Proposal for new Renewables Support Scheme published

On 15 September 2017, Finland’s Ministry of Economic Affairs and Employment published the long-anticipated draft proposal for the upcoming renewables support scheme.

According to the draft proposal, the new support scheme will be based on a competitive auction system. It is intended to arrange bidding rounds in 2018 and 2019. In addition to wind power, technologies such as solar, wave, biogas and wood fuel power are covered. According to the current Energy and Climate Strategy, the aim is to make support available for a total of 2 TWh of annual electricity production.

The proposed new support system is similar to the existing Feed-in Tariff for wind power, the difference being that the target price is not fixed at a specific level, but rather determined individually for each project in a competitive auction:

Based on a floor price of EUR 30/MWh, each bidder calculates the additional premium (max. EUR 53.5) required to make the project feasible. Floor price plus premium make up the target price.

Projects are approved into the scheme on a pay-as-bid basis, meaning that the support granted to the winning projects is based on their actual bids, rather than the highest bid still eligible for support.

The amount of premium paid under the scheme would depend on the average market price for the relevant calendar quarter. If the market price is below or equal to the floor price (EUR 30/MWh), the total premium amount awarded in the auction will be paid. If the market price exceeds the floor price, only the difference between market price and target price awarded will be paid.

According to the draft proposal, support will be granted for a maximum duration of 12 years. The 12-year period starts from the date set in the auction bid, regardless of whether or not the project is already in operation.

In order to be eligible for support, projects need to fulfil certain preconditions similar to the existing support scheme. Furthermore, only fully permitted projects with a secured grid connection can participate in an auction round. The bid has to be submitted to the Energy Authority by the relevant due date and include inter alia the amount of premium offered, the annual production volume and information on the generating unit(s). The premium and annual production stated in the bid cannot be altered anymore at a later stage.

Participation in the bidding process is subject to a non-refundable fee of 2,500 EUR. In addition, a security (EUR 2 per MWh of annual production) has to be provided. The security will be released in case the bid is unsuccessful. In case of the winning bid, the bidder has to replace the bidding security by a construction security (EUR 16 per MWh of annual production) within one month of the approval into the scheme.

Finally, the proposed new scheme includes significant underperformance penalties in case the actual annual production stays below the annual production stated in the relevant bid.

The draft proposal is currently open for comments, the deadline for comments being 4 October 2017.