Our point of view

Legal Update | Government Bill on the New Finnish Support Scheme for Renewable Energy

16 November 2017

Government Bill on the New Finnish Support Scheme for Renewable Energy

On 9 November 2017, the Finnish Government submitted to the Parliament a government bill on the new Finnish support scheme for renewable energy. The government bill largely corresponds to the draft bill that was published for consultation purposes in September.

The contemplated subsidy scheme is intended to bridge the gap between the current subsidy scheme and the future development needs of renewable energy sources on market conditions.

According to the government bill, the subsidy scheme would be technology-neutral and applicable to wind power, biogas, woodchips and wood fuel as well as solar power and wave power investments. The scheme would be based on a competitive bidding process, mixing elements of a fixed and a sliding premium.

An energy producer selected to the scheme in the technology-neutral bidding process would be paid the premium it has offered in its bid (on top of the market price) if the market price of electricity corresponded at its maximum to the reference price of EUR 30/MWh. The premium is proposed to be reduced with the difference of the market price and the reference price of EUR 30/MWh when the market price exceeds the reference price 0f EUR 30/MWh. No premium would be paid if the market price for electricity exceeded EUR 30/MWh plus the offered premium.

The bidding processes would be managed by the Energy Authority and are planned to be held in 2018–2019.

The energy producer would be obligated to produce renewable electricity in accordance with its accepted bid. If the set production quota is not met, the energy producer will need to compensate the underproduction to the government.

Based on the government bill, only new projects would be eligible to apply for a permission to participate in the bidding. In respect of wind farms, this means that everything on top of the foundations and apart from the power plant building would have to be new and built using new parts only. To be eligible, no binding construction or supply contracts could have been entered into.  However, the necessary plans and building permits related to the project would need to be valid and legally binding, and the wind power company would need to have received an offer for a connection agreement from the holder of the relevant electricity distribution network.

Projects that have received administrative support or state aid in the past would be excluded.

Only 2 TWh of electricity production would be accepted into the new scheme. According to the government bill, if the last project that fits into the scheme does not fit into it in its entirety, it will not receive support. Additionally, in a situation where two or more projects quoted the price that would be the last to fit into the scheme and the quota would be exceeded if they were all accepted, none of the projects would be accepted into the new scheme. In other words, in practice, there is a risk that the 2 TWh quota will not be used in its entirety.

The premium system will need to be accepted by the European Commission before the provisions regarding the new scheme can enter into force. According to the government bill, this is expected to take 6 to 12 months, which means that the first auction round could be arranged in the fall 2018 at the earliest.

Please find a link here to the government bill (the text is available in Finnish and Swedish).

For further information, please contact:

Klaus Metsä-Simola | Counsel
Telephone: +358 9 2288 4595
Mobile: +358 45 262 8916
klaus.metsa-simola@hannessnellman.com

Rabbe Sittnikow | Partner
Telephone: +358 9 2288 4343
Mobile: +358 40 544 5280
rabbe.sittnikow@hannessnellman.com

Tapio Teräkivi | Partner
Telephone: +358 9 2288 4373
Mobile: +358 40 769 8273
tapio.terakivi@hannessnellman.com

Maria Landtman | Specialist Partner
Telephone: +358 9 2288 4359
Mobile: +358 50 388 9468
maria.landtman@hannessnellman.com

Maria Neovius | Partner
Telephone: +358 9 2288 4476
Mobile: +358 40 551 6376
maria.neovius@hannessnellman.com