Curtailment in Portugal rose to 182 GWh in 2024 and could triple by 2027 if storage deployment lags the pace of solar commissioning. Against that trajectory, the Portuguese government published its National Energy Storage Strategy on 29 June 2026, setting targets of 3.9 GW of pumped storage by 2030 and 5.26 GW by 2040, starting from a current base of approximately 3.5 GW. The strategy covers battery storage alongside pumped hydro and reflects an explicit government acknowledgment that record levels of renewable curtailment and negative electricity pricing, driven by the rapid build-out of wind and solar without matching investment in flexibility and storage, have made long-duration storage an urgent system priority.
Portugal’s renewable position is genuinely strong. From January to August 2025, Portugal generated 33,107 GWh of electricity, with renewables accounting for 76.9% of total generation, the fourth-highest share in Europe following Norway, Denmark, and Austria. Solar PV alone generated approximately 8.7 TWh in 2025, an increase of more than 20% over 2024. But the same solar expansion that is driving that renewable share is also creating the intraday volatility and curtailment pressure that the storage strategy is designed to address. Wholesale market dynamics during 2025 were characterised by continued intraday price volatility, particularly during hours of high solar production.
What 5 GW of Pumped Storage Actually Means
Portugal already operates more than 3.5 GW of pumped storage, giving it one of the highest per-capita pumped hydro endowments in Europe. The Tâmega hydroelectric complex, which includes the Alto Tâmega plant with a rated capacity of 1,158 MW, provides up to 1.76 TWh annually and 40 GWh of pumped-storage capacity. The existing fleet gives the country a meaningful operational baseline. The strategy’s 2030 target of 3.9 GW represents a modest addition of 400 MW above current installed capacity within a four-year window, while the 2040 target at 5.26 GW requires an additional 1.76 GW over the subsequent decade. The pace implied is manageable in historical terms for a country with established hydropower engineering capability and a pipeline of identified sites.
The Minhéu project referenced in the government announcement is among the developments aligned with this longer-term expansion. Its scale and timeline have not been publicly specified in detail. Permitting reform, identified in the strategy as an enabling measure alongside competitive auctions and future tenders, is operationally significant: large pumped storage projects require environmental impact assessments and water use approvals that have historically taken years to complete in Portuguese and broader European regulatory contexts.
Europe’s development pipeline for pumped storage has reached 59 GW and an estimated electricity storage capacity of more than 500 GWh, enough to sustain the energy for one million houses in Europe for two months. Portugal’s 5.26 GW target by 2040 positions it within a continental investment wave rather than as an outlier, but the country has an advantage most European markets lack: existing water infrastructure, established reservoir systems, and decades of operational experience with large hydro. That advantage makes the incremental expansion to 5 GW substantially less complex technically than building equivalent capacity in markets starting without a pumped hydro base.
The Battery Gap and the Short-Term Flexibility Problem
The 2040 pumped storage target addresses long-duration flexibility. The nearer-term curtailment problem, which could triple from 182 GWh in 2024 to over 500 GWh by 2027 at current solar deployment rates, requires storage solutions that can be deployed faster than pumped hydro projects permit.
As of mid-2025, total installed and near-operational battery capacity in Portugal amounts to roughly 120 MW, with several hundred megawatts in development. If all currently announced storage projects proceed, Portugal could operate roughly 750 MW of batteries by early 2026, rising towards about 2 GW by 2030. That 2 GW battery trajectory, alongside the incremental pumped storage additions to 3.9 GW by 2030, constitutes the combined short-term flexibility response implied by the strategy.
Grid capacity is constraining the pace of renewable deployment and electrification in Portugal, with the IEA’s Energy Policy Review Portugal 2026 identifying grid capacity expansion as failing to keep pace with renewable deployment needs. The storage strategy does not resolve this independently. Pumped storage co-located with existing reservoir infrastructure can absorb renewable generation at source without creating additional transmission demand, which is part of its system value in a constrained grid, but battery storage near curtailment hotspots still requires network access that the current grid cannot always provide. Portugal’s mainland electricity system faces approximately 41 GW of connection requests from large electricity consumers, a queue that illustrates the scale of grid pressure the energy transition is generating.
The Revenue Model and Investment Certainty
The government’s announced auction mechanism for new storage capacity provides the regulatory foundation for private investment. Whether the auction design delivers revenue certainty sufficient for pumped storage project finance, which involves multi-decade assets with high upfront capital costs and long payback periods, depends on details that have not yet been published. Pumped storage economics in liberalised electricity markets are challenged by market dynamics that value flexibility intermittently rather than continuously: a plant that can earn extraordinary revenues during price spikes may sit idle for extended periods, and lenders require revenue stability across the project lifetime that merchant market exposure cannot easily provide.
Contracts for difference or capacity payment mechanisms specifically structured for long-duration storage would address this, providing floor revenue against which project finance can be structured. Great Britain’s energy regulator has provisionally selected three pumped storage projects to be among the first to benefit from its new long-duration storage support scheme, a mechanism developed precisely because merchant revenue alone was insufficient to attract the investment the UK system needs. Whether Portugal’s forthcoming tender design incorporates comparable revenue support is the critical implementation question that the strategy’s publication has not yet answered.
The IEA has recommended that Portugal prepare a comprehensive flexibility roadmap quantifying future requirements for storage capacity, ramping capability, frequency response, inertia and voltage support through 2030, 2035 and 2050, based on multiple scenarios testing sensitivity to renewable deployment pace, demand growth from electrolysers, data centres, electric vehicles and heat pumps, and climate variability affecting hydro and renewable output. The National Energy Storage Strategy represents the target-setting layer of that roadmap. The sequencing of regulatory reforms, auction structures, and grid investment that must accompany it to produce the 5.26 GW by 2040 will determine whether the strategy functions as a genuine investment programme or as a policy statement awaiting implementation instruments.
