Global thirst for low-carbon energy technology – what has Finland to offer?

22.3.2018 9.16
Column

If we are to stop or even slow down global climate change, we need to accelerate our efforts to reduce greenhouse gas emissions. We will not be able to achieve this with traditional technologies alone, and therefore we need to find new solutions. What role does Finland play in this global innovation effort?

The Paris Agreement on climate change aims to hold the rise in the global average temperature to well below 2 degrees Celsius above pre-industrial levels and pursue efforts to limit the increase to 1.5 degrees. This is the time to accelerate our efforts to reduce emissions, otherwise we will fail to achieve these targets.

The International Energy Agency IEA estimates that without significant new policy measures the use of fossil energy sources – crude oil, natural gas and coal – will continue to grow at least until 2040.

The European Union and the industrialised world in general have started to reduce emissions, to some extent at the expense of short- and mid-term economic growth. Developing countries have a different approach, and their policy efforts aim to reduce poverty and improve living standards. Moreover, many seem to think that the West should shoulder the costs of combating climate change.

How to bridge this gap in the global approaches to climate change mitigation? The fact is that in the long-term there are no winners in climate change, not in economy or the environment. In my view, the key is climate change mitigation that does not increase costs unreasonably even in the short term compared to the more traditional approach.

One way to level the effective costs is to introduce a comprehensive global tariff or tax on pollutant emissions, which would make concrete the negative externalities of greenhouse gas emissions. Another question is, however, whether this approach would ever be politically feasible.

It is, therefore, of utmost importance to reduce the costs of low-carbon solutions to make them more financially attractive. We will need technological breakthroughs and clean energy investments within the next few decades to meet our emission reduction targets beyond 2050. At the current pace we are unlikely to meet them. However, we can achieve a lot even with existing technologies.

According IEA scenarios, an average of 2.4–2.9 trillion dollars a year will be invested in energy production and use. These investments, when properly allocated, will pave the way for a major transition in the energy sector. The vast amounts of funding will also open unprecedented opportunities to develop new technologies.

Finland has excellent potential: stability, skills and partnerships

It is necessary to identity and understand the links between long-term energy and climate policy and technological development. We in Finland have excellent potential to take active part in the move toward a low-carbon future.

Our energy and climate policy is consistent and ambitious. By 2030, renewables will account for half of the energy consumption in Finland. The share of fossil fuels is already relatively low and will get even lower at a quick pace. We have a comprehensive energy mix, which also means comprehensive expertise. We have strong knowledge in many fields, digitalisation included.

Our energy and climate policy incentives drive forward the deploying of new technologies. The administrative branch of the Ministry of Economic Affairs and Employment alone has enormous potential. VTT Technical Research Centre of Finland pursues world-class research in many technology fields. The recently created Business Finland offers companies incentives to spur their research, development and innovation activities. The Ministry grants investment aid (energy and key project aid), aiming to promote new technologies and demonstration projects. The Energy Authority’s regulatory activities spur companies to develop reliable smart networks. The research efforts of the Geological Survey of Finland facilitate the deployment of geothermal energy, among other technologies.

We can and must continue to shift our policy and investment priorities towards supporting the discovery of new solutions. In the long run, this will promote both low-carbon technologies and economic growth. It is essential that companies, research institutes and the public sector partner up to find and invest in new development targets. While this may need more transformative funding, in many cases it will be enough to find common interests and purpose and pursue consistent efforts.

The capacity to rapidly scale up both the quantity and quality of production and exports is vital in the international markets, and we need companies with both capacity and aspiration to operate on new and growing markets. Versatile ways of business collaboration play a key role. The importance of large companies as engines of technology projects and facilitators of contacts cannot be underestimated. However, they need the backing of agile and innovative SMEs with the potential to provide novel approaches.

There are a variety of ways for collaboration: partnerships, outsourcing, and research collaboration, among others. This collaboration should always have the opportunity to cross borders; finding the best international partners is in fact an important key to success.

Finland’s potential in the energy sector also means that we are active and respected in central international energy fora. Finland has been a member of IEA since 1992. In terms of technology cooperation, it is probably even more important that Finland together with three other Nordic countries have gained access to the high-level global fora of Clean Energy Ministerial (CEM) and Mission Innovation (MI), formed around the G20.

CEM promotes policies that advance clean energy technology, while MI aims to accelerate clean energy innovation by encouraging collaboration between public and private operators. The MI partner countries, Finland among them, have in fact pledged to double their public clean energy innovation investment by 2022. The Nordic countries and the European Commission will be organising the next CEM and MI meetings in Copenhagen and Malmö in May. It will be a great opportunity to showcase Nordic energy expertise.

How should Finland target its investments?

As small countries have limited resources, we in Finland need to define our priorities for public sector measures, at the very least. A sensible start is to deploy our strengths in existing technologies. One of them is related to heat: we have high-level expertise in CHP and district heat generation and the energy performance of buildings. We are also highly skilled in deploying different kinds of wood- and biobased fuels. We have long been using the forest industry’s residues and waste in energy production, and we have companies with world-class expertise in biodiesel.

The open electricity market in the Nordic countries is an excellent basis for finding innovative, market-driven solutions. We have expertise in smart power systems and demand response solutions which are needed to make the most of the growing wind and solar power production. The energy sector is a pioneer in digitalisation. Finland’s other strengths in the international market include remote operation and supervision of power plants, smart meters, and different kinds of software solutions in the energy sector.

Naturally, there are also other technologies where we are among the world leaders. Technologies such as wave power, geothermal energy and final disposal of spent nuclear fuel are in the early commercialisation or pre-commercialisation phase.

We need the Finnish Government to promote exports by opening doors in certain countries, especially in Asia. I would say that the growing markets in countries such as China, India and Indonesia are natural geographical priorities for Finland. In these countries low-carbon solutions are often based on the recycling and recovery of waste, and waste-to-energy could be a promising field for cooperation.

We should not forget North America when we talk about leading clean energy solutions. Russia and Eastern Europe have vast potential as a market area for district heat solutions, for example. The importance and role of Finnish Diplomatic Missions in charting and deploying these and many other markets are naturally great.

The key is to identify the most promising technologies and export markets and to target our scarce resources there. We can invest in research and innovation at home, but the best way to expand markets is to go where the buyers are and tailor solutions to customers’ needs. Here, there is a lot of room for improvement, and we at the Energy Department and the entire Ministry of Employment and the Economy Group are accelerating our efforts together with our stakeholders.

Riku Huttunen is Director General of the Energy Department at the Ministry of Economic Affairs and Employment.