The initiative follows the publication of a security of supply assessment by the Directorate-General for Energy and Geology (DGEG), carried out in cooperation with national grid operator REN and energy regulator ERSE, which examined whether Portugal’s electricity system will be able to meet demand over the coming years under a range of scenarios and in line with European methodology.

According to the findings, additional capacity will be required as electricity consumption continues to grow, driven by the expansion of electric vehicles, industrial electrification and broader economic development.

Power generation assets

The government plans to introduce a competitive capacity mechanism to address these challenges, which will reward energy resources for being available when the system faces the most strain.

This scheme is expected to be technology-neutral, allowing participation from power generation assets, energy storage facilities and demand-response providers.

According to officials, the objective is to ensure sufficient electricity is available during critical periods while keeping costs to households and businesses as low as possible.

The move forms part of a wider strategy to strengthen the country’s energy security as Portugal accelerates its transition towards renewable energy, as its generation now accounts for a significant share of the nation’s electricity mix, and authorities stress that reliable backup capacity remains essential when weather-dependent generation is unable to meet demand.

This assessment established a reliability standard of 1.46 hours per year, representing the maximum acceptable level of supply risk, as the benchmark was calculated by using European methodologies and informed by consultations with consumers and businesses.

“Portugal is now one of Europe’s leading countries in renewable electricity generation”, Maria da Graça Carvalho, Minister of Environment and Energy, said. “Ensuring energy is available at all times is the other side of that ambition.”

Mechanism approval

The government will now begin the pre-notification process with the European Commission, marking the first step towards securing approval for the mechanism under EU state-aid and energy market rules.

According to the Ministry of the Environment and Energy, discussions with Brussels will focus on ensuring the scheme remains competitive and open to a broad range of technological solutions.

“We are developing this mechanism in a serious and sustainable way, safeguarding the lowest possible cost for families and businesses while taking the necessary steps with the European Commission”, Carvalho explained. “We are not simply making announcements, as we are making decisions and implementing them.”

In addition to the proposed capacity mechanism, the government is pursuing several complementary measures aimed at strengthening system reliability, including investment in combined-cycle natural gas power stations, the expansion of energy storage capacity, a planned auction for 750 MVA of battery storage, as well as pumped-hydro storage projects and greater use of demand-side management.