Finnish energy policy - IEEJeneken.ieej.or.jp/data/4391.pdf · 1 4 710 13 1 61 922 25 28 31 3 3 40...

22.6.2012L. Muranen

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Finnish energy policy

Lauri MuranenFinnish Energy Industries

IEEJ 2012 June Issue: All rights reserved

Contents of the presentation

1. Background – Special features regarding the Finnish energy sector

2. Supply and demand profile3. Electricity market structure4. Finland as a part of the European energy 5. The role of nuclear power in Finnish energy policy6. Economics – energy as a driver for the Finnish economy7. Recent trends, the forceeable future and beyond

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1. Background

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Finnish Energy Industries

Finnish Energy Industries

•Branch organisation of companies operating in the electricity and district heating sectors

– 250 member companies and 60 co-operation members

•Focus on industrial policy and labour market policy

•40 employees

•Member of the Confederation of Finnish Industries (EK)


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FINLAND

•Population 5,4 M

•Land Area 338 000 km2

•GDP per capita $49,349 (12th)*•(Japan $45 920 18th)*

•Currency: Euro €

•Capital: Helsinki

•Independence 1917 from Soviet Russia

•EU Member since 1995

*IMF

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Finland’s energy challenges

• Mitigation of climate change– Reduction of greenhouse gases and energy efficiency

• Structural dependency on electricity imports, phase-out of older power plants

– Investment needs in power generation capacity

• Energy sources and self-sufficiency– Increase of domestic and renewable energy resources– Energy efficiency

• Energy price competitiveness


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Special energy features in Finland (many are similar to Japan)

• Lack of own energy resources, the share of bioenergy and hydropower is little bit over 30 %, the rest is imported energy.

• Part of integrating Europe, yet geographically isolated – security of supply and competitive prices have been the traditional driving forces and policy rationale for the electricity sector

• Very high energy consumption per capita - biggest user of electricity / capita in EU (c. 16 000 kWh / capita) - Japan C. 7 000 kWh / capita

• High share of low carbon sources (nuclear and renewables) in electricity production (64 %)

• High share of combined heat and power production (CHP) - 30 % of the total electricity is generated with CHP

• High share of district heating, almost 50 % market share in space heating

• Trust in nuclear power

The Finnish energy system is efficient and emissions are at low levelcompared to the EU average


2. Supply and demand profile

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Electricity Consumption in Finland(84.4 TWh, year 2011)

Metal industry10 %

Forest industry25 %

Services and building

22 %

Housing and agriculture

27 %Chemical industry

8 %

Other industry5 %

Losses3 %

Other consumption total 49 %

Industry total 48 %

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Net Supplies of Electricity in Finland(84.4 TWh, year 2011)

Net imports16,4 %

Nuclear power26,4 %

Condense etc11,4 %

CHP, district heating17,6 %

CHP, Industry13,0 %

Hydro power14,6 %

Wind power0,6 %

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Electricity Production by Energy Sources in Finland(70.6 TWh, year 2011)

Renewable 33 %

Carbon dioxide free 64 %Natural gas

13,0 %

Oil 0,6 %

Wind power0,7 %

Hydro power17,4 %

Waste fuels0,9 %

Peat7,4 %

Nuclear power31,6 %

Bio fuel14,3 %

Coal14,1 %

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Variation of Electricity Supply in Finland in 2011Weekly average consumption

0

2000

4000

6000

8000

10000

12000

14000

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49week

MW

Nuclear Power CHP, district heating CHP, industry

Condence etc Hydro power Net imports

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3. Electricity market structure

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Background - market liberalisation in the EU

• Liberalization started slowly in some member states:– UK 1990 (big customers) / 1998 (households)– Norway 1991/1995– Finland 1995/1998– Sweden 1996/1998

• Creating a Nordic electricity exchange in the late 1990’s• EU internal energy market legislation (electricity & gas)

– 1996– 2003– 2009 (Vertical unbundling – producers have had to sell their

shares in transmission companies TSO’s)


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Where we are going - Integration of European electricity markets

IPS/UPS

CWE

Nordic

UK/IE

CEE

SWE CSESEE

Baltic


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Nordic power market

Gas

turb

ines

100 200 400

Hydro power Nuclear

300

Operating Costs(€/MWh)

