“Electricity generation subsidies must be transparent”

Fingrid will establish a subsidiary to manage the feed-in tariffs for wind power. In his speech at the Electricity Market Day today, Fingrid’s President and CEO Jukka Ruusunen emphasised the importance of transparency of the subsidy: the consumers must know what they are paying for. Ruusunen also commented on the duties of the transmission system operator, stating that Fingrid should not be imposed too many public duties.Fingrid arranged a theme day today on the topical challenges of the electricity market. One topic was the adaptation of the European electricity market and climate policy. Fingrid’s President and CEO Jukka Ruusunen discussed the matter from the point of view of the transmission system operator (TSO). The electricity generation architecture will change towards a carbon-neutral direction, and it is Fingrid’s duty to make sure that the electricity transmission infrastructure does not retard the progress towards the objective of carbon-free Finland.

“We contribute to fighting climate change by securing the access of new generation capacity, such as wind power and nuclear power, to the market. In practice, this will mean considerable capital investments in the grid and reserve power. Economic fluctuations do not have a major impact on our capital expenditure programme of 1,600 million euros. The time horizon of political decision-making may be four years, but the energy industry plans its capital investments over a time frame of a quarter of a century,” Jukka Ruusunen pointed out.
 
Ruusunen spoke strongly for the expanding European electricity market.
“The market and climate objectives support each other. If there was not an open electricity market, it would be much more difficult to put the plans concerning additional renewable energy into practice. For decades, Finland has drawn advantages from the Nordic electricity market both in terms of the price of electricity and its sufficiency. As an example, most of the hourly adjustments in our power system are carried out by using hydropower in Sweden and Norway, which is a very efficient solution in terms of economy,” Ruusunen reminded the audience.

The duties of TSOs are changing while at the same time their ownership and the unbundling of generation and transmission are being discussed in Europe. In addition to taking care of the electricity transmission system in Finland, Fingrid is being imposed new responsibilities resembling those of authorities, such as managing the feed-in tariff systems for wind power and biogas or the maintaining of power reserves.

“In my opinion, Fingrid cannot have too much of a role of authority, because then the boundary between us and authorities ultimately responsible for matters is blurred. Duties belonging to authorities may even be in conflict with Fingrid’s basic duties, in other words objectives to promote system security and market functioning,” Jukka Ruusunen stated.

Fingrid has decided to establish a separate subsidiary to administer the collection and payment of feed-in tariffs for wind power.
“This is the best way to ensure the transparency of the feed-in tariffs. Wind power requires subsidies in the initial stages, but the costs must not burden the consumers unnecessarily. We will report the subsidies for wind power generation very openly on the Internet,” Jukka Ruusunen said.

The power reserve system established for peak load situations can be compared to a feed-in tariff system from Fingrid’s point of view.
“Electricity producers would not wish to maintain condensing power plants which are needed only rarely. Obliged by the present temporary act, Fingrid pays a compensation for the maintaining of power reserves, and the costs are levied from electricity users. There is a risk that this type of subsidy becomes permanent and expands, and that Fingrid is actually made an electricity producer,” Ruusunen commented. Different price of electricity in Northern and Southern Finland? The main theme in the Electricity Market Day was the price area division of the inter-Nordic electricity exchange area. The Ministry of Employment and the Economy has requested Fingrid to examine the division of Finland into two price or bidding areas for electricity in the wholesale price market. This was prompted by the problems caused by congestions in the Nordic transmission grid.

The Electricity Market Day examined the matter from both a Nordic and Finnish point of view.  An interim report of the potential division was also published today on Fingrid’s website. The final report will be ready by the end of October.

The transmission capacity between Northern and Southern Finland restricts electricity trade with Sweden in a difficult hydropower situation. Such situations occur in 1 or 2 years in a decade. In practice, this has posed only a small problem on the electricity trade between Finland and Sweden. There are more congestion problems in Sweden, which is also situated in the middle of the Nordic electricity exchange area.

According to the interim report, dividing Finland into two price areas would not bring considerable benefits to the Nordic electricity market. However, Fingrid considers that the possibility for area division should not be ruled out, because it may be difficult to control congestion problems in extraordinary hydropower years by using other means. Moreover, the location of new wind and other generation units and potential changes in electricity imports/exports may have a considerable impact on the transmission situation in the grid. If Finland was divided into price areas, Northern and Southern Finland could in practice have a different price for wholesale electricity occasionally.

The presentations given in the Electricity Market Day can be followed on Fingrid’s website as webcasting transmission. A link to this service can be found on the first page of the company’s website at www.fingrid.fi.   Interim report to the Ministry of Employment and the Economy
Further information: Jukka Ruusunen, President & CEO, tel. +358 (0)30 395 5140 or +358 (0)40 593 8428
Juha Kekkonen, Executive Vice President, tel. +358 (0)30 395 5120 or +358 (0)40 560 5274
http://www.fingrid.fi/portal/suomeksi/uutiset/seminaarit/ webcasting:
http://qsb.webcast.fi/c/customers/customers_fingrid_2009_0421_menu_sahkomarkkinapaiva/index_ondemand.htm