Energy policy in Finland – how will we reach the RES targets

Total energy consumption by energy source, 2009

Nuclear energy 19%

Net imports of electricity 3%

Wind power 0.08 %

Hydro power 3%

Natural gas 10%

Heat pumps, solidrecovered fuels, other 2%

Peat5%

Wood fuels 20%

Coal 11%

Total energy consumption by energy sources 1 327.7 PJ (368.8 TWh)Source: Energystatistics 2010 Eija Alakangas, VTT

Oil 25 %

1 TWh = 3,6 PJ

1/2012 2 EOS/AL

Energy consumption by sector

Transport 17%

Space heating 21%

Other consumption 15%

Industry 44%

Total energy consumption by sector was 1 034 PJ.

1/2012 3 EOS/AL

Electricity production in 2009

Indigenous energy sources 32%

Natural gas 12%

Net electricity import 15%

Oil 0.6%

Coal 13%

Nuclear power 28%

Indigenous energy sources

Wind power 0.3%

Other fuels 2%

Peat 5%

Wood fuels 10%

Hydro power 19%

Eija Alakangas, VTT

Total electricity production was 81.3 TWh in 2009, of which by renewable energy sources 21.1 TWh (26.1%).

1/2012 4 EOS/AL

Renewable energy sources, 2009

Use of renewable energy sources was 337 716 TJ (93.8 TWh), 25% of total energy consumption. Bioenergy use was 284 177 TJ (78.9 TWh), which is 84% of RES.

1/2012 5 EOS/AL

Use of forest chips in Finland, TJ

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

50 000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Forest chips in industry and energy utilities

Forest chips in small-scale use

TJ

1/2012 6 EOS/AL

Bioenergy in Finland

• Over 400 medium and large scale biopower and heating plants (mainly CHP-plants) - From farm size up to the world´s biggest construction

• Finland is one of the world leaders in the utilisation of wood-based fuels

• Almost 80 % of RES is wood-based bioenergy • About 65 % of RES is based on residuals from forest industry

• Technology and logistic know-how globally well-known, global export over 0,5 billion euros

• Business volume 2,5 billion euros • Level of employment (direct): 26 000 man-years

1/2012 7 EOS/AL

• According to the scenario of 2010 final consumption of energy in 2020 would be 327 TWh

• The 38 % of RES equals to 124 TWh • In 2005 the use of RES in final consumption was 87 TWh • Needed increase of RES 2005 2020 is about 38 TWh • The structure of the Finnish energy economy is very

diversified Forest energy has a central role in renewable energy Share of RES is very dependent on the by-products

from our forest industry

New scenario in 2012

Increase of the use of RES

1/2012 8 EOS/AL

Shares in the increase of RES in primary energy in 2005–2020, %

48 %

15 %

15 %

16 %

6 %

Forest chips

Wind Power

Heat Pumps

Biofuels in transp

Other

Other includes hydro power, small Scale use of wood, biogas, pellets, Solar energy and the reduction of bi-products from forest industry

Increased use of RES in primary energy 39.2 TWh and in final consumption 37.5 TWh

1/2012 9 EOS/AL

Verifier

Network operator's meter Produced electricity per each hour MWh

W

Producer

- Verifies that producer complies with requirements - Verifies the amount of produced electricity per each hour

Energy market authority

- Approval of producers (including the target price) - Approval of verifiers - Supervision of verifiers and producers - Information and guidance

information on 3 months

∑ production MWh Target price

€/MWh

NordPool spot

3 kk Spot market price €/MWh

Energy market authority

(Calculation of the feed-in tariff, Database)

Supervision

Payment

State budget

€

€ €

Feed-in tariff system in Finland Payable Feed-in tariff =

(Target price – Spot market price) X electricity production

1/2012 10 EOS/AL

Feed-in tariff for wind power • The production of wind power is

increased to 6 TWh by 2020 • Wind power production now only

0,3 TWh • Feed-in subsidy = target price –

electricity spot market price • Target price for wind power 83.50

€/MWh • ”Early bird” –bonus until the end

of 2015: target price 105.30 €/MWh for max three years

• The total cost of the subsidy system in 2020 is 200 million €, if market price is 50 €/MWh

0

20

40

60

80

100

1 51 101 151 201 251 301 351

pvä (2008)

€/M

Wh

Paid tariff

• The aid system took effect on 25 March 2011 after the European Commission had approved the state aid notification.

