Portugal possesses significant untapped potential in hydrogen production and lithium exploration, which could lead to substantial economic gains for the country’s development.
However, a recent report from the European think tank E3G suggests that these benefits may never materialize if Portugal fails to fully exploit the potential of these “green” technologies and their contribution to the European value chain.
According to the report, most hydrogen and lithium projects in Portugal are focused on exporting these high-value products to wealthier regions or engaging in low-value activities, such as blending “green” hydrogen with fossil gas for injection into the network. By adopting this approach, Portugal risks missing out on the global wave of investment in clean technologies and losing the opportunity to play a relevant role in the future value chain of green hydrogen and lithium in Europe.
The production of “green” hydrogen holds immense importance for Portugal, as it could unlock two crucial industrial segments: the production of “green” steel, which is essential for the electric mobility sector and offshore wind power, and the production of electrolysers. These value chains are critical in the field of clean technologies and align with the country’s goals of carbon neutrality and energy transition.
The European Commissioner for Energy, Kadri Simson, has already recognized Portugal’s potential in these areas and urged Portuguese businesses to not only produce green hydrogen for decarbonizing the economy but also to venture into green steel production. By doing so, Portugal can retain the economic benefits domestically, create jobs, and meet the market demand for clean options.
However, the current green hydrogen strategy in Portugal primarily focuses on investments that position the country as an exporter of renewable fuels to the rest of Europe, rather than prioritizing the domestic production of high-value hydrogen products.
When it comes to lithium, its extraction can pave the way for accelerating battery production for electric cars and their components. Presently, three investments are underway for lithium exploration in Portugal: the Savannah lithium extraction and export project at the Barroso mine, the joint investment by Aurora Lithium, Galp, and Sweden’s Northvolt for lithium refining and export, and the battery factory project by China Aviation Lithium Battery Technology (CALB) with a capacity of up to 45 gigawatt hours (GWh).
The report emphasizes that lithium mining and refining projects alone do not bring significant socio-economic benefits to Portugal. However, the production of batteries from lithium could result in a tenfold impact on GDP, estimating gains of around 2.6 billion euros for the Portuguese economy and the creation of 2,500 direct jobs. A battery factory’s impact would be roughly three times higher than that of the Volkswagen Autoeuropa factory.
The E3G report highlights several barriers that hinder the profitability and socio-economic development potential of green hydrogen and lithium exploitation in Portugal. These include the lack of strategic industrial policy orientation, the absence of governance structures focused on developing these value chains, and the limited presence of national industrial groups with the necessary scale to drive their creation. Additionally, Portugal faces difficulties in contributing to the innovation market and leveraging European funds associated with these activities, while local communities affected by lithium exploitation lack clear information on the socioeconomic benefits.
To harness the full potential of green hydrogen and lithium, E3G recommends that the Portuguese government incorporate a strategy in the National Energy and Climate Plan (PNEC 2030) that values the entire value chain of these resources. The report also suggests establishing goals for incorporating these resources in the development of new clean technology value chains, such as incorporating green steel requirements in future offshore wind auctions.
Portugal stands at a crossroads where it has the competitive advantage and potential to become a significant player in the development of new green technologies. However, unless the country addresses the challenges highlighted by E3G and adopts a more strategic and value-driven approach, this economic opportunity might slip away, leaving Portugal unable to fully reap the benefits of its resources.
