Impact Assessment supports the introduction of the connection fee reform

The impact assessment report concludes that Fingrid's proposed connection fee reform will not jeopardise Finland's competitiveness or the achievement of a clean transition. The impact assessment supports the introduction of the reform by demonstrating that the proposed reform would lead to enabling new connections with less main grid investments which would support the clean transition. The reform would also contribute to maintaining Finland as a single bidding zone and to keeping transmission tariffs at competitive levels. Fingrid assesses introducing the reform in early 2025.

In June, Fingrid proposed changes to the grid charges aimed at strengthen increasing cost-reflectiveness to recover the costs of network reinforcement investments, improving the connectivity of new projects and increasing the efficiency of network use. Stakeholders were consulted on the proposed changes in late summer. On the basis of the consultation feedback received, Fingrid decided to commission an independent consultancy study to assess the impact of its proposed connection fee reform.

Dr. Juha Vanhanen from Centrocampista Oy, was selected as the impact assessor after a competitive tender. The study was carried out between October and December. The impact assessment included an assessment of the need for reform in the light of the current situation and prospects for future electricity consumption and production, a comparative study (Sweden, Denmark, UK), stakeholder interviews, a computational analysis and conclusions based on the above.

The study assessed the impact of the reform of the connection fee on 1) the profitability of individual projects, 2) the steering effect on the location of projects and 3) the realisation of the overall potential by project type (solar, wind, battery energy storages, boilers, hydrogen and other electricity-intensive industries and hydrogen production). No significant impacts were observed on the overall potential of the projects being carried out or on Finland's competitiveness in international comparison due to the reform, but there were impacts on individual projects.

The feed-in tariff reform would encourage more solar projects to be implemented in consumption-dominated and balanced areas. Battery energy storages, on the other hand, would be diverted more to production-dominated and balanced areas. This would reduce the need to reinforce the grid and help Finland to remain a single bidding zone in the electricity market. In the impact assessment, it is estimated that between 2026 and 2030, the reform would reduce the need for new grid construction by the equivalent of one north-south 400 kV transmission link, i.e. in euros about €400 million. Based on the impact assessment, this saving would mean on average 25 M€/year less grid charges to be collected, based on the grid pricing regulation, compared to the situation without the reform.

Calculations of the impact assessment estimates the power-based fee for connection to cover about 10% of Fingrid's grid charge revenues if the power-based fee for connection would be levied on both main grid and high-voltage distribution network connections. However, collecting the fee on high-voltage distribution networks would require legislative changes. If the new fee would only be levied on those connecting to the main grid, the impact of the reform would be insufficient, both in terms of the cost causation reflectiveness and in terms of the steering effect. This would also mean that some of the savings in grid investment would not materialise.

Fingrid will assess the progress of the introduction of the connection fee reform in early 2025. Juha Vanhanen will present the impact assessment at a Fingrid stakeholder event on 16 December 2024. The event will also include a more detailed regionalisation of the planned boundaries of the production-dominated, consumption-dominated and balanced areas. The event will be held in Finnish.

Read the English summary of the study. Read the full report here.

More information: Laura Ihamäki, tel. +358 30 395 5166

E-mail addresses are firstname.lastname@fingrid.fi