A strategic opportunity for the energy transition in Portugal

The Modernisation Fund has established itself as one of the European Union’s most significant funding instruments for the energy transition and decarbonisation of beneficiary Member States

July 22, 2026
European project funding

Would you like to identify the most suitable funding strategy and accelerate your energy transition initiatives? CONTACT US

At a glance: the essentials of this article

The Modernisation Fund is becoming an increasingly important instrument for financing energy transition projects in beneficiary EU countries. Following Portugal’s first call in 2025, organisations have a new opportunity to prepare investments that support energy system modernisation, industrial decarbonisation and greater competitiveness, with a second call expected to launch soon.

A strategic funding instrument. The Modernisation Fund supports investments that modernise energy systems, improve energy efficiency and reduce greenhouse gas emissions.

Broad investment scope. Portugal’s first call covered renewable energy, renewable gases, energy storage, smart grids, energy efficiency and renewable heating and cooling.

National implementation model. Projects are selected through national calls and assessed by national authorities, the European Commission and the European Investment Bank.

New Portuguese call ahead. Portugal is preparing a second call with an estimated budget of more than €700 million to accelerate energy transition investments.

Growing opportunity for industry. The fund helps businesses strengthen competitiveness while advancing industrial decarbonisation and energy system modernisation.

As energy costs, regulatory requirements and climate commitments continue to intensify, businesses, energy operators and public authorities are under growing pressure to accelerate the decarbonisation of their activities. In this context, the Modernisation Fund is playing an increasingly strategic role by supporting investments that modernise energy systems, improve energy efficiency and reduce greenhouse gas emissions.

Established to support eligible Member States in delivering the energy transition, the Fund continues to gain importance. Portugal marked a significant milestone in 2025 with the launch of its first Modernisation Fund call, supporting projects aligned with the National Energy and Climate Plan 2030 (NECP 2030) and the EU’s climate neutrality objectives.

Much more than renewable energy

Funded through revenues generated by the EU Emissions Trading System (EU ETS), the Modernisation Fund was established for the 2021–2030 period. In Portugal, the first call highlighted investment categories linked to:

renewable gases and renewable energy sources (solar, wind, hydropower, biomass and renewable hydrogen);
energy efficiency in buildings and industrial processes;
energy storage;
modern and smart electricity networks;
renewable-based heating and cooling solutions.

While national implementation mechanisms may evolve over time, the European framework of the Modernisation Fund remains focused on accelerating the climate and energy transition. Its broad scope makes the fund particularly relevant for industry, one of the sectors facing the dual challenge of maintaining competitiveness while achieving decarbonisation.

How does the Modernisation Fund work?

Unlike many other European funding programmes, the Modernisation Fund operates through a governance model involving the European Commission, the European Investment Bank (EIB) and the national authorities responsible for implementing the instrument.

In broad terms, through a national call, the projects are identified and submitted by beneficiary Member States and subsequently undergo a technical and financial assessment designed to ensure their alignment with the Fund’s objectives and with the European Union’s energy and climate priorities.

This model is intended to ensure that supported investments make a tangible contribution to the modernisation of energy systems, the reduction of emissions and the strengthening of energy security.

A second Portuguese call in preparation

The European framework of the Modernisation Fund continues to prioritise investments that contribute to energy system modernisation, emissions reduction and enhanced energy security. In this context, projects promoting energy system flexibility, the integration of different technologies and the more efficient use of available resources are expected to play an increasingly important role. This approach is essential to ensuring a competitive, secure and sustainable energy transition.

In March this year, the Directorate-General for Energy and Geology (DGEG), the authority responsible for managing Portugal’s first Modernisation Fund call, announced that preparations are underway for the launch of a new call, with an estimated budget of over €700 million.

“For Portugal, the Modernisation Fund continues to represent an important instrument for accelerating projects that support industrial modernisation, reduce dependence on fossil fuels and strengthen economic competitiveness”, highlights Pedro Castro, European Projects consultant at Zabala Innovation. “More than a funding mechanism, the Modernisation Fund is a catalyst for transforming climate ambitions into tangible investments that support the energy and industrial transformation of Portugal and Europe,” he adds.

“At Zabala Innovation, we have been closely following the development of the Modernisation Fund since its implementation at both national and European level, and we support public and private organisations in identifying funding opportunities, positioning investments and preparing applications aligned with the Fund’s requirements”, he concludes.

Contact Zabala Innovation to identify the most suitable funding strategy and accelerate your energy transition initiatives.