Portugal secures funding for geothermal incentive program from EU Modernization Fund
Lisbon, Portugal (source: flickr/ Andrea Mann, creative commons)
Carlo Cariaga
8 Jan 2026
Portugal will be receiving EUR 15 million in funding from the EU Modernization Fund for a financial incentive scheme to advance geothermal utilization.
The Directorate-General for Energy and Geology (Direção-Geral de Energia e Geologia / DGEG) of Portugal has announced the approval of its application to the European Union’s Modernization Fund, which guarantees Portugal €15 million in funding for the creation of a financial incentive system aimed at harnessing geothermal potential in mainland Portugal.
The Modernization Fund supports investments in renewable energy, energy efficiency, and grid modernization in 13 lower-income EU Member States. Established in 2018 for the 2021-2030 period, it aims to help the beneficiary Member States achieve their climate targets and the objectives of the European Green Deal.
This will be the first project in Portugal to receive funding from the mechanism following the declaration of the country as one of the eligible Member States in January 2024. The measure aims to promote the sustainable use of natural mineral waters with temperatures equal to or greater than 25 °C.
The measure will initially cover the decarbonization of thermal spas, but projects enabling the creation or expansion of geothermal power plants, as well as complementary systems, will be funded. In cases where the beneficiaries are public entities, the fund will cover the construction of small geothermal heat distribution networks. Such projects will under two of the priority areas of the EU Modernization Fund, namely:
- Generation and use of energy from renewable sources, including renewable hydrogen
- Heating and cooling from renewable sources
With a budget of €15 million and funding covering 100% of eligible expenses, this initiative reinforces the national commitment to the energy transition, integrating into a European effort that has already mobilized more than €20.7 billion for 294 projects in the field of clean energy. The Modernization Fund is financed by revenues from carbon emission allowance auctions.
Geothermal power development in Portugal has been concentrated at the Azores islands, notably at the Pico Vermelho and Ribeira Grande geothermal fields, under the operation of EDA RENOVAVEIS. Geothermal energy has also been harnessed for heating in mainland Portugal, particularly at the Algarve region, where geothermal supplies all-year heating for the touristic hotspot.
Source: DGEG
