Perfect potential impeded by politics

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With Finland's prime minister having signed the permit for construction of the country's fifth nuclear reactor -- a project he had campaigned against during all his political life -- the country's vast wind power potential looks as if it will be left largely untouched for many years to come

With a staunch anti-nuclear campaigner as its new prime minister, and generous wind energy subsidies on offer, Finland should be a market of great potential for the wind industry. Nothing could be further from the truth. The state-funded Renewable Energy Program (REP) -- which offers a i0.069/kWh tax credit for wind production and capital subsidies of up to 40% -- is all but impotent faced with a government fixated on developing a domestic energy base around natural gas, energy imports, biofuel, hydro and nuclear power -- and a horribly complex permitting procedure for wind plant.

The subsidies on offer make wind development feasible, says Ralf Granholm, head of ABB Finland's wind energy unit, but only just. Finnish electricity prices are so low that even with subsidies wind struggles to compete. Indeed, most wind generated electricity in Finland is sold directly to customers willing to pay 3-5% more for green power, points out Henrik Lindqvist, who manages Ålands Vindergi Andelslag Ab, a wind plant operator based in Mariehamn. For a new project, he says the deciding factor is the price the associated green credits can fetch.

Granholm also points out that the sliding-scale system for granting capital subsidies -- which gives small projects a higher subsidy than large projects -- works against good project economics. The Finnish Wind Power Association agrees. It says the tax credit structure of the support system and the higher subsidies for smaller projects work against its success.

The i0.069/kWh credit, effectively a negative energy tax, can be offset against pre-tax earning by anybody investing in a wind plant. But it is not deemed incentive enough to promote large scale wind power development in Finland. Merja Paakkari, director of the Finnish Wind Power Association, also points out that more often than not the capital subsidy is 30% not 40%. "With these subsidies it is unlikely that we will be able to reach the target set by our government -- 500 MW by 2010. The reason is not so much the amount of subsidy, because it is unlikely that the state will raise it, but the way subsidies are paid," he says.

Timo Mäki, who heads the Hyotytuuli wind power development group, also says the 500 MW target is unreachable under current policy. "To achieve it, Finland would need to add 2 MW of energy every second week from now on," he says. Hyotytuuli plans to build Finland's largest wind farm, comprising 15, 3 MW turbines, by 2007.

"Another problem is the complicated and lengthy planning submission and permission procedures. These discourage large scale developments, while restricting development to small sized projects with several turbines at once," continues Paakkari. State guarantees for loans and a requirement that wind power is given priority grid access would help counteract the market uncertainties caused by the poorly structured subsidy system, he adds, but that would require the government adopting an entirely different attitude to wind power.

Energy compromises

Since prime minister Matti Vanhanen came to office nine months ago, his energy policy has been anything but pro-wind. The delicate balance of Finnish politics has required him to make huge compromises on his anti-nuclear and pro-renewable beliefs. The cliché that there are few certainties in political life is unquestionably true in the case of 47-year-old Vanhanen, who left his post as the Centre Party's European and energy affairs specialist to replace a hapless Anneli Jäätteenmäki as Finland's prime minister in June last year.

Vanhanen's appointment was as surprising as it was unforeseen. It had significant shock and awe value. The shock ingredient materialised in Vanhanen's high profile track record as a vigorous opponent of atomic power and a strong critic of Finland's fifth nuclear reactor project (FIN5). But it is the awe component of Vanhanen's selection that has had most impact on energy policy. The Centre Party's most vocal adversary of nuclear power has endorsed a decision taken by parliament in May 2002 to approve the construction of FIN5, a project which Vanhanen spent the whole of his adult and political life campaigning against.

The problem is that the former defence minister succeeded in winning the prime minister's job not for his views on nuclear energy and the environment, but because he was regarded as a safe pair of hands following the debacle that was Anneli Jäätteenmäki's brief and controversial stint in office.

The cross-party support Vanhanen received came from his coalition partners: the Social Democrats (SDP) and the Swedish People's Party (SFP). It was given in the knowledge that FIN5 was a done deal regardless of the prime minister's hostility. In this political reality, there is little Vanhanen can do but rubber-stamp the will of parliament, especially with a majority of his 18 ministers supporting FIN5. All three coalition parties, but especially the Centre Party and SDP, are deeply split on the issue.

What is also crystal clear is that the labour movement backed SDP would without hesitation use the FIN5 issue to collapse the government if Vanhanen ever attempted to overturn the parliament's approval of the plant. The SDP demanded, and received, pre-nomination assurances from Vanhanen that he would not interfere with the vote. In his official government program he has pledged to push through the permit for FIN5 without delay.

What of wind?

So where does all this leave Finland's minnow sized and struggling wind power industry? Just 2 MW was built last year and Finland ended 2003 with no more than 40.7 MW of operating wind capacity supplied by some 64 wind turbines.

The government's energy policy does offer some hope. Coal fired power plants are to be more tightly regulated. State funding of wind, solar and small-sized hydro power plants is likely to double in terms of total allocations to alternative energy projects by 2006. "We have approved subsidies to companies planning to build new wind capacity totalling 20 MW at locations in Raahe, Inkoo, Hanko, and Nauvo. We hope to receive more applications, but few have materialised of late," says Mika Anttonen, head of the Ministry of Trade's wind project assessment department.

Despite such good intentions, Finland's wind industry chiefs can argue, and with some justification, that they have heard such promises before. Particularly frustrating is the knowledge that the Finnish wind resource is considerable and that it provides a perfect match for hydro: when the wind blows, water can be stored in reservoirs, which can be utilised in still weather. The combination means Finland could achieve a highly sustainable energy system, both economically and environmentally. The recently published West Finland Wind Report, sponsored by the environment ministry, estimates the wind power potential of Finland's west coast alone could be up to 8000 MW.

Among the many factors working against exploitation of the large wind resource is the possibility that FIN5 could trigger a FIN6 for a similar 1000-1500 MW of nuclear capacity. The Baltic Estlink underwater interconnector, linking Estonian and Finnish grids, is due for completion 2005, providing 315 MW of cheap coal capacity. Coal and oil fired plants in Finland will lose market share, but this is likely to be compensated for by increased natural gas and electricity imports from Russia. By 2010, it is expected nuclear will meet 24-30% of Finland's annual energy requirement, hydro power 18%, coal (mainly combined heat and power) 10%, oil 5%, energy imports 20% and natural gas fired power plants 15%. The contribution of wind, solar and biomass is set to remain at 1.5-2%.

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