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

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.