Working group looked for the best model to support renewable energy

Ministry of Economic Affairs and Employment 13.5.2016 14.30
Press release
A working group appointed by the Ministry of Employment and the Economy has evaluated whether a model based on investment aid, operating aid or certificates best fulfils the goals set for the new support scheme for renewable energy. The group also considered competitive bidding process as a part of the new support system. The working group submitted its report on 13 May 2016 to Minister of Economic Affairs Olli Rehn.

"Work carried out by the working group is an important part of the preparation of the national energy and climate strategy. Renewable energy requires a clear but also a flexible support scheme that adjusts to the market situation, and that will help us achieve our ambitious objectives without paying too much for the produced energy," Minister Rehn said when he thanked the working group and its Chair Anja Liukko for their competent work.

The working group reviewed the support schemes for the production of industrial scale renewable electricity and the combined heat and power generation. One of the starting points of the review was also to evaluate how the objectives concerning the increase of the share of emission-free renewable energy and self-sufficiency could be achieved in a technologically neutral and cost-efficient manner, while ensuring the preconditions for the long-term development of new technology solutions and renewable energy projects. In addition, the objective was to achieve a clear and consistent support scheme, and efficient management and control of subsidies granted.

According to the working group, a discretionary investment subsidy is suited specifically for demonstration projects and the commercialisation of new energy technology, as well as specified other project types outside the EU ETS. The operating aid scheme for forest chips-based electricity is cost-effective and promotes replacement of peat with forest chips in the combined heat and power generation.

The operating aid scheme, which is based on a technology-neutral competitive bidding process, would be a cost-effective way to guarantee an increase to the production capacity for electricity that uses renewable energy in Finland. Such an operating aid scheme is also an efficient way to ensure that the aid level is as low as possible. The scheme can be made flexible and such that it reacts quickly to changes concerning the need to increase the share of renewable energy. It can be implemented in a number of different ways, and the applied procedure can be developed on the basis of experiences. The scheme would be financed from state budget.

The certificate scheme would be market-based after political decision-makers first set the target level of obligation. The scheme helps facilitate an increase in the share of renewable energy cost-effectively. In a cross-border scheme investments are directed to the areas where their realisation is the most cost-effective as well as otherwise most favourable. There would be no guarantee that investments take place in Finland. As a rule, the scheme is technology neutral, but at the same time the risk of over subsidising applies to it. It would be funded by electricity consumers. In the certificate scheme, the project developer bears the risk for the development of the market price of electricity and the price of the certificate. The high level of risk increases the need for subsidies. The scheme cannot be implemented on a quick schedule.

The Working Group for Developing Subsidy Schemes for Renewable Energy report (in Finnish) is located at: http://www.tem.fi/en/current_issues/publications

Further information:
Government Counsellor Anja Liukko, Ministry of Employment and the Economy, tel. +358 29 506 2078 (Chair of the Working Group)
Senior Officer Pekka Grönlund, MEE, tel. +358 29 506 4815
Senior Officer Kati Veijonen, Ministry of Employment and the Economy, tel. +358 29 504 7170