Finland

Current Situation
Finland differs from most industrialized countries in that many of its energy needs stem from the Nordic conditions. Finland is located between 60 and 70 degrees northern latitude and a quarter of its area lies north of the Arctic Circle. In fact, one third of all people living north of the 60th parallel are Finns. The annual mean temperature in the south of the country is around 5 ºC and 0 ºC in the north. The population-weighted average number of heating degree days for Finland is 5000, considerably more than in Sweden and Norway (4000). Thus, the Finnish climate is the coldest in the EU and, consequently, a large share of the energy (22 %) is used for the heating of buildings.

Of primary energy consumed in Finland, around 25 % is covered with renewable sources. This is one of the highest figures among all industrialized nations and the third highest in the EU. Finland is among the leading countries in the use of biomass in energy production. Share of bioenergy is 20 % of all primary energy consumption and, therefore, the second highest in the EU after Latvia.

The high share of biomass in Finnish energy production is explained by the large forest resources of the country and a highly developed wood and paper industry. Most of the country (68 %) is covered by boreal coniferous forests. The wood and paper industry accounts for nearly two thirds of all industrial energy consumption but it is also a major producer of renewable energy. Most liquid and solid industrial wood residues are recycled into energy production, which accounts for 20 % of Finnish primary energy use. Thus, the wood and paper industry is for large part energy independent.

Biomass is widely used as a fuel in electricity production, CHP plants and district heating, often mixed with other fuels, especially peat. In fact, Finland is among the world leaders in the use of CHP. Both renewable and fossil fuels are used. The world’s largest bio power plant with a capacity of 265 MW is situated in Pietarsaari in Finland. Wood is also used directly for heating. In total around 6 million m3 or 50 PJ of firewood are used annually for space heating. There are also dedicated boilers that burn wood chips or pellets. Fuel oil fired heating can be converted to use pellets, which has been estimated to have a potential of 25 PJ/a. (VTT, 2002)

Agricultural biomass production takes place on a modest scale. Annually around 6000 tons of straw is used as a fuel, while theoretically a maximum of 1.8 million tons could be used. Furthermore, turnip rape is cultivated on about 860 hectares mainly for lubrication oil and diesel oil production. Finally, there is some interest in the possibility of growing reed canary grass for use as a fuel. Some tests have been carried out in its use in multifuel boilers and as a raw material for pellets.

The second largest source of renewable energy after bioenergy is hydropower, most of which is large-scale production (90 %). The total capacity amounts to 3 000 MW, of which 300 MW is small-scale. There are numerous old dams and abandoned small hydropower stations once operated as power sources for mills and saw mills. Therefore there is potential for increased small-scale production. In a larger scale there remain some potential unharnessed sites. However, environmental concerns limit the possibility of building new capacity.

There is relatively little production of wind power in Finland compared to other Nordic countries. Less than one percent of energy is produced with wind power. In 2007 VTT calculated that the national capacity is 107 MW and quickly growing partly due to a 40 % government grant on investment costs, preferential taxation and other subsidies. Major wind power potentials have been identified in the fells of Lapland and in coastal areas. Also there is an indigenous industry producing wind power plants and components.

Perspectives
The Finnish energy policy is based on the National Climate Strategy of 2001, updated in 2005 and 2008. The strategy provides the basis for policy preparation, decision-making and negotiations on national, EU and international levels. In its most recent adaptation, the strategy focuses on setting guidelines up to 2020 and a vision as far as 2050 to steer long-term planning.

The aim is to fulfil the Kyoto Protocol and its obligations by 2013. By that time, adequate post-Kyoto emission reduction measures should be in place, including the set of measures required of EU countries by 2020 by common agreement. To that end, the EU requires its members to report by 2016 about their ability to meet the obligations set for 2020. With regard to renewables, the EU goals aim to a share of 38 % of final energy consumption in Finland by 2020, compared to 28.5 % in 2005 and a previous national goal of 31 % by 2020.

The national long-term vision aims at halting the growth of final energy consumption on one hand, and increasing the share of renewables on the other hand. To attain these objectives, the energy efficiency of consumption must be enhanced, particularly in housing, construction and transport, and new policy measures must be enacted to promote renewables.

The government expects the growing global demand of fossil fuels to drive their prices further up in the long term. Combined with the cost of emission allowances, this will significantly change the price relationship of fossil and renewable energy in favour of the latter. The government envisions significant growth in the use of wood-based energy, waste fuels, heat pumps, biogas and wind energy. A feed-in tariff system will be introduced as a major new policy measure to drive the introduction of renewables.

Other major points in the strategy include:
The use of bioenergy in the forest industry will be maximised.
The use of wood residues from forestry as a fuel and raw material will be tripled by 2020 to 12 million m3.
The government will support the installation of heat pumps, bioenergy and solar energy systems for space heating.
The use of fossil oil for heating will end at the latest during the 2020’s.
The use of agricultural biomass and biogas as fuels will be increased.
New technologies for transportation biofuel production will be explored with the aim of having a share of 10 % for biofuels in transport fuel use by 2020.
Installed wind power capacity will increase to 2000 MW by 2020 from the present 120 MW with the help of various subsidies.
The government will support the use of off-shore wind power by leasing the sea areas with low tariffs.
The government will encourage power uprates in old hydropower plants and the construction of some new hydropower plants.
The use of recycled fuels will increase with 150 % by 2020.