Generation capacity(TWh/a)

Impo

rts

(Rus

ia)

Win

d

Demand

Market price

Market price with ETS

Con

dens

ing

Coa

l

Con

dens

ing

oil

Impo

rts

Euro

pe

Emisission allowance

CHP


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Imports and Exports of Electricity in Finland

TWh

-8-6-4-202468101214161820

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Exports

Imports

Nordic countries Russia Estonia

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4. Finland as a part of the European energy system - sustainability as a driver of energy

policy

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Key drivers & challenges – the cornerstones of the European energy policy

Security of supply

Environment, Climate changeCompetition,

Affordability

BUSINESS AS USUAL NOT

SUSTAINABLE


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The role of EU’s climate and energy policy

• Common targets for 2020– Climate change – GHG emission reductions (-20% vs. 1990)– Renewable energy (20 % share of end-use)– Energy efficiency (20 % more efficient use of energy)

• EU measures and efforts– Common and open energy markets– Emissions trading scheme with emission caps– Energy efficiency standards for applications– Common environmental minimum requirements

• Primary energy sources are part of national energy policy– National support schemes for renewable energy– National decision on the use of nuclear energy


EU ETS

• Cap-and-trade scheme – Limited and decreasing total number of allowances (t Co2) at

European level– Companies need to verify their emissions and return

equivalent amount of emission allocation units (EUAs) every year

• Commodity market – Anyone can trade EUAs

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CO2 emission in selected EU countriesFigures in 2007-2008 (Eurelectric Power Statistics 2010)

0 2 0 0 4 0 0 6 0 0 8 0 0 1 0 0 0

R u o ts i

R a n s k a

S u o m i

B e lg ia

E s p a n ja

U n k a ri

S lo v e n ia

Ita lia

Is o -B rita n n ia

S a k s a

R o m a n ia

T a n s k a

P u o la

g C O 2 / k W h

Poland

Denmark

SloveniaHungarySpainBelgium

FranceSweden

Romania

GermanyUK

Italy

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Japan: 436 g CO2/kWh (2008)


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Expected trend in CO2 emissions in power generation in Finland in in the EU 2007-2050

Sources: Carbon neutral vision 2050, Finnish Energy Industries 2009Eurelectric: Power Statistics 2010

0

50

100

150

200

250

300

350

400

450

2007 2011 2020 2030 2050 2007 EU-27 2030 EU-27

CO2

g/kW

h

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Main support scheme for renewable electricity in EU member states

Feed-in-tariffs

Feed-in-tariff or premium

Price premium

Green certificates

Investment aid

Investment aid + premium


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Finland´s 2020 commitments in EU energy package

• Climate change target– According to EU energy package division to emissions trading and

other sectors• Energy intensive industries + electricity generation + 90 % of

district heating are part of EU ETS• -21 % / 2020 at EU level compared to 2005

• Outside ETS: -16 % emissions compared to 2005• Renewable energy

– 38 % share of final use of energy (current level 31 %)• Energy efficiency

– 20 % increase in energy efficiency• Traffic

– 10 % share of renewables in traffic


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Bioenergy in Finnish renewable energy planFigures in primary energy, TWh 2005 2020Fuels connected to industrial productionWaste liquors (black liquor) 37 38Industrial wood waste / by-products (bark, sawdust,…) 20 19Total 57 56Renewable energy with energy policy measuresHydro power 13,4 14Wind power 0 6Forest chips 6 25Small combustion of wood 13 12Heat pumps 2 8Biofuels in transport 0 7Biogas 0 1Wood pellets 0 2Recovered fuels (renewable share of) 2 2Other (solar heat and power etc) 0,4 0,4Total 37 77Renewable primary energy in total 94 134Renewable energy in final energy consumption 87 127Total final consumption of energy in Finland 303 327Share of renewable energy in final energy consumption 28,5 % 38 %


5. The role of nuclear power in Finnish energy policy

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Belgium:7 units operating No new planned unitsConditional phase-out by 2025

Bulgaria:2 units operating 2 units under construction

Czech Republic :6 units operating 2 units planned

Netherlands:1 unit operating 1 planned unit

Finland:4 units operating 1 unit under construction2 units planned

France:58 units operating 1 unit under construction1 planned unit

Germany:9 units operating Nuclear phase-out by 2023

Hungary:4 units operating Doubling of generationcapacity planned

Italy:No operational unitsCancelled 10 planned units inreferendumUnited Kingdom:17 units operating 8 units planned

