EDP BUSINESS SUMMIT '24

Portugal, Europe, and the world have a unique opportunity

Vera Pinto Pereira, executive board member at EDP, emphasizes that now is the time for the country to step up its adoption of green energy, given that in January, 81% of its energy came from renewable sources. In an interview, she outlines the challenges that still need to be overcome.

The decarbonization of the economy and the energy transition are no longer mirages but a reality that is now palpable. In January, Portugal managed to ensure that 81% of its energy came from renewable sources - a positive sign for the road ahead until 2026, when the country is supposed to guarantee 80% of energy production from hydro, solar or wind sources on a consistent basis. Finding solutions and defining strategies to meet the goals towards carbon neutrality is the ambition of the international event EDP Business Summit 2024, which returns to Lisbon on March 7th, digitally accessible worldwide, with a program featuring recognized national and international speakers. In anticipation, Jornal de Negócios spoke with Vera Pinto Pereira, executive board member at EDP, about the challenges of the energy transition.

EDP has set 2040 as the deadline to become carbon neutral. What challenges need to be overcome to get there?

Portugal, Europe, and the world have a unique opportunity to move towards controlling the alarming impacts of climate change. On this front, the type of energy sources we use daily is critical. We cannot continue to use fossil fuels as we have been and urgently need to replace them with renewable, inexhaustible sources with no carbon emissions. But besides mitigating climate change, the energy transition to sustainable resources presents a series of opportunities for economies, companies, and families.

What are these opportunities?

I'll start with the financial ones. There is no question that the greater penetration of renewable electricity will lower costs for customers, as we stop importing fossil fuels and start using renewable and locally produced electricity. Additionally, the European Union estimates that about 30 million jobs will be created in Europe within this industry, with the potential to create supply chains in countries like Portugal, which has been a pioneer in this sector.

Is significant investment needed to get there?

At EDP, we see this decade as decisive. We know we have to lead by example, and that's why we have committed to investing €25 billion in the energy transition by 2026, doubling the renewable capacity we will have installed and investing in wind, solar energy, energy storage, and emerging technologies like green hydrogen. At the same time, we are closing down coal-fired power plants - in Portugal, we did it at the beginning of 2021 - and by the end of the decade, we want to be 100% green, using only water, sun, and wind to produce the electricity we generate in the four global regions where we operate. As challenges, I would list the need to accelerate the pace and to work in partnership - companies, public and private entities, and customers - so that we can achieve the ambitious decarbonization goals.

The energy transition in Portugal will create 300,000 jobs by 2025, according to McKinsey.

Portugal has advanced the goal of having at least 80% of its energy produced from renewables by 2026. How do we make the leap to 100%?

The goal is ambitious, but we think it’s possible. In January alone, this target was already achieved, with 81% of production coming from renewable sources. We know that it was a very positive month, with plenty of rain, which allowed us to increase hydroelectric production and that, although there was little wind to produce wind energy, one day in January even broke the record for wind production in Portugal. For renewable production rates to remain at these levels, and because we know there will not always be abundant rain or wind, Portugal needs to accelerate the development of renewable projects.

And is it possible to do this while reducing costs? 

There is a huge opportunity in the Iberian Peninsula to take advantage of the approximately 300 days of sunlight per year to generate energy. Thousands of companies with available roofs or land could be used to increase the country's renewable capacity and simultaneously reduce electricity costs for entities in self-consumption regimes by over 25%. And finally, we need to invest in solutions for storing this energy

Renewable sources are crucial for the reindustrialization of Europe and the country. Considering the natural characteristics of the country and the resources it possesses, can Portugal assert itself in the EU through energy?

Portugal has been a pioneer in this sector, and I believe it has all the conditions to continue to be part of European leadership. We were the first country to commit to carbon neutrality by 2050 we have even accelerated that goal to 2045. Over 20 years ago, EDP invested in wind energy in Portugal, making the country one of the European leaders in the early development of this technology. About 10 years ago, EDP tested the resilience of a floating wind turbine off the coast of Póvoa do Varzim, and years later, installed the first semi-submersible park in Viana do Castelo on the European coast, a project that is still used as a flagship project worldwide.

Will this change have an impact on employment?

While there will be sectors linked to the fossil industry that are potentially affected by the energy transition, the labor market will be transformed by the creation of a large number of new jobs and specialized training. In Portugal, McKinsey's estimates point to the creation of 300 thousand new jobs in the short term, particularly in sectors such as energy production, transportation, buildings, industry, agriculture, waste, and forestry, not to mention professional requalification and training. It is an opportunity that we must seize.

"Portugal has proven to be a pioneer in this sector, and I believe it has all the conditions to continue being part of European leadership." Vera Pinto Pereira, Executive Board Member at EDP

Decentralized energy production and energy communities are becoming increasingly important in this path. Are there still challenges in implementing these projects, particularly in terms of licensing?

Although we continue to feel that the development and implementation of these communities could be faster, given the country's potential and the demand from companies and families, it is important to note that in recent months, we have felt that processes are finally starting to speed up and that we could, in the short to medium term, be putting these communities into operation and sharing the benefits with the thousands of customers who have wanted to be part of these projects. Energy communities are a true example of what EDP advocates as a fair energy transition - through the use of inexhaustible solar energy it is possible to increase renewable energy production, make our consumption more sustainable, reduce electricity costs, and share these benefits with families or businesses that do not have available space for their own solar panels. By installing a larger plant at a certain customer, which we call a producer, we can produce more energy than they need and share it with neighbouring companies or families, creating what we call the EDP Solar Neighbourhood. The more than 2,600 communities we already have contracted or are under development will allow us to share benefits with about 40 thousand neighbours, a project of which we are proud, and which perfectly represents several of the benefits of transitioning to cleaner energy sources.

EDP has a long history of signing long-term energy contracts, particularly with multinationals such as Google or Amazon. What benefits do these contracts represent for companies making their way through the energy transition?

One of the most comprehensive measures in economic, environmental, and ESG criteria improvement are Power Purchase Agreements that companies can sign with energy producers and traders. In these contracts, which have variable durations but typically exceed five years and can even be 20 years long, a fixed price is guaranteed to the client for the contracted energy, reducing their exposure to market volatility. This option also significantly reduces a company's carbon footprint and environmental impact, especially for those with high energy needs in their production systems. For EDP, long-term contracting allows us to continue developing renewable projects with the guarantee of stability and our track record, with around 9 GW of energy contracted over the long term, proves the success of these contracts.

What are the priority sectors of activity in the long-term contract strategy?

There are rationales for long-term contracts for various types of customers, but the ones who can benefit most from this type of contract are those who have large energy needs, as is the case with some industries. EDP Comercial has signed an 18-year long-term contract with AAPICO for energy supply, with significant benefits for this client. There is also increasing demand from other types of customers such as data center managers, as is the case with Amazon or Microsoft, who have chosen EDP Renewables for long-term energy supply. However, EDP has increasingly signed medium-term contracts with small and medium-sized companies, guaranteeing them price stability and predictable energy costs for that period. In 2023 alone, we signed contracts for around 1 TWh/year of energy in the Iberian Peninsula.