Portugal's electricity generation relies heavily on renewable sources, which accounted for over half of the country's production in recent years. The Portuguese government has set ambitious renewable energy targets for 2030. The R3EA project (https://r3ea.web.ua.pt/pt/projeto) evaluates the impact of new investments in solar and wind energy capacity in the Centro Region of Portugal, focusing on the costs and benefits of externalities. This study examines Portugal's electricity market outcomes in terms of prices, generation mix, and emissions for different wind and solar capacities, using the National Energy and Climate Plans (NECP) of Portugal and Spain as the reference scenario. The electricity markets of both countries are modelled together, reflecting the integrated Iberian market with significant interconnections. The NECP scenario results in lower market prices and emissions, but less significantly than scenarios with lower demand and higher renewable energy share. In all scenarios, increasing renewable energy sources drives market prices down from over €200/MWh in 2022 to under €100/MWh during peak hours in 2030. Demand is the main driver of emissions, as higher demand leads to more reliance on fossil fuel plants. Lower demand scenarios in 2030 show 20 % fewer CO2 emissions per TWh than higher demand ones.

This work is financed by National Funds through the Portuguese funding agency, FCT - Fundação para a Ciência e a Tecnologia, within project PTDC/EGEECO/2621/2021. This work was financially supported by the Research Unit on Governance, Competitiveness and

Decarbonization,Electricity markets,Energy scenarios,Renewable generation,Environmental impact

• Economics and Business - Social Sciences