Portugal plans capacity market with dedicated battery storage auction

From ESS News

Portugal has begun work on a new capacity mechanism designed to safeguard electricity supply as electrification accelerates, renewable energy expands and power demand is expected to rise over the coming decade.

The measure, announced by the Ministry of Environment and Energy, would remunerate resources that can be available during periods of peak demand through competitive processes open to generation assets, energy storage and demand-side flexibility.

The initiative draws on the findings of the Electricity Supply Security Assessment Report (RMSA-E), prepared jointly by the Directorate-General for Energy and Geology (DGEG), Portuguese transmission system operator REN and energy regulator ERSE.

To assess the future resilience of the power system, Portuguese authorities adopted a reliability standard of 1.46 hours per year, representing the maximum level of outage risk considered acceptable under the European methodology for security of supply following consultations with consumers and businesses.

According to the study, maintaining that standard will require additional sources of flexibility and dispatchable capacity capable of complementing the rapid growth of renewable generation.

The remuneration mechanism will be open to a range of technologies able to provide firm capacity to the system, including conventional generation, energy storage systems, demand response programmes and aggregated flexibility resources.

A central element of Portugal’s strategy is the explicit inclusion of energy storage within its security-of-supply framework, with the government arguing that batteries and other storage technologies will be essential to manage the growing variability associated with solar and wind generation.

In this context, the government reiterated plans to launch a dedicated auction for 750 MVA of battery storage capacity. The strategy will also include the development of new pumped hydro projects, which Portugal sees as a key source of long-duration storage.

The government also envisages investment in combined-cycle gas plants, which it said will continue to provide backup capacity during the large-scale integration of renewable energy.

As in Spain, the mechanism will require approval from the European Commission before it can be implemented.

Portugal will now begin the pre-notification process with Brussels, the first step towards the formal approval required under European Union state aid and electricity market rules.