Ministerial Committee on Economic Policy supports auction model for leasing public water areas for offshore wind power production
On 8 December 2021, the Government’s Ministerial Committee on Economic Policy decided to support the proposal for an auction model that is to be applied to leasing public water areas governed by Metsähallitus to private companies for offshore wind power development and construction projects. The proposal aims to boost the market-driven development of offshore wind power.
The progress in wind power technologies has been strong in recent years, and considerable amounts of onshore wind power are currently being built in Finland on market terms. So far offshore wind power construction on market terms has not been profitable in Finland, but its profitability is expected to improve in the near future, partly because of the advancing technologies. This is why various operators are showing a growing interest in Finland’s marine areas, including the water areas governed by Metsähallitus, a state-owned enterprise responsible for the management of state-owned lands and waters.
New wind power projects are also needed to achieve Finland’s climate and energy policy objectives. Finland’s objective is to be carbon neutral in 2035 and carbon negative soon after that, which is why the role of wind power and other renewable energy as an energy source is becoming increasingly important. The European Union has also set ambitious targets for the development of offshore wind power capacity in the Member States.
“In the decades to come we will need large amounts of clean electricity for the industry and society as whole. This is why it is extremely important to create a clear and predictable regulatory environment for future offshore wind power investments,” says Minister of Economic Affairs Mika Lintilä.
The model now supported by the Ministerial Committee implements the objectives set in the Government Programme and the ownership policy outlines concerning Metsähallitus, according to which the tasks of Metsähallitus include creating a beneficial business environment for companies. The proposal will also contribute to meeting Finland’s international commitments, and takes into account both environmental considerations and the management of risks associated with responsibility and the environment. Matters related to merchant shipping and national defence operations have also been taken into account in the proposal.
The auction model does not concern the Åland Islands or offshore wind power projects in Finland’s exclusive economic zone outside the territorial waters. The details of the model to be applied in the exclusive economic zone will be specified later.
Areas to be auctioned selected based on overall interest of society
At first, Metsähallitus will conduct preliminary studies concerning water areas and, based on these, will select the areas to be auctioned, taking into account the overall interests of society. Depending on the significance of the project, the Government or the Ministerial Committee on Economic Policy will approve the areas to be leased and the terms and conditions of the auction before starting the auction. They can also set minimum lease prices for the areas. The auction model does not include any financial support to be granted to the operators who win the process.
“The auction model for water areas to be leased for offshore wind power was created in cooperation between the ministries and other administrative bodies and operators in the energy sector. It is based on experiences from onshore wind power projects that Metsähallitus has been involved in. The role of Metsähallitus in the projects is only to act as a facilitator. The winner of the auction will be responsible for applying the necessary permits and, after the contract has been signed, may develop the area in a way that will serve its purposes,” says Minister of Agriculture and Forestry Jari Leppä.
The lease price to be paid for the area is determined in the auction process on the basis of the surface area during the project development and construction phase and, during the production phase, primarily on the basis of the amount of electricity generated. After the auction, the decision on leasing the area is made by the Government or the Ministerial Committee on Economic Policy.
The winner or winners of the auction will have exclusive rights to project development, application for the permits required for construction, construction of offshore wind power and electricity generation in the sea area in question. As the planning and permit procedures for offshore wind power projects may take up to 5 to 10 years, it is important that project development is started early enough and that the responsibility for the development is transferred to the operator or operators at an early stage.
It is estimated that the first auction could take place in 2023 and 2024 and it could concern 3 to 4 areas suitable for offshore wind power production.
Ministry of Agriculture and Forestry: Leena Arpiainen, Ministerial Adviser, tel. +358 29 516 2238
Ministry of Economic Affairs and Employment: Outi Vilén, Senior Specialist, tel. +358 50 475 7725
Jukka Ihanus, State Secretary, tel. +358 295 047 259
Email addresses are in the format [email protected]