Thanks to steady expansion of hydropower, wind power generation and solar photovoltaics (PV) in recent years, Portugal has one of the lowest carbon intensities of electricity generation among IEA Member countries. Portugal is entering a mid‑transition that requires managing two interconnected energy systems that are moving in opposite directions: one is based on renewables and electrification and must scale up rapidly; the other is a legacy fossil fuel system that must decline in an orderly way to avoid stranded assets and price shocks. Electricity is becoming the central pillar of energy security and the main driver of emissions reductions.

Portugal has established an ambitious direction for its energy transition through a series of strategic policy documents centred on the National Energy and Climate Plan (NECP). The NECP sets ambitious 2030 greenhouse gas (GHG) emissions reduction targets that aim to put the country on a pathway to climate neutrality by 2045. It also outlines measures to increase the deployment of renewable electricity and deliver broad end-use electrification. Portugal needs to translate its strategic objectives into co-ordinated delivery across all sectors. Although the NECP sets clear ambitions, the pathways for achieving these goals remain dispersed across separate strategies, regulatory reforms and funding programmes, which make it difficult to align investment planning, infrastructure development, workforce needs and consumer incentives. A national roadmap based on bottom-up sectoral agreements would integrate these efforts, increase transparency, and provide clarity and direction for public authorities, industry and consumers.

Maintaining social acceptance of the energy transition requires ensuring that the benefits of clean, efficient and affordable energy reach all people. In particular, low‑income households, which are more exposed to high energy costs, inefficient housing and limited access to affordable, low-carbon mobility options, should be empowered to participate in the energy transition. This is especially important in Portugal, where energy poverty remains well above the European average. Although Portugal has a national strategy on energy poverty, many support programmes do not reach those the most in need. At the same time, electrification, digitalisation and expanded buildings' renovations will require new skills and workforce redeployment. A people-centred approach is essential to ensure that affordability, access, consumer protection and workforce capacity are integrated into energy transition policies. Public support should be targeted to where it delivers the greatest benefit and drives broad participation in the energy transition.

With clear progress on decarbonising electricity supply, the next phase of Portugal’s energy transition must focus on the electrification of transport, buildings and industry, which together account for most energy-related GHG emissions (82% in 2024). Electrification is expected to drive a notable increase in electricity demand, requiring a rapid expansion of renewable generation, primarily from solar PV (both utility-scale and distributed) and wind. As electrification accelerates, electricity will become the main driver of energy security. These developments require grids, markets and regulation to evolve so that renewable deployment, electrification and system flexibility can scale in a co-ordinated, affordable and secure manner.

Delivering this transformation will require electricity grids that are ready for rapid growth in renewable generation and electrification. New transmission capacity is needed to integrate solar and wind resources and to strengthen cross-border trade and system balancing with Spain. Distribution networks face rising pressures from rooftop PV, electric vehicles (EVs) and heat pumps, and will require investment in digitalisation and advanced network management. Grid planning needs to become more proactive, with anticipatory investments in areas where renewable resources and electrification are expected to grow. Remuneration frameworks for electricity system operators need to support both large infrastructure investments and improved system flexibility. Stronger co‑ordination between the transmission system operator (TSO) and distribution system operators (DSOs) as well as between national and municipal planning processes will be critical to ensure that electricity grids support electrification and the rapid scaling of renewable generation.

Efficient electricity markets with clear price signals will be essential for mobilising investment in renewables, storage, EVs, heat pumps and building renovations. Electricity remains more expensive than gas on a final energy basis, largely because of non-energy, non‑network charges, which weakens incentives for households and businesses to electrify. Reforms that deliver price signals supporting electrification while protecting vulnerable consumers are needed to accelerate cost-effective decarbonisation. Investment frameworks for storage and demand-side response should provide predictable revenue opportunities and fair access to markets. Continued development of long-term contracting, power purchase agreements and clear market rules are required to support the needed scale of private investment in Portugal’s energy transition. Markets also need to value flexibility, recognise the contributions of distributed energy resources and ensure that system services are procured in ways that reflect actual system needs.

Portugal’s natural gas demand is already in structural decline, driven primarily by a large reduction in generation from combined-cycle gas turbines (CCGTs). Total gas demand has already dropped to levels the gas TSO expected in the mid‑2030s. Electrification in buildings and industry will further reduce gas consumption. These trends raise important challenges for gas networks, including declining throughput, rising unit costs, tariff pressures and the risk of stranded assets. An orderly and equitable transition will require updated remuneration frameworks for gas system operators that support efficient network operation during contraction and clear planning for decommissioning. The expertise of gas sector workers and companies should be leveraged. These steps are essential for managing the decline of the gas system in a way that protects consumers and ensures system reliability and a people-centred energy transition.

Over half of Portugal’s energy-related GHG emissions come from the transport sector, which remains highly reliant on imported oil. Around 95% of the sector’s emissions come from road transport, as the vehicle fleet is old and inefficient. Portugal is, however, making progress. In 2025, EVs accounted for 38% of new vehicles sales, higher than the European Union average share. However, the share of EVs in the total fleet was around 6%. Policy supports for the uptake of used EVs is needed to better reflect consumers’ limited purchasing power and the structure of Portugal’s vehicle market, where around 80% of purchases are used vehicles. Equally important is the expansion of charging infrastructure in urban areas, with specific attention to low-income households. More effort is also needed to shift freight from Portugal’s diesel-dependent truck fleet to its highly electrified rail system. Portugal has delivered successful fare-reduction programmes and expanded bus and rail services, but modal shift must remain a central pillar of its transport policy. Urban and regional planning should ensure equitable access to active mobility options, reliable and affordable public transport, and national high-speed rail so that all citizens can benefit from cleaner and more efficient mobility. These actions will help place the transport sector on a trajectory consistent with Portugal’s climate targets.

Portugal’s industrial emissions have remained broadly flat for more than a decade, even as national climate ambition has increased. The sector now faces two transitions in tandem. Existing industrial facilities must cut emissions rapidly to meet the 2030 climate targets and industry must position itself competitively within global value chains that are shifting toward low-carbon production. These pressures come at a time when electrification and efficiency measures remain uneven across subsectors, and many industries, particularly small and medium-sized enterprises (SMEs), face structural constraints related to scale, skills and access to capital. A clear industrial decarbonisation strategy can provide needed direction by establishing subsector emissions reduction pathways that reflect Portugal’s diverse industrial base and by identifying where additional policy, regulatory or financial measures are required. This strategy should focus on leveraging Portugal’s low-carbon electricity supply to build new value chains around clean technologies. The strategy can also help target innovation and funding to hard-to-decarbonise processes.

Portugal has made progress in building electrification and is seeing increasing uptake of heat pumps. However, the building stock remains inefficient and renovation rates are low. Many households face financial and administrative barriers to renovating their homes. Energy performance certificates are not yet comprehensive, and existing support schemes do not always reach vulnerable households or deliver deep renovations. Portugal needs to scale up the pace of deep renovations to address high rates of energy poverty and phase-out fossil fuel use in buildings. The network of one‑stop shops should be reinforced and expanded to be able to deliver comprehensive renovation support from initial assessment through project delivery. Public funds should be targeted to low-income households. In addition, a broad white certificate programme that rewards energy suppliers, energy service companies (ESCOs), energy communities, SMEs and consumers for verified energy efficiency improvements is needed to mobilise private capital and drive deep renovations across the country. Together these actions would turn the renovation challenge into a cornerstone of social, economic and climate progress and ensure that all people benefit fully from Portugal’s energy transition.