Carbon Pricing as a Value Catalyst for Santa Marta & Baloiço

Portugal has become one of Europe’s most attractive environments for renewable energy investment. The country combines stable regulation, EU ETS carbon pricing, rapid solar deployment, and a market structure (MIBEL) that increasingly rewards flexibility assets such as battery storage.

Three structural trends define the opportunity:

• EU Carbon Pricing Raises Fossil Marginal Costs: Portugal is fully integrated into the EU Emissions Trading System (ETS). As free allowances phase out and carbon prices stabilise at higher levels, gas-fired generation becomes more expensive. This directly lifts wholesale electricity prices during marginal hours, improving the revenue profile of merchant solar and hybrid renewable projects.
• Explosive Growth in Solar Capacity: Portugal’s solar fleet has surpassed 7 GW, growing at ~40% per year. This expansion is creating more midday oversupply, deeper negative-price episodes, and stronger evening peaks. The result is a market where renewables remain highly competitive, but flexibility becomes essential.
• Storage-Friendly Regulation: Portugal is one of the few European markets where battery storage is exempt from grid fees, avoiding double charging. Combined with rising volatility and new balancing markets (MARI, PICASSO), this creates a highly favourable environment for BESS assets.

Impact on Santa Marta (Solar / Hybrid Platform)

Santa Marta stands to benefit directly from Portugal’s carbon-pricing and market dynamics.

1. Higher Carbon Prices → Stronger Merchant Revenues

As EU ETS costs rise, fossil generators set higher marginal prices. For Santa Marta, this means:

• Higher average merchant prices
• Improved competitiveness versus gas-fired PPAs
• Stronger long-term price floors

2. Low Curtailment Protects Output

Portugal’s curtailment remains extremely low (~0.4%), meaning that once operational, Santa Marta would be positioned to capture nearly all available generation. Carbon pricing would therefore pass through cleanly into realised revenues.

3. Hybridisation Enhances Value

Pairing solar with storage (or flexible offtake structures) allows Santa Marta to:

• Shift generation into higher-priced evening hours
• Capture volatility created by carbon-driven fossil price spikes
• Offer premium “firmed renewable” PPAs to corporates

What this means: Santa Marta is positioned as a high-visibility, low-curtailment solar platform with improving merchant economics and optionality through hybridisation.

Impact on Baloiço (Battery Storage Project)

Baloiço is even more positively exposed to Portugal’s evolving market.

1. Carbon Pricing Increases Volatility

Higher carbon costs widen the spread between:

• Midday oversupply (often negative prices)
• Evening peak demand (fossil marginal hours)

This directly increases arbitrage spreads for Baloico.

2. Negative-Price Hours Are Rising Fast

Portugal recorded ~222 negative-price hours in Q1 2026, up from ~48 a year earlier. For Baloico, this means:

• More opportunities to charge at zero or negative cost
• Higher margins when discharging into peak hours
• Stronger economics without relying on subsidies

3. Storage-Friendly Regulation

Portugal’s exemption of BESS from grid fees is a major structural advantage. It:

• Reduces operating costs
• Improves round-trip economics
• Makes Portugal one of Europe’s more favourable markets for standalone storage

4. New Balancing Markets Add Revenue Streams

Integration into European balancing platforms (MARI, PICASSO) opens:

• Frequency response
• Reserve capacity
• Fast-acting flexibility services

These markets benefit directly from carbon-driven volatility.

What this means: Baloico is positioned as a flexibility asset in one of Europe’s most favourable storage markets, with multiple potential revenue streams and policy tailwinds.

The Combined Platform

Together, the two projects form a strategically powerful platform:

1. Complementary Revenue Profiles

• Santa Marta provides low-cost renewable generation.
• Baloico monetises volatility and flexibility.

2. Carbon Pricing Strengthens Both Assets

Higher EU ETS prices:

• Lift solar merchant revenues
• Increase storage spreads
• Improve the economics of hybrid PPAs

3. Portfolio-Level Risk Reduction

Combining generation and storage:

• Smooths revenue variability
• Reduces exposure to negative-price hours
• Creates a dispatchable renewable block attractive to utilities and corporates

4. Strong Fit with Portugal’s Energy Transition

Portugal’s policy direction is clear: More renewables, more electrification, more flexibility.

Santa Marta and Baloico align closely with this trajectory.

Summary

Portugal’s energy market is entering a new phase defined by higher EU carbon prices, rapid solar expansion, and rising volatility. Santa Marta stands to benefit from stronger merchant prices and minimal curtailment, while Baloico is positioned to capture growing arbitrage spreads and new balancing revenues in a storage-friendly regulatory environment. Together, the projects form a complementary renewable-plus-flexibility platform that is structurally advantaged by Portugal’s transition dynamics.

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