Finnish energy policy update

The Finnish energy policy is currently going through noteworthy changes. This update shortly outlines the most significant recent developments and future expectations.

Policy outlines of new cabinet
A parliamentary election was held in Finland in April 2015. The new cabinet was formed by the top three parties in late May 2015. Reflecting the weak overall trend of the Finnish economy, the cabinet has announced considerable cuts and plans for reform in five strategic focus areas. “Bioeconomy and clean solutions” has been declared one of the five strategic focus areas and will form a base for future climate and energy policy in Finland.

Bioeconomy and clean solutions
The key target within bioeconomy and clean solutions is perhaps most adequately captured by the cabinet’s mission statement: In the 2020s, the share of emissions-free, renewable energy is increased to more than 50%, and the level of self-sufficiency in renewable energy exceeds 55%. In addition, in the 2020s, the use of coal is to cease fully and the use of imported oil for domestic use is cut by half.

The achievement of this key target is seen to be walking hand-in-hand with the 10-year objective to make Finland a pioneer in bioeconomy and clean solutions.

The “Finnish renewable”
On 2 September 2015, the cabinet announced its first high-level plans on how to achieve the above key target, i.e. the considerable share of renewable energy in the Finnish energy mix.

The cabinet outlined that forest-based bioenergy plays a critical role in achieving the targeted share of renewable energy. This is in line with the previous trends and policies. Forest-based fuels have historically been one of the most important energy sources and have generated most of the renewable energy in Finland. Further, in mid-2014, a strategy for bioeconomy was launched and set a target to considerably increase the volumes of the bio-based industry. The cabinet has announced its intention to allocate state support to projects that accelerate the use of forest-based bioenergy, particularly bioplants and generation of biogas for transportation.

The cabinet further emphasized the importance of “other” renewable energy sources – without identifying any specific renewable or putting the existing ones into a specific priority order.

New state support regime for renewable
On 3 September 2015, the cabinet issued its proposal to the parliament to amend the existing, above market, wind power feed-in-tariff scheme. The proposal does not amend the subsidies of capacity already accepted to the scheme but instead sets certain time and other restrictions that are assumed to limit the factual future allocation of the tariff and thus result in savings in the state budget. In short, it is being proposed that the quota decision whereby capacity is accepted to the scheme is valid at most until 1 November 2017 and potential capacity released e.g. due to delays in the construction of the wind power capacity, will not be redistributed.

At the same time, the cabinet is currently starting its work to renew the state support regime for renewable energy. To date no further information has been given on the contents of the regime. Based on the developments of the wind power feed-in-tariff it is safe to say that future regime will be highly market-based and directed at the most cost-efficient technologies.

Impact of global and EU developments
The Finnish energy policies and market will further be impacted by the outcomes of the United Nations Climate Conference that is held in late 2015 and the new binding EU climate targets for 2030 that will be agreed by the EU member states in 2016. In addition, the launch of a resilient “Energy Union” by the European Commission in early 2015 – that aims to scrutinize member states’ energy policies and to create a single energy market – will accelerate changes in Finland and affect future policies and regulation.

The above developments will be reflected in the National Energy and Climate Strategy for 2030 that is currently being prepared by the new cabinet and expected to come out in late 2016.

What to expect?
Various aspects are currently affecting the formation of Finnish energy policy. The first policy outlines of the cabinet will be further specified in the coming months and years. This is likely to result in changes in the Finnish energy market and in future regulation.

The key message set by the cabinet is, however, clear. The aim is to create a greener Finland through investments in forest-based bioenergy and other renewable. Such investments will be promoted by the state but financial support will be available only to the extent market-based.

For further information, please contact:
Mikko Alkio, Partner +358 50 413 5502
Tanja Koivistoinen, Senior Associate +358 50 540 9510