Portugal Phases Out Legacy Tariffs, Cutting Bills and Sparking Green Boom

Portugal scraps guaranteed tariffs, unlocking cheaper power bills and a wave of renewable investments

Portugal has started to dismantle the system of guaranteed-price contracts awarded to early renewable-energy producers, a decision the Environment and Energy Ministry says will shave hundreds of millions of euros off the electricity system’s annual costs while opening the door to new solar, wind, storage and hydrogen projects.

What is changing

• End of legacy fixed-rate contracts – From this year, remuneration linked to the old “feed-in tariff” regime is being phased out as plants reach the end of their contracts. The surcharge attached to those payments will shrink by roughly €500 million by 2026 and disappear entirely by 2028, according to the energy regulator ERSE.

• Regulated prices still exist – but will be lower in real terms – ERSE’s 2025 proposal lifts the regulated energy component by 2.1 % for households on low-voltage supply. That increase is more than offset by a cut in network access charges (-5.8 %) and a new 6 % VAT rate on the first 200 kWh each month (300 kWh for large families). A typical domestic customer is expected to pay 82 to 91 cents less per month at the start of 2025, bringing bills close to their 2021 level.

• 2026 outlook – For the following year the regulator foresees only a 1 % nominal rise in regulated household tariffs, well below anticipated inflation. Industrial users connected to high- and very-high-voltage grids are in line for reductions of more than 30 %, a move the government argues will boost competitiveness and exports.

• Funding the transition – Cost-containment measures worth €515 million are being financed with proceeds from CO₂-allowance auctions, an extraordinary levy on energy companies and a slice of the fuel tax (ISP). These resources help amortise tariff debt, which fell by €508 million last year alone.

Pipeline of new projects

The withdrawal of fixed remuneration also frees up budgetary and grid capacity for fresh investment. Among the headline initiatives already confirmed:

Pego re-use auction – A 300 MVA tender to exploit the grid connection of the closed coal plant will be launched before the end of 2025. Endesa, winner of a previous round, plans five solar parks, two wind farms, large-scale batteries and a hydrogen electrolyser worth €700 million, with first power pencilled in for 2027.

Offshore wind – A competitive procedure to secure up to 2 GW of floating wind by 2030 is under way, backed by the Offshore Renewable Allocation Plan (PAER). The first 1.5 GW tranche off Viana do Castelo is due to be awarded late this year.

Battery storage – A separate auction offering 750 MVA of standalone storage capacity is scheduled ahead of January 2026. Lisbon has also asked Brussels to redirect €40 million of Recovery and Resilience Facility money to storage and a further €20 million to biomethane.

Hydrogen and renewable gases – Seventeen projects sharing €70 million of public support were unveiled in June. They form part of the broader goal of positioning Portugal as a green-hydrogen export hub.

‘High-demand zones’ – New grid access areas in Sines, Abrantes and the central coast are aimed at shortening permitting times for investors.

Solar boom – National targets for photovoltaic capacity have doubled to 20.4 GW by 2030—14.9 GW in utility-scale plants and 5.5 GW in distributed generation. Simplified licensing under Decree-Law 15/2022 should allow 11–12 GW of additional solar projects to clear permitting more rapidly.

Faster licensing and the ‘Green Map’

A digital map highlighting regions with low environmental sensitivity is being finalised. Developers locating projects inside those zones will benefit from a one-stop shop and shorter decision deadlines, a reform expected to cut average permitting times from three years to under 12 months.

Lessons from abroad

European experience suggests that fully liberalised markets can deliver competitive prices and innovation if consumer protection remains robust. The Nordic Nord Pool and the British power market are frequently cited as examples. Regulators stress, however, that Portugal will retain social tariffs and gradual transitions for the roughly 800 000 vulnerable customers still on regulated supply contracts.

The bottom line

By dismantling outdated tariff guarantees, Portugal expects to drive down system costs, ease pressure on households and create the fiscal space needed for the next generation of clean-energy projects. If timelines hold, consumers could see real-term price stability while the country doubles its renewable capacity and positions itself at the forefront of Europe’s green-power value chain.