Portugal Axes Fixed Power Prices, Cutting Bills and Sparking Green Investment

Portugal Phases Out Guaranteed Tariffs: What It Means for Energy Bills and New Investment

Portugal’s progressive withdrawal of fixed-price contracts for renewable electricity, a process that started last year and accelerates throughout 2025, is reshaping the country’s power sector. Below is an overview of the key consequences already visible in the market and the debates the reform is triggering.

1. Why the Guaranteed Tariffs Are Disappearing

For more than a decade, many wind, solar and small hydro plants in Portugal were paid a pre-agreed price for every megawatt-hour delivered to the grid. Those commitments, while crucial in the early years of the renewables boom, are now regarded by the Ministry for Environment and Energy as an expensive legacy that is no longer required to attract capital.

• Under the phase-out plan, the oldest contracts began to expire in 2024; each subsequent year more plants will migrate to the open market or to competitive auctions.• According to Environment and Energy Minister Maria da Graça Carvalho, ending the carve-outs will “free up budget space” in the tariff system while making room for fresh private investment.

2. Effect on Household Electricity Costs

The regulator ERSE estimates that relinquishing fixed remuneration reduces the so-called ‘special-regime production’ surcharge built into all consumer bills. For regulated-tariff customers in low-voltage households (Baixa Tensão Normal):

| Year | Proposed change in regulated energy tariff | Net change in average monthly bill* ||------|---------------------------------------------|------------------------------------|| 2025 | +2.1 % | –€0.85 to –€0.91 || 2026 | +1.0 % | +€0.20 to +€0.37 |

*Examples refer to an average couple (3.45 kVA, 1 900 kWh) and a family of four (6.9 kVA, 5 000 kWh). Lower VAT brackets on the first electricity blocks partly offset tariff increases.

Social-tariff beneficiaries will keep a 33.8 % discount next year, and the government has extended the right to stay on the regulated supply option until the end of 2027, covering about 800,000 customers.

3. Investment Hotspots and New Auctions

The government is pairing tariff reform with faster permitting and stronger grid infrastructure:

• Three high-demand connection hubs are being prioritised—Sines, Abrantes and the central coast—each marketed to international developers, especially from the United States.• Since 2019, Portugal has relied on competitive tenders rather than feed-in tariffs to contract new capacity. Record-low prices have followed: €20.33/MWh on average in the 2019 solar tender and an all-time low of €11.14/MWh in 2020.• Upcoming opportunities include a 1.5 GW floating offshore wind auction in the Viana do Castelo area (scheduled for late 2025) and a 750 MVA battery storage tender before January 2026.

4. Points of Contention

The reform is not universally applauded. Industry bodies and environmental NGOs highlight several risks:

Revenue Volatility: APREN, the Portuguese Renewable Energy Association, warns that market prices in the Iberian wholesale pool can drop to zero when renewable output surges, jeopardising project bankability without some form of price floor or forward contracts.

Political Uncertainty: Investors are wary of election-related delays in licensing, APREN adds, fearing that a new parliament could stall energy legislation.

Reduced Climate Ambition: The NGO ZERO criticises the lowering of the 2030 renewable target from 51 % to 49 % of final energy consumption, calling it a step backward on climate commitments.

Land Speculation in Fast-Track Zones: ZERO supports quick-permitting ‘Renewable Acceleration Areas’ but cautions that without safeguards they may fuel real-estate speculation and overlook community ownership models.

5. What Comes Next?

• ERSE expects the surcharge tied to legacy guaranteed contracts to shrink by roughly half a billion euros through 2026 and disappear entirely by 2028, wiping out an important portion of the sector’s historical tariff debt.• If wholesale electricity continues to trade well below inflation, the 1 % rise in regulated rates for 2026 could translate into a real-terms decrease for households.• Grid operator REN is finalising a €400 million plan to reinforce transmission lines, partly financed by European funds, to accommodate the new wave of solar, wind and storage projects.

6. Bottom Line

The sunset of guaranteed tariffs in Portugal is simultaneously cutting hidden levies on consumer bills and catalysing a new era of competitive clean-energy investment. Yet the transition also exposes developers to market swings and magnifies the importance of stable policy signals. The next two years will reveal whether auction prices, grid upgrades and consumer savings can keep pace with the country’s climate goals.