Romania:2 units operating 2 units planned

Slovakia:4 units operating 2 units under construction

Slovenia:1 unit operating No new planned units

Spain:8 units operating No new planned units

Sweden:10 units operating Approval to replace currentunits at the end ofcommercial lifespanSwitzerland:5 units operating Nuclear Phase out by 2035

Ukraine (ei EU):15 units operating 2 units under construction

Nuclear Power in the EU:126 units operating (28 % electricity)6 units under constructionC. 30-40 units planned

Poland: 6 units planned

Lithuania: 1 planned unit


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Nuclear safety on the agenda again in Europe due to the Fukushima accident

• Early reassessment of the Nuclear safety directive (unified framework for nuclear safety regulations)

• Stress tests – meant to test plants’ ability to withstand ”Fukushima-like” scenarios (not earthquake and tsunami as such) where the facility loses access to AC supply, loss of UHS, and severe and prolonged accident management + peer reviews

• Nuclear liability will probably be handled separately – increased liabilities for operators are in the pipeline


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Status of nuclear energy in Finland• Two existing nuclear power plants (4 reactors)

– Capacity c. 2700 MW, generation 22 TWh/a– 2 BWR reactors in Olkiluoto (TVO) (1979 and 1982)– 2 PWR reactors in Loviisa (Fortum) (1977 and 1981)– Phase out around 2030

• One new plant under construction, Olkiluoto 3– EPR / Areva-Siemens 1600 MW– Expected generation 12 TWh/a– Estimated commercial operation in 2014

• Extremely good operational experience from current fleet• Plans for final disposal of spent fuel scheduled, funded and widely

accepted– High level waste storage facility under construction– Low and intermediate level waste storage in use since 1992

• Nuclear power faces a relatively high public acceptance


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Nuclear energy – two new projects in Finland

• Government’s decision in May 2010– Positive decisions of principle for 2 reactors

• TVO: Olkiluoto 4 (1000…1800 MW)– 5 alternative plant suppliers

• Fennovoima: one reactor (max 1800 MW)– 2 alternative plant suppliers

– Ratification by parliament in July 2010• Supplier selection under process• The new units in operation in 2020´s


Nuclear power performance in Finland

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Expected changes in power genearition capacity in Finland

Lauhdetuotanto Ydinvoima Tuulivoima

20102025

Illustrative picture!!!

Conventional condensing

Nuclear power Wind power

Excludes hydropower and CHP


Management of spent nuclear fuel

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Questionnaire sent out on March 11th 2011!!


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38

24

positive 42 %

negative 23 %

%

Development of the acceptance of nuclear power 1982 - 2012 1982-2004 Gallup omnibus, 2006- telephone interview

TNS Gallup OyEnergiateollisuus ry

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012


Reasons for relatively high level of acceptance of nuclear power

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• Independent (of industry and government) and respected safety authority

• Very good operating experiences with existing plants (incl. safety and capacity factors)

• Environmental reasons (esp. climate protection)

• Viable program for permanent management of spent fuel and low + intermediate level radioactive waste

• Economic reasons (need for competitive electricity for the industry and households) and wide ownership base of NPPs

• Consistent communication strategy


6. Economics – energy as a driver for the Finnish economy

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42

Electricity production costs with 20€/t CO2 costs, 8 % interest rate

FuelO&MCapital cost

EUA 20euro/tCO2

All costs without subsidies

Nuclear Gas Coal Bk Peat Wood Wind= 2200 hours /a

Real interest rate 8 %

Cost as of Oct 2010

For thermal generation baseload = 8000 hours / a

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Electricity prices for household consumers (incl. taxes) (consumption 2500-5000 kWh / year) 1st semester 2011

0

5

10

15

20

25

30

35

Bosn

iaBulg

aria

Est

onia

Rom

ania

Cro

atia

Latv

iaLi

thuan

iaTurk

eyG

reec

eFr

ance UK

Slo

venia

Pola

nd

Cze

chFi

nla

nd

Port

ugal

Luxe

mbourg

Hungar

ySlo

vaki

aM

alta

Net

her

lands

EU

-27

Irel

and

Spain

Aust

ria

Ital

yCyp

rus

Sw

eden

Norw

ayBel

giu

mG

erm

any

Den

mar

k

Cen

ts /

kW

h

Source: Eurostat

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Electricity prices in purchasing power standards for household consumers (incl. taxes)(consumption 2500-5000 kWh / year)1st semester 2011

