Government cooperation and incentives packages make projects like the Serpa plant possible for foreign energy companies. Howard Wenger, executive vice president of PowerLight, says his company became involved with the project when Catavento, a Portuguese renewable energy firm, approached it. After PowerLight began working on the plant, Wenger says that it enjoyed open access to government agencies and local companies. The presence of some leading Portuguese officials at the ribbon cutting signaled that the project was an important concern for the government. "They sent the minister of economy and finance [Fernando Teixeira dos Santos] with a complement of limousines and bodyguards," Wenger recalls.

Portugal has placed its renewable energy goals high on its priority list, and seems ready to support foreign investment with euros. Not only was the Serpa project awarded a e3.7 million ($5 million) grant from Portugal’s Economic Modernization Program, but its financier and owner, GE Energy Financial, was guaranteed a 15-year operating contract as a sign of Portugal’s support for green energy. The country intends to generate 45 percent of its electricity with renewable sources by 2010, indicating the nation’s desire to lead the green revolution in the European Union. Even the EU’s goal—20 percent of its electricity from renewable sources by 2020—pales in comparison.

Sizeable Strides

The commitment to green energy represents a bold step for this nation of 10.6 million people, which holds a dubious economic position. In 2002, Portugal became the first country to breach the EU’s Stability and Growth Pact, which mandates that member countries maintain a budget deficit below 3 percent of GDP (Portugal’s reached 6 percent in 2005). Since then, Portugal has progressed, slashing its deficit to 3.9 percent of GDP in 2006 under the leadership of prime minister Jose Socrates, a Socialist Party member who took power in 2005. However, last year GDP growth trudged along at 1.3 percent—the worst among all European nations. Portugal will be in the European spotlight over the next few months as Socrates fulfills his duties as EU president. His six-month term expires January 1.

Certainly foreign investment must continue to play a role in Socrates’ economic agenda. A new government office, AICEP Global Portugal, debuted July 1, merging services previously offered by other agencies, including Invest in Portugal, or API, which provided incentives like the ones given to PowerLight. In 2002, API started as a means to provide support for foreign investors looking to enter the Portuguese market. It enjoyed some modest success on behalf of the Portuguese economy: Cisco Systems will open its European sales headquarters in Lisbon in 2008. The Massachusetts Institute of Technology is also embarking on a partnership in Portugal, establishing a research and educational center there.

Portugal has improved its lot among entrepreneurs and investors: In the World Bank’s ranking of 175 countries based on the overall ease of doing business, Portugal ranks 40th, ahead of neighbors such as Italy. Export costs also remain relatively low. However, Portugal continues to lag far behind the Organisation for Economic Co-operation and Development averages in many categories, including warehouse licensing and in the ease of hiring and firing employees.

But if the Serpa power plant is any indication of the country’s commitment to its energy goals, investors may find a windfall in alternative energy sources there. With financing from companies like GE and Millennium bcp (a subsidiary of the country’s largest bank), Portugal may get its chance to shake off its reputation as the underdog of Europe.

Jennifer O’Reilly is a frequent contributor to Worth.

Photograph by SunPower Corporation.