Finland's FIT feeds market development

FINLAND: Finland's new feed-in-tariff (FIT) has stimulated significant applications for wind projects, with 6GW onshore and 3GW offshore at the planning stage, according to figures released in April by state technology institute VTT. The government is optimistic that its target of 2.5GW of wind by 2020 will now be met.

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VTT says 70% of onshore and 80% of offshore applications were lodged between October 2009 and October 2010, following the September 2009 government announcement of the introduction of the tariff and the June 2010 confirmation for the timetable for the first phase of the FIT.

VTT estimates that capital investment costs for onshore projects are around EUR1.5 million/MW and about EUR2.5 million/MW for offshore projects.

Finland produced 197MW of electricity from 130 turbines in 2010, after adding 16 turbines and 50MW of installed capacity. This underscores the scale of the challenge required to meet 2020 targets because, to reach them, Finland will need to add 250-260MW a year.

Based on latest planning applications and project startup data, Finland will probably surpass the 2.5GW figure, economic affairs minister, Mauri Pekkarinen says.

"Given that further construction of nuclear power plants is under scrutiny, we can no longer delay measures to use and promote renewable energy sources in Finland," says Pekkarinen.

Frans Liski, CEO of wind farm developer Rajakiiri agrees, saying: "We can see by the level of heightened planning activity that investors were waiting on the government to put a transparent tariff system in place. Our view is that we will see more investors, Finnish and foreign, want to build windfarms in Finland because that tariff is now functioning."

The statute regulating the FIT came fully into effect in late March. Some elements were introduced in January, but the use of state subsidy required approval by the European Commission, and this was received in mid March.

Generous tariff

The tariff will apply to turbine units larger than 0.5MW. It guarantees that electricity producers receive a target price of EUR83.5/MWh for 12 years. In order to generate immediate investor interest and fast-track the construction of wind power projects, the target price will be EUR105.3/MWh until December 31, 2015.

The government expects to pay out the full amount of EUR300 million a year in FIT payments. Their calculation is based on the average price of electricity of EUR50-EUR60 per MWh.

"Should the price of electricity increase or fall markedly from this level, then the need for the subsidy will decline or rise as the case may be," Pekkarinen says.

Finland has a target to increase the use of renewable energy from 28.5% to 38% by 2020. This projection sees the contribution from wind rise from its 2010 level of 0.3% to 4.5-5% by 2020.

Some commentators believe that planning laws need to be reformed to accelerate projects to the start-up stage. In particular, an agreement needs to be reached with Finland's defence forces, which are a key obstacle to development, says Saini Heikuri Alborzi, a planning director in Ostrobothnia province.

"The military feels that wind turbines pose a threat of interference with their radar systems, and they are constantly objecting to wind projects," says Alborzi.

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