Renewable Energy: The Finnish Context

Political Targets

Finland’s policy framework places a strong emphasis on renewable energies with the goal of becoming a “superpower in the green economy”. The country has positioned itself as a trailblazer in the global transition towards sustainability by setting itself the ambitious goal of achieving carbon neutrality by 2035.

The government program prioritises promoting an affordable, emissions-free, and secure energy system, while also contributing to global climate goals through the export of sustainable energy solutions. In allocating public funds, the focus lies on gaining a competitive edge through research and development, smooth permitting processes, and robust energy infrastructure.

Finland is striving to become a key European player in clean hydrogen and aims at producing at least 10% of the EU’s clean hydrogen demand by 2030.

Energy Markets

Finland has one of the highest per-capita electricity consumptions in the EU. The energy mix is distinctly low-carbon, with the primary sources being hydro, wind, nuclear and biomass. Nuclear power is expected to remain significant in the foreseeable future, with a growing emphasis on small modular reactors (SMRs). Thanks to the increase in renewables, the country is well on its way from being a traditional energy importer to becoming a significant exporter.

While fossil sources have been almost phased out in electricity generation, the heating sector is still catching up. However, with increasing electrification and further expansion of the already robust district heating network, this is only a matter of time.

Finland has a high share of energy intensive industries, including pulp and paper, steel and metal manufacturing, chemicals, mining and wood-based industries. Other large consumers of electricity are the heating and transport sectors. With the rising trend of electrification and the emergence of new offtaker markets such as data centres and Power-to-X, the electricity demand is projected to significantly increase in the coming decade.

Finland’s energy markets are closely integrated within Europe. Finland is part of the Nord Pool power exchange, which operates in 16 European countries, including the Nordics, Baltics, Germany and the UK. High-voltage interconnectors link the national grid to Estonia, Sweden and Norway. To manage this coupling, the national TSOs have allocated reserve quotas they procure from national or joint reserve markets.

Finland has one single price zone, and the Finnish electricity prices are among the lowest in Europe. Except for a peak during the 2022 energy crisis, the annual average has in recent years fluctuated around the 50 EUR/MWh mark, however with considerable seasonal and daily variations.

For gas, energy and capacity are traded wholesale in an entry-exit system that opened to competition in 2020. LNG terminals and the Balticconnector pipeline enable gas flows between Finland and other markets around the Baltic Sea and beyond, and investments to complement these with hydrogen pipelines are underway.

Geography

Finland’s vast area and low population density means there is ample space for renewable projects without significant conflicts over land use. The long distances between cities and regions necessitate efficient energy transmission, making it essential to invest in robust power grids and interconnections.

Wind conditions, especially in the coastal and northern regions, are ideal for onshore wind. At the same time, the consistent winds and comparably shallow waters of the Baltic Sea provide excellent conditions for offshore wind farms. While irradiance levels are lower than in other parts of Europe, advances in technology allow Finland to harness solar energy effectively.

Finland boasts a well-developed energy infrastructure, including power grids and natural gas pipelines. The country’s ports play a crucial role in importing and exporting equipment and materials, as well as in supporting offshore activities. The concentration of industries and the excellent district heating network create beneficial synergies and allows for the effective use of waste heat.

Moreover, renewable energy aligns with Finland’s broader national security objectives. By eliminating reliance on fossil fuels and decentralising energy production, Finland bolsters its energy security and mitigates risks associated with energy imports.

Business Environment

Finland’s dynamic and entrepreneurial business culture fosters innovation, encourages companies to explore sustainable solutions, and facilitates collaboration among businesses. Finnish organisations typically have flat hierarchies, enabling efficient decision-making and open communication.

The energy sector has the benefit of local world-class expertise in clean energy technologies. Companies investing in renewables can tap into this knowledge base, benefiting from research, development, and skilled professionals.

Finnish legal culture puts an emphasis on non-binding guidance and best practices. Authorities are not shy to provide guidance and actively collaborate with project developers to establish optimal permitting approaches. This is particularly valuable in the dynamic field of renewables, where regulations tend to lag behind technological advancements.