Wild and free in Portugal (1)

One of the poorest countries in western Europe has harnessed its wind, solar and wave power. Now the nation is becoming a world leader in renewable energy. Peter Wise reports.

Emily Brontë, the 19th-century English novelist, would have felt at home in the Alto Minho. The wuthering heights of Portugal‘s northernmost region are as wild and exhilarating as the Yorkshire moors, a landscape of "intractable mountains, dark woods, deep valleys and dangerous ravines", according to a monk who reached the area in the 17th century. The weather rarely strays from what Brontë called "atmospheric tumult" and the people, like her tempestuous characters, see themselves as fearless, headstrong and rebellious.

Horses, an ancient local breed known as garranos, roam free on boulder-strewn uplands. Further down the steep valleys, stone villages shelter in the lee of granite hills. Packs of wolves still prey on cattle, sheep and goats in the rugged mountain ranges, known as serras, which form this part of Portugal’s north-western border. The stone walls of fojos — elaborate traps once used to lead the wolves into deep pits — wind across the grassy slopes.

Today, for the sparse population of subsistence farmers, redress for livestock lost to wolves involves filling out forms for government compensation, rather than dogs, torches and hunting parties. But the wolf as an embodiment of the power and mystery of the Alto Minho still looms large in the local imagination. José Miguel Oliveira has had two close encounters. An economist originally from Setúbal in southern Portugal, he recently glimpsed a wolf at dusk, running off into a pine wood. He also keeps on his mobile phone a photograph he took of a wolf’s paw print, distinguishable from a dog’s track by its longer claw marks and the spacing of the four toes.

Over the past five years, Oliveira has come to know this territory like few others do. In the process of pinpointing the sites for 120 wind turbines spread over five different serras, he has gained an intimate knowledge of a region unchanged for thousands of years. "It’s a place that always makes a strong impression on people," says Oliveira, the project manager for Ventominho, the wind energy company that operates the turbines. In a task beyond the sturdiest garrano horses, installing each turbine required 10 articulated truckloads of huge concrete and steel components to be transported up steep hill tracks to altitudes of up to 1,300 metres. "It was a logistical challenge," says Oliveira. "We had to negotiate individually with every landowner when a road needed widening or a corner modifying."

Erecting the turbines — each 65 metres or 78 metres high — linking them together with a 54-kilometre power line and building substations took 600 workers the better part of two years. When the 120 turbines became fully operational in January 2009, this impoverished rural region, depopulated by successive waves of emigration, found itself unexpectedly at the forefront of the clean-energy revolution. The Alto Minho is now the site of the largest onshore wind farm in Europe, among the first fruits of a bold plan to make one of western Europe’s poorest countries a world leader in renewable energy.

Portugal enjoys a rare geographical bounty. Thanks to its position, climate and geology, it is blessed with an abundance of clean-energy resources. Prevailing westerly winds and a broad sweep of accessible hill ranges in the north and centre create ideal conditions for wind farms. The south enjoys up to 300 sunny days a year, making it a natural choice for solar-energy plants. A long Atlantic coastline, where swells and storms are not as strong as in northern Europe, provides enormous potential for wave energy. Rivers entering the country from Spain are an important source of hydro power.

For years, the productive potential of these natural advantages lay unnoticed and unrealised. But global efforts to combat climate change by reducing carbon dioxide (CO2) emissions and finding clean alternatives to fossil fuels have alerted the country to its resources. The assets of water, sun and wind, previously seen only as a boon for tourism, will in a few years become the country’s main source of electricity generation.

"In the same way as Finland is famous for mobile phones, France for its high-speed trains and Germany for its industry, Portugal will become known for renewable energy," declares Manuel Pinho, the economy minister and chief architect of a plan to pump new strength into a weak economy by tapping into the country’s huge potential for clean energy. "All of a sudden, a lot of people are looking to Portugal as an example."

The 40-metre rotor blades turning on the heights of the Alto Minho hills harvest the wind to produce an estimated 530 gigawatt hours (GWh) of electricity a year, enough to supply 53% of the needs of the local population of about 250,000. But this represents only a small part of a much wider transformation of the Portuguese economy, focused on harnessing the country’s natural endowments. As other projects advance, including the world’s largest solar photovoltaic farm, the first commercial wave power plant and a national network for electric cars, the Lisbon government is setting ambitious new benchmarks for Europe’s response to climate change.

