Working Group Proposes Market-based Guaranteed Price for Wind Power
On 7 April 2009, the working group considering the structure and size of renewable energy feed-in tariffs submitted its interim report, a unanimous proposal for a feed-in tariff for wind power, to Mauri Pekkarinen, Minister of Economic Affairs. The working group is chaired by Senior Engineer Petteri Kuuva of the Ministry of Employment and the Economy.
The working group suggests that a market-based guaranteed price be introduced for wind power in Finland. Under this scheme, the target price for wind power, to be determined by the authorities, would be €83.5/MWh. The difference between the market price of electricity, and this target level, would be paid to wind power producers as a feed-in tariff. For instance, at a €50/MWh market price, the premium guaranteed by the feed-in tariff would be €33.5/MWh. The producer would gain the remaining portion of income from selling the electricity produced. However, in the initial stages, the tariff levels would be somewhat higher in order to facilitate the rapid launch of investments. The working group will comment on this level in its final report, due in June.
– Due to the rapid implementation of this project, I find it justified that tariff levels be determined by the authorities at this stage. For future purposes, the Ministry will examine the prerequisites for determining the tariff level via competitive tendering, which could be arranged after it has been ensured that such tendering would function well, and that the prerequisites for a genuine competitive tendering process are in place, Minister Pekkarinen commented.
The guaranteed price for wind power would be introduced in early 2010 for a period of 12 years. Under this system, the wind power producer would receive a feed-in tariff, comprising the difference between the guaranteed price and market price. The electricity producer itself would sell the electricity and bear responsibility for the balance. Hence, the system would operate on market terms, and be highly suitable for the Nordic market. Furthermore, the producer would receive tariff payments at three-month intervals.
The feed-in tariff is expected to further the construction of wind power in line with the Government’s Climate and Energy Strategy, whose objective it is to increase the production of wind power to 6 TWh, i.e. by almost 30 times by the year 2020 (current production level approximately 0.2 TWh). The increase in wind power would cover 24 per cent of Finland’s obligation to increase its share of renewable energy by the year 2020.
At present, 21 of 27 EU member states employ a feed-in tariff. Finland's aim is to plan the system carefully, taking account of both positive and negative experiences gained in other countries.
The tariff would be exclusively applied to new wind power plants planned for construction. A power plant eligible for the tariff would have to be located in Finland, or within Finland’s territorial waters, and be connected to the power grid within the territory of Finland. The baseline for power plants constructed prior to the new system is that their position will not be undermined due to the new system.
The working group emphasises that the tariff system would not be sufficient as such to ensure a significant increase in wind power capacity. Therefore, in addition to legislation on feed-in tariffs, it should be ensured that wind power projects can be implemented within a reasonable schedule. In the current situation, schedules may be prolonged due to the slow pace of licensing processes and land use planning in particular.
Currently, insufficient knowledge of wind conditions in Finland poses another challenge, but this will not be improved until the end of the year, as an extensive Wind Atlas, charting Finland’s wind conditions on land and at sea, is due for completion only then.
The feed-in tariff for renewable energy would be financed outside the state budget, with the fee to be collected directly from electricity end-users. This aspect will be further elaborated on in the working group’s final report, due for completion in June.
For the 2020 objective to be met, a little short of one thousand 3MW power plants would have to be constructed. On land, they would normally be located on wind farms consisting of 5 to 15 power plants, whereas projects constructed at sea are larger for reasons of economy. Assessed on these grounds, 80–100 wind farms will be necessary in Finland.
The working group proposes that Fingrid, Finland's transmission system operator, or its wholly-owned subsidiary, coordinate the system. The Energy Market Authority would be responsible for information and advice concerning the tariff system, its monitoring and reporting, and the supervision of compliance with the law.
According to the working group, the initial costs of the feed-in tariff for electricity end-users would be some 10 million euros per year, and, at the highest, i.e. at the end of the 2010s, some 200 million euros, if the market price for electricity were €50/MWh. For an average consumer living in an apartment house, this would entail an additional cost of around 4.4 euros a year, whereas users of electric heating would have to pay an estimated additional €39.6 per year.
Petteri Kuuva, Senior Engineer, MEE tel. +358 (0) 10 606 4819
Antti Linna, Senior Adviser, MEE, tel. +358 (0)10 606 4106