Economic analysis of the profitability of existing wind parks in Portugal

Discussions on the appropriate policy design and level of incentive to promote renewable energy adoption and meet the 20/20/20 goals have spurred recently in the European Union. These discussions are also ongoing in Portugal, namely in what concerns the level and duration of feed-in tariffs that should be provided to independent power producers. This, in turn, raises the question of whether the past feed-in tariff levels were well designed to achieve the goals of a larger penetration of renewables in the Portuguese grid. The policies to induce wind adoption have led to a growth in wind installed capacity and share of electricity generated by wind in Portugal, but questions arise on their cost-effectiveness and whether alternative policy designs would have led to the same goal. In this work, we estimate profits made by wind independent power producers for wind parks that were connected in Portugal between 1992 and 2010, and conclude that the feed-in tariffs have overcompensated some wind power producers. We also discuss the recent changes in feed-in tariff legislation published in February 2013 and estimate the expected costs of the introduced changes.