Key Players
Energy markets in Finland are based on free enterprise and open competition. The electric power industry in Finland has been open for competition since the new electricity market legislation in 1995. At the same occasion Finland joined the joint Nordic electricity market area where spot prices for electricity are determined at the common electricity exchange Nordpool. Power can be bought and sold freely in Finland, Sweden, Norway and most parts of Denmark.

For district heat there is no national market for technological reasons, as heat cannot be transported over long distances. However, district heat is largely produced by the same energy companies in centralised district heating plants or CHP plants. Locally there is usually only one district heat provider available, which means that the competition takes place between alternative heat sources. Biomass fuels and peat are commonly used for district heating. Some district heat is also sold in small scale by local entrepreneurs who produce it with biomass fuels. The government company for promoting energy efficiency, Motiva, has a program for promoting small scale heating entrepreneurship.

In the Nordic electricity market, each country is independently responsible for its transmission grid. In Finland the local distribution grids are owned primarily by local energy companies. The national transmission grid is owned by the Fingrid corporation which for its part is owned jointly by the state, energy companies and financial investors. Major changes in the ownership of Fingrid are expected as new EU legislation will forbid energy producers from owning parts of the transmission grid.

The largest electricity producers in Finland are Fortum, the state energy company, Pohjolan Voima, the energy company owned by major industries, Teollisuuden Voima, the industry-owned nuclear power company, Helsingin Energia, the power company of Helsinki City, and Vattenfall, the largest energy company of Sweden. There are also a large number of small and medium-sized local energy companies. A special feature of the Finnish electricity markets is companies like Pohjolan Voima and Teollisuuden Voima that operate with the Mankala-principle. That is, they do not pay dividends, but rather provide power to their owners without seeking profit.

Moreover, many of the industrial corporations are themselves major energy producers as in a number of factories process wastes are used as fuels. In most cases such fuels originate from wood processing and, therefore, count as renewables. Thus major producers of bioenergy in Finland include all the major wood and paper industry corporations: Stora-Enso, UPM and M-Real. Furthermore, the national oil company, Neste Oil, is a growing producer of biofuels and biodiesel in particular. Largest hydropower producers are the state-owned companies Fortum and Kemijoki and the industry-owned Pohjolan Voima. The largest producer of wind power in Finland is the Hyötytuuli corporation, owned by the energy companies of various cities. Hyötytuuli produces about one third of wind power in Finland. The rest is produced by a large number of companies in relatively small power plants.

One small, but interesting player is St1, a Finnish energy company who states as their vision “to be the leading producer and seller of CO2 aware energy”. The company researches and develops economically viable, environmentally sustainable energy solutions, and their energy services cover everything from energy consultancy to heat production solutions and wind power. They operate in Finland, Sweden and Poland.

The largest producers of RES technology in Finland are
ABB, produces among other things components to wind power plants.
WinWind, producer of wind power plants.
Foster Wheeler and Metso Power, producers of boilers for biomass and other fuels.
NAPS Systems, producer of solar power systems.

Smaller companies that produce energy-related clean technology include Aidon, Bearing Drive Finland, DGT Direct Granulation Technology, EcoSir, Finnish Electric Vehicle technologies, Greenvironment, Modilis, Primet, Puhdas Energia and The Switch.

Energy efficiency in Finland is promoted by the state-owned company Motiva. Public funding for the development of new technologies is primarily distributed by the Finnish Funding Agency for Technology and Innovation Tekes.

Job Demand
Electricity and district heat production employed 14 000 people and oil refining and distribution 13 500 people out of the 2 500 000 people employed in Finland in 2003. Bioenergy sector employed an estimated 6000-7000 people. The total employment in the energy sector amounted to 34 000 people in 2004.

The major renewable energy sources, namely hydropower and bioenergy are produced in a large scale, where business models and jobs are similar to other large-scale energy production. There is additionally small scale production of renewable energy that tends to generate small enterprise and a proportionally greater amount of jobs. For example, the Ministry of Employment the Economy has conducted a research that found that there are 368 small bioenergy companies that provide 1 667 jobs. The amount of companies and jobs has grown steadily in the past years and the growth is expected to continue given the ambitious goals for bioenergy in the national climate and energy strategy. Given that there is established production of wind power plants and plant components, the increased use of wind power in Finland and elsewhere can be expected to create jobs in the sector. This would generate demand for professionals of all levels in mechanical, material and electrical technology. Similar demand can be expected from the increased use of bioenergy and the production of the necessary power plant components. Professionals in chemistry and life sciences and related fields will be needed for the envisioned development and production of the next generation of biofuels. They will also have an important role in developing the forest industry towards more versatile biorefineries instead of traditional pulp and paper mills.

Finally the strengths of the Finnish electronics industry and education can give rise to a variety of clean technologies such as solar power (e.g. roll-to-roll PV panels), control systems for power production and consumption, electric vehicles, etc.

Finland

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