Elizabeth Rosenthal has written an excellent front page feature in this morning's New York Times on how they managed it.
If you think of it as a recipe, there are three key ingredients of Portugal's success:
- 1 part opening up of the energy sector to market forces (including the privatization of energy utilities)
- 1 part technological modernization (in particular the creation of a smart-grid able to handle diverse sources of renewable energy), and
- 2 parts savvy country-wide energy policy (including guaranteed rates for renewables, and the EU Carbon Trading System).
The current system is a mixture of wind, solar, hydro, small scale decentralized renewables on people's homes (see my last post), and some power still coming from natural gas generators. The Times gives a nice snapshot of the type of “plate-spinning” necessary to keep this kind of system running. (Not mind you, that a traditional energy grid is simple to run either.)
The financial costs seem to have been relatively minor. The state has not used taxes or debt to fund this transition. The costs are born by the private power producers and come out in the rates paid by consumers. Over the past 5 years, electricity costs have gone up 15%.That's not insignificant, but utilities are asking for similar increases here in North America, without providing any where near the kind of innovation taking place in Portugal. All the same, voters have been unhappy about rate increases and it seems that this is at least partially responsible for Sócrates narrow victory in 2009.
I've posted short excerpts below, but the full piece is well worth reading.
“You cannot imagine the pressure we suffered that first year,” said Manuel Pinho, Portugal’s minister of economy and innovation from 2005 until last year, who largely masterminded the transition, adding, “Politicians must take tough decisions.”
Still, aggressive national policies to accelerate renewable energy use are succeeding in Portugal and some other countries, according to a recent report by IHS Emerging Energy Research of Cambridge, Mass., a leading energy consulting firm. By 2025, the report projected, Ireland, Denmark and Britain will also get 40 percent or more of their electricity from renewable sources; if power from large-scale hydroelectric dams, an older type of renewable energy, is included, countries like Canada and Brazil join the list.
If the United States is to catch up to countries like Portugal, energy experts say, it must overcome obstacles like a fragmented, outdated energy grid poorly suited to renewable energy; a historic reliance on plentiful and cheap supplies of fossil fuels, especially coal; powerful oil and coal industries that often oppose incentives for renewable development; and energy policy that is heavily influenced by individual states.
The relative costs of an energy transition would inevitably be higher in the United States than in Portugal. But as the expense of renewable power drops, an increasing number of countries see such a shift as worthwhile, said Alex Klein, research director, clean and renewable power generation, at IHS.
“The cost gap will close in the next decade, but what you get right away is an energy supply that is domestically controlled and safer,” Mr. Klein said.