Assessment of legacy generation contracts' costs in the future Portuguese electricity system

Abstract

Although the Portuguese electricity system liberalization process started almost 20 years ago, 83% of electricity generated in 2010 still benefited from a State guaranteed price, independent of market behavior. This applies not only to producers using renewable energy sources and cogeneration under feed-in tariffs, but also to all conventional power plants that undersigned a power purchase agreement in the 1990s. Because no comprehensive public information about State guaranteed prices is available, research was first carried out to unveil generation legacy contracts' volumes and then costs and their impact on consumers. A producers' database was created by the authors which enables an accurate assessment of the volumes of electricity with and without State guaranteed prices. In a previous paper the authors have validated the data set and the volume computation methodology for the period 2000-2010 and provided an estimate of those volumes in the period 2011-2030. This paper estimates average prices per producer type and assesses generation legacy contract costs in the period 2011-2030. Moreover, the paper computes the impact of generation legacy costs upon end-user average electricity prices and generation costs for several scenarios of market prices and demand.