By 2020, Pinho says, the country will produce more than 60% of its electricity and 31% of its energy (including electricity, heating and transport fuels) from renewable sources. This compares with a European Union (EU) electricity target of 20% of energy. Plans announced by US president Barack Obama will see the United States producing 12% of its power from clean energy sources at about the time Portugal reaches the 50% mark, says Pinho. By next year, he says, Portugal will already emit less CO2 per capita than any other EU country.

Pinho, 54, a former banker and economist with no background in energy, consolidated his vision of Portugal as a clean energy economy in 2005, when the centre-left Socialist party won its first absolute majority in parliament and José Sócrates, then the incoming prime minister, asked him to leave a senior position at the Espírito Santo banking group to take up the economy portfolio. He brought with him to the ministry both a willingness to think radically and parts of his large collection of historic art photography, of which he is an avid collector.

"I was conscious that a small country like Portugal couldn’t be good at everything," says Pinho, a soft-spoken, unassuming man. "But I knew we needed to be very good at something. If we didn’t move our technology rapidly forward, we would fall behind. Leadership of capital- or skill-intensive industries such as semiconductors or software design is beyond our capacity. By a process of intuition, renewable energy emerged as an ideal sector in which Portugal could become a world leader and establish a role for itself at the technological frontier. This seems evident today, but four years ago it was far from obvious."

Pinho’s clean-energy plan won immediate backing from Sócrates and within six months of the new government taking office a programme called the New Energy Policy was approved. The plan envisages Portugal producing 31% of all the energy it consumes, including transport, from renewable sources by 2020, up from 20.5% today. "This is not wishful thinking," Pinho insists. "The projects are in the pipeline." The equivalent energy target for Britain is to move from 1.3% to 15%.

Portugal‘s push to harness the full potential of its renewable resources is inspired partly by dire necessity. In a country that lacks any primary energy resources of its own, oil, gas and other energy supplies have to be imported, placing a heavy burden on a relatively small economy. In 2008, the energy deficit was the equivalent of 5% of gross domestic product (GDP). Falling oil prices could close half of that gap this year, but fluctuations like this serve only to emphasise the extent to which Portugal is subject to international forces beyond its control.

The key to achieving greater energy independence, Pinho says, is to adopt the right business model to produce clean energy at competitive prices. "To do this a country needs to achieve a minimum scale of production, enforce competition and create the right incentives to bring in private investment." By 2015, he says, investment in renewable energy will be saving Portugal 440 million euros (US$565 million) in annual fuel costs. This, in turn, will reduce CO2 emissions by more than 12 million tonnes a year. Traded at current prices on Europe’s carbon emissions market, this represents a further annual saving of around 100 million euros (US$130 million).

The business model favoured in Portugal is based on what are known as feed-in tariffs. These involve an undertaking to buy electricity from clean-energy producers at above market rates for a fixed period. Unlike other incentives systems, such as the green energy certificates used in Britain or US tax credits, feed-in tariffs provide long-term financial stability that enables producers to raise project finance.

Feed-in tariffs drop in line with the diminishing costs of clean-energy production as technology evolves and producers gain economies of scale. Wind capacity has developed much faster in Portugal than anyone forecast. Having grown from 537 megawatts (MW) to 2,740 MW over the past five years, capacity is projected to double again over the next three, and to reach 8,500 MW by 2020. Wind turbines will then supply 30% of the country’s electricity needs, double their share in 2007.

As a result of that rapid growth, the feed-in tariffs now being offered have fallen to several cents per kilowatt hour (kWh), roughly the equivalent of average prices on the wholesale electricity market. This means Portugal has reached a stage where wind power is almost as cheap as the electricity generated by fossil-fuel plants. If the costs of paying for permits to produce carbon dioxide are taken into account, it is probably already cheaper.

NEXT: Focusing on wave energy

Copyright The Financial Times Limited 2009

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