already in June, Minister of the Environment João Matos Fernandes referred to the importance of allowing renewable, cheaper energy flowing from Portugal to the rest of the continent – and thus contribute to the EU’s energy security. The minister considered that the PT-ES line – initially predicted to become operational by 2015, and then postponed to 2017 – was finally on the right path again, following what he described as Spain being uncertain regarding the location of the corridor. He also reiterated that Portugal remains interested in a subaquatic connection with Morocco to transport electricity, a project delayed since its proposal in 2016 – following Matos Fernandes, also due to hesitancies from the other party.
In July of 2020, the Portuguese National Energy and Climate Plan (NECP) for 2030 was approved. It highlights, among other aspects, the evolution of electricity interconnections with Spain, currently consisting of six 400 kV lines and three 220 kV lines. It mentions the goal of reaching 10% by 2020 and 15% by 2030, stating that while Portugal is doing its share to meet the targets the same is not happening on the other side of the Peninsula – described as an “electric island” by the plan. Portuguese MEP Maria da Graça Carvalho wrote recently an opinion piece for Diário de Notícias, where she considers the Pyrenean line as extremely important for the maintenance of natural gas as a “transition fuel”. She attributes its stalling to the French “lack of political will”, an opinion shared by Secretary of State for Energy João Galamba – that considers that France prioritizes its nuclear sector above all.
Current state of affairs
António Costa Silva, former president of oil company Partex, has another “culprit”: speaking to online media Observador, he believes Germany put its own energy interests ahead of the Union’s by building Nord Stream II, instead of promoting a more integrated European energy market – all the way to Lisbon and Sines.
For Spain, the idea of the PT-ES lines is to be able to double its electricity exports to Portugal. Going through the worst drought since 2005, Portugal has been producing less hydroelectric energy due to the unusually lower average water level in dams – with four of them having already been limited at the start of the month not to produce electricity. From 2020 to 2021, Portuguese electricity imports from Spain increased by 40%, while exports decreased by 15% - the final balance, around 4.75 GWh and tripling the level of 2020, meant around 10% of electricity consumption in the country. After some controversy that closing the two remaining coal plants in 2021 (that represented nearly 10% of all electricity production and made Portugal the fourth Member State to stop using coal) would increase coal-produced electricity imports from Spain, the government has ensured that this is not the case and that solar energy production is compensating for coal. Furthermore, data shows that these plants already lacked price competitiveness in 2020, which is the number one factor that determines a higher or lower level of imports (and not a decrease on the supply side). In that same year, Portugal surpassed its 31% target for the share of renewables in primary energy consumption (34.1%), the fifth-highest value among the Member States. By October 2021, 65.2% of all electricity produced in Portugal came from renewable sources and only 1.56% from coal.
Two weeks ago, the Portuguese Foreign Affairs Minister was interviewed by Expresso. Augusto Santos Silva focused on how Portugal can be a key player in reducing the European overdependence on Russian gas, in particular the role of the aforementioned Sines terminal – that is being used at full capacity to receive LNG from the US. Rui Cartaxo, former president of the Portuguese energy grid (REN), considers the suspension of Nord Stream II by Chancellor Olaf Scholz as a win not only to America but also to countries like Qatar that can benefit from the inevitable rise in gas prices. Santos Silva also mentions how other European leaders are becoming more aware of the very important part gas interconnections can play in bringing green gases (among them, hydrogen) from Portugal and Spain to the rest of Europe – and denoting confidence that France is (again) on-board. He believes the current energy prices crisis shows how crucial it is for the Iberian Peninsula to be integrated, and in particular for Portugal to export with not only green hydrogen but also its extremely high output of solar, wind, and hydroelectric energy.
