The recent storage auction in Portugal generated significant expectations in the energy sector. However, according to Manuel Pessanha, an expert in energy markets and energy transition at Synertics, the conditions set for these projects are not sufficient to guarantee their commercial feasibility.

“The 20% incentive in Portugal is not enough to make all projects viable,” he stated in an interview with Strategic Energy Corp, highlighting that the incentive schemes still present significant limitations.

In this regard, he pointed out that, in comparison with Spain, where subsidies have reached up to 40%, Portugal imposed stricter criteria and very short deadlines, which made it difficult for more industry players to participate.

Was It a Good Auction? A Questionable Design

Despite its limitations, the auction had a positive impact on boosting the sector. “It was for a good cause, it helped push the market,” says Pessanha.

However, he warns that the information was announced with very short notice and that the participation conditions were restrictive.

One of the main problems was the requirement to install the batteries within a short period, coinciding with the holiday season in Iberia, which made it difficult to secure resources and specialized advisory services.

“We would have preferred to see a different remuneration scheme instead of a simple CAPEX subsidy,” the expert states.

According to his analysis, instead of granting upfront capital incentives, a model based on remuneration per MW installed over 10-15 years would have generated greater interest and financial sustainability in the projects.

Uncertainty About the Execution of Awarded Projects

It remains to be seen whether the awarded projects will actually be implemented. According to Pessanha, “when the auction was announced, many rules were still unclear,” which created uncertainty among investors.

While he considers that batteries can have a positive impact on the grid, he warns that the current conditions could hinder the realization of the awarded projects, emphasizing that:

“If they are successfully implemented, they will set an important precedent for the future of energy storage in Portugal.”

Implementation Challenges: Permits and Grid Access

One of the main obstacles identified is the lengthy permitting process: obtaining environmental permits and access to the grid.

While the construction phase is usually more transparent, administrative procedures cause significant delays, putting execution deadlines at risk.

Adding to this is the rigidity of the storage model imposed in the auction. In many cases, the awarded batteries could only be charged from solar photovoltaic plants, which limited their potential for optimization in the energy market.

Was Innovation in Storage Technology Encouraged?

Another key aspect Pessanha highlights is the promotion of new technologies. However, he believes that the auction’s criteria did not allow for significant innovation advancements.

According to the expert, the design was focused on lithium-ion technologies, without providing room for emerging solutions that could improve efficiency and sustainability in energy storage.

Impact on the Integration of Renewables into the Grid

In the long run, energy storage will play a fundamental role in grid stability. As Pessanha points out, batteries can mitigate the cannibalization of photovoltaic energy in Iberia.

“Storage projects can increase the value of solar plants, allowing electricity to be stored when prices are low and sold when prices are high,” he explains, highlighting that these solutions contribute to grid stability, although the ancillary services market in Portugal is still limited.

Lessons from Other Markets: Germany and Italy as References

Portugal’s model presents clear differences compared to other European markets. According to Pessanha, countries such as Germany and Italy have structured their storage auctions around long-term remuneration schemes, rather than focusing on direct investment incentives.

“In Germany, the battery market is much more attractive because the remuneration scheme offers greater predictability,” he explains.

Meanwhile, in Italy, the market design has generated greater interest, driving the installation of batteries through capacity payments rather than simple CAPEX subsidies.

In this sense, Portugal could benefit from a shift in its incentive approach, moving towards a MW-installed payment scheme, similar to those in these countries.

Despite the challenges, Pessanha believes that a more robust storage market in Portugal requires new auctions, but with a more efficient remuneration model.

“More auctions are definitely needed, but with a focus on capacity markets rather than investment subsidies,” he states.

This would allow projects to better adapt to market conditions and ensure their long-term viability.

For the expert, future CAPEX cost reductions could make storage more attractive, but without an adequate remuneration scheme, investment will remain risky.

Conclusion: A First Step, but Adjustments Are Needed

Portugal’s battery auction was an important first step, but it presents key challenges that must be addressed to ensure its success. From the need for a more attractive remuneration scheme to the reduction of regulatory barriers, the country has room to improve its energy storage strategy.

For Manuel Pessanha, the success of these projects will depend on their actual execution and their ability to establish a replicable model for future auctions.

“If the projects are successfully implemented, they will set an important precedent,” he concludes.