Sian Crampsie

The International Energy Agency (IEA) has urged Portugal to continue its efforts to resolve financial issues in its energy system and says that stronger energy links between Spain, Portugal and France are needed.

In a review of Portuguese energy policies, the IEA notes the progress that the country’s government has made towards dealing with the so-called tariff deficit, but says that a financially sustainable energy system is essential for attracting investment.

"Portugal has made some difficult choices," IEA Executive Director, Dr. Fatih Birol, commented. "But to maintain investor confidence, Portugal must also closely follow the principles of transparency, predictability and certainty if the country wishes to continue to remain attractive to further investment in the energy sector."

Eliminating the tariff debt by 2020 is a significant challenge, the IEA report adds, but Portugal must remain on the path towards a financially sustainable energy system.

The tariff deficit has been caused by past imbalances between regulated costs and revenues from regulated tariffs in the electricity system, and has saddled utilities with significant debt.

The IEA also urged Portugal, with its regional partners Spain and France and alongside the European Commission, to reinforce interconnections with transnational European electricity and natural gas networks. The first new interconnection between the Iberian Peninsula and France in almost three decades was inaugurated just over a year ago, and more capacity is being planned.

"After decades of limited results, the IEA is pleased to see movement in the right direction, but these are only first steps," said Birol. "More interconnection capacity is needed for such efforts to show their full value to Portugal."

The IEA report acknowledges that Portugal has weathered difficult economic times in recent years. It praises the government or increasing renewable energy deployment, notably wind power, which alone provided almost a quarter of electricity generated in 2015. The IEA also welcomed Portugal’s updated energy strategy, which places greater emphasis on renewable energy and energy efficiency activities but also focuses on efforts to lower investment costs and strengthen national competitiveness.