1/2012 11 EOS/AL

How tariff level is defined for biogas electricity?

• Tariff is paid to power plants using biogas from biogas reactors (not biogas from landfills)

• No restrictions for raw materials • Target price for biogas electricity is

83.5 €/MWh and the tariff is paid for 12 years - in CHP generation target price is 133.5 €/MWh.

• Producer is paid a tariff, which is the difference between the target price and the spot market price (E.g. tariff is 83.5 €/MWh, if spot price is 50 €/MWh)

• With the tariff level • Farm-size biogas plants are

not economical • Plants using bio waste and

manure are economical if they receive fees from bio waste

• Estimated size of the system • About 60 plants • 19 MW, 150 GWh

1/2012 12 EOS/AL

Forest chips and other wood energy

• In 2009 the use of forest chips was about 10 TWh i.e. about 5 million solid cubic meters

• The use of forest chips will be increased to 25 TWh in 2020 i.e. about to 13.5 million solid cubic meters

• A subsidy package of three components to promote wood energy • Feed-in tariff dependent on EU-ETS allowance price for

electricity from forest chips • Feed-in tariff for small CHP plants using wood energy • Energy subsidy for small diameter wood from young forests

1/2012 13 EOS/AL

Production subsidy dependent on EU-ETS allowance price for electricity from forests chips • The share of wood fuel is increased

in multi-fuel boilers using wood and peat.

• Production subsidy dependent on EU-ETS allowance price as follows: 18 €/MWhe if CO2 price max. 10 €/t, the subsidy deceased linearly to 0 €/MWh when CO2 price is 23 €/t.

• Capability to pay for forest chips is set to 21 €/MWh

• The total cost of the subsidy scheme with present CO2 price (14 €/t) is 24.8 million € and in 2020 (CO2 price 20 €/t) the cost is 22 million €.

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20

25

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Market price of emission allowances, EUR/CO2t

Cap

abili

ty to

pay

for f

ores

t chi

ps, E

UR

Needed capabitlity to pay forforest chipsCapability to pay for forestchips, CHP district heatingCapability to pay for forestchips, condensing powerCapability to pay for forestchips, CHP industrialCapability to pay (withotsubsidies)Aid for fuel

• The aid system took effect on 25 March 2011 after the European Commission had approved the state aid notification.

1/2012 14 EOS/AL

Feed-in tariff for small CHP plants using wood energy • Boilers producing only heat are

replace with CHP plants • Target price (feed in tariff = target

price - electricity spot price) for new CHP plants with typical generation capacity of 3 MWe

• Heat premium 20 €/MWhe • Subsidy max. 750 000

€/plant/year • About 50 new investments by

2020 and increased use of wood fuels about 1-1.5 TWh.

0

20

40

60

80

100

1 51 101 151 201 251 301 351

pvä (2008)

€/M

Wh

Paid tariff

+ heat premium 20 €/MWh

• The aid system took effect on 25 March 2011 after the European Commission had approved the state aid notification.

1/2012 15 EOS/AL

Aid for forest chips from small diameter wood • The aid is paid for energy wood, which is obtained in connection

with forest management from young stand tendering and first thinning sites.

• Supply of small diameter wood is not dependent on cycles of forest industry, like logging residuals and stumps.

• High production cost because of small volume which can be collected per hectare (m3/ha) and high labour intensity

• The aid system is based on the Act on aid for forest chips from small diameter wood from young stands (101/2011), but the aid level and further details will be determined Government Degree.

• In the Government Bill proposed an example: aid level 10 €/m3 and aid is paid for max 45 m3/ha

• Pre-notification of the system has been sent to the European Commission

1/2012 16 EOS/AL

Biofuels in transport sector • The use of biofuels in transport sector will be increased to 7 TWh

by 2020 based on a national obligation to the retailers of transport fuels.

• The obligation in the new legislation is set to 20 % in 2020. • The aim is also to supply biofuels from domestic large scale 2nd

generation bio-diesel plants (three plants are planned). Investment subsidies will be granted to these plant both from national and EU (NER300) financing sources.

1/2012 17 EOS/AL