Portugal continues to use energy auctions as a key policy tool to manage the expansion of renewable generation.
Unlike models focused purely on price or installed capacity, Portugal"s tenders have given developers a critical advantage: access to the electricity grid, an essential condition for large-scale project development. "Historically, the most direct way for renewables to secure access has been through government-issued auctions," explains Guillermo Burillo, Senior Associate at Aurora Energy Research, in conversation with Strategic Energy Europe. This mechanism has enabled developers to submit highly competitive bids sometimes even below generation costs prioritising grid connection as a strategic asset. This rationale is clearly reflected in the 2021 solar auctions, where record-low prices were recorded in Europe, including 11.14/MWh in the Solara4 project (Finerge).
"The auction price applies only during the first 15 years, which allows the project to become profitable over the remainder of its lifetime," Burillo clarifies. The Portuguese auction model has since evolved to include more complex technological components.
The 2022 hybrid auction, which combined wind and solar, awarded 270 MW across seven lots, with slightly higher prices than standalone solar due to greater technical complexity.
EDPR was awarded 83 MW at a price of 32.50/MWh for its Hybrid Park Alentejo. More recently, the March 2024 auction incorporated battery storage as a core requirement for solar projects.
Successful bids included Neoenergia (50 MW), Voltalia (30 MW), and EDP (70 MW), with estimated prices ranging between 45 and 50/MWh.
According to Burillo, "storage is emerging as a key element to mitigate price cannibalisation", though he cautions that current regulatory constraints limit revenue potential: "They require that at least 75% of the energy stored must originate from the hybridised asset, which can reduce revenues by up to 40% compared to unrestricted scenarios. Portugal has also launched auctions targeting new value chains, such as its 2023 green hydrogen tender, which awarded 550 MW in electrolysers to projects like GreenH2Atlantic (100 MW, led by EDP, Galp, Bondalti) and Sines Green Hydrogen Valley (62 MW, by Fusion Fuel). In the short term, attention is focused on the upcoming floating offshore wind auction, planned for the Viana do Castelo zone, with a target capacity of 1,500 MW. This will be Portugal"s first formal offshore wind tender. No other auctions are expected during 2025, making this offshore wind tender particularly strategic for the sector. Despite these developments, profitability remains a challenge.
Aurora notes that solar PV is facing intense price cannibalization, with captured prices averaging 44/MWh in 2024.
In response, many developers are seeking power purchase agreements (PPAs) to stabilize revenue. "Portugal offers better PPA conditions than Spain due to lower market saturation," Burillo explains. Beyond PPAs, project owners are also exploring revenue diversification through ancillary services, including secondary and tertiary reserves.
Although volumes in these markets remain modest, they represent an emerging income stream for flexible assets such as batteries or hybrid systems. In this context, Portugal"s auctions should not be viewed solely as revenue mechanisms, but as one element in a broader investment strategy, where grid access, income diversification, and technological integration are key to long-term project viability. "The country has developed a model that blends price competitiveness with structural objectives for its electricity system," Burillo concludes.