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0

5

10

15

20

25

30

PPS /

100 k

Wh

Source: Eurostat

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Electricity prices for industrial consumers (incl. taxes) (consumption 500-2000 MWh /year)1st semester 2011

22.6.201245

0

2

4

6

8

10

12

14

16

18

20

Bosn

ia

Bulg

aria

Est

onia

Finla

nd

Turk

ey

Rom

ania

Fran

ce

Sw

eden

Cro

atia

Hungar

y

UK

Latv

ia

Slo

venia

Port

ugal

Den

mar

k

Luxe

mbourg

Gre

ece

Pola

nd

Net

her

lands

Lith

uan

ia

Bel

giu

m

EU

-27

Nor

way

Cze

ch

Spai

n

Irel

and

Ger

man

y

Slo

vaki

a

Ital

y

Cyp

rus

Mal

ta

Cen

ts /

kW

h

Source: Eurostat

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Financing nuclear - Mankala principle

• A model for co-ownership of power generation

• A number of varying sized utilities group together with industryto share financial risks of capital intensive project that a single actor would not be able to finance

• A long history in Finland - originates from 1960´s

• Applied widely for all kinds of power generation


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The main principle of mankala ownership

• The mankala companies are limited liability companies• However, the company itself does not aim to produce profit or to

give dividend– The objective is to generate electricity for the shareholders at

cost– The economic result of generating electricity is thus a part of

each shareholders´ own profit and loss account• The obligations and rights to the company are set in the articles

of association and shareholders´ agreement• The owners share the costs

– Fixed costs according to shares in ownership– Variable costs according to shares in generation


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The share of mankala companies in Finnish power generation in 2010

YEAR 2010 Total generation "Mankala"- Sharein Finland production of mankala

FORM OF GENERATION TWh TWh %Hydro power 12,7 7,0 55 %Wind power 0,3 0,2 59 %Nuclear power 21,9 14,1 65 %Thermal power 42,3 11,0 26 %

Combined power and heat 28,1 3,8 13 %Condensing power 14,2 7,3 51 %

TOTAL 77,2 32,4 42,0 %


7. Recent trends, the forceeable future and beyond

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EU Energy Road Map 2050

• Policy initiative by European Commission, December 2011– Under evaluation by EU member states and EU parliament

• Alternative pathways to low carbon energy future– Five different future scenarios

• With more or less renewables, nuclear, CCS, energy efficiency

– In all scenarios appr. -85 % reduction in CO2 emissions in energy use• Remarkable increase in energy efficiency• Role and amount of electricity will increase• Renewables will increase tremendously• Role of energy infrastructure and market will increase

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EU Energy future continued

• One outcome is one single target – i.e. 40 % Co2 reduction by 2030 (targets for renewable and efficiency likely too)

• If support schemes for renewables will continue, increased pressure to harmonize due to market distortion

• Shale gas will likely play an important role in some member states – the shale gas revolution is yet to happen in Europe

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Graph 1: EU Decarbonisation scenarios - 2030 and 2050 range of fuel shares in primary energy consumption compared with 2005 outcome (in %)

0%

25%

50%

75%

RES Gas Nuclear Oil Solid fuels0%

25%

50%

75%

RES Gas Nuclear Oil Solid fuels

2005

2030 2050


Energy future for Finland

• Diverse portfolio including nuclear, renewables and to lesser extent imported fossil fuels

• Natural gas (incl. shale gas) continue to be important albeit not as critical to national energy system as renewables and nuclear power

• Challenges:– Security of supply– Taxes – predictable investment conditions– The future of EU energy policy and climate negotiations

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Thank you for your attention!For more information, please contact

Lauri MuranenFinnish Energy Industries

• Association of electricity and district heating companies

[email protected]. Fredrikinkatu 51-53 B FI-00100 Helsinki

P.O.Box 100, FI-00101 Helsinki Tel. +358 40 707 6637http://www.energia.fi


Contact: [email protected]

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