Riku Huttunen Fingrid Current 5.4.2017

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Fingrid Current 5 April 2017

Presentation recordings are published at: www.fingrid.fi/en/news/events

http://www.fingrid.fi/en/news/events/Pages/default.aspx

Finland’s Views on Electricity Market Development at National, Regional and

European Level

Riku Huttunen, Director General

Fingrid Current5 April 2017

Themes

• The National Energy and Climate Strategy for 2030• Background• General description and outcome• Electricity market issues

• EU proposals on internal electricity market• Finnish positions

• Regional electricity market• The way forward

02.05.2023Ministry of Economic Affairs and Employment of Finland • www.tem.fi 3

Big picture: Renewables progressing,fossil fuels losing ground

Primary energy consumption 2016 (371 TWh)


Supply of electricity 1970 – 2016


Source: Statistics Finland

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1970 1980 1990 2000 2010

TWhNet import

Conventional condensingpowerCombined heat and power,district heatCombined heat and power,industryNuclear power

Wind power

Hydro power

Juha Sipilä’s government programme:Towards carbon-free, clean and renewable energy cost-efficiently

– The use of emission-free, renewable energy will be increased in a sustainable way so that its share will rise to more than 50 per cent during the 2020s and the self-sufficiency in renewable energy to more than 55 per cent, also including peat. This will be based, in particular, on the growth in the supply of bioenergy and other emission-free renewable energy. The greatest opportunities will be achieved in increasing the production and technology of liquid biofuels and biogas.

– Aid for lowering the costs of the increase in renewable energy that is compatible with the EU guidelines will be based on technology neutrality and ranking of economic priorities.

– Meeting the sustainability criteria for biomass and fair burden sharing in the EU and international climate negotiations will be secured.

– Coal will no longer be used in energy production and the use of imported oil for the domestic needs will be cut by half during the 2020s.

– The share of renewable transport fuels will be raised to 40 per cent by 2030.


National Energy and Climate Strategy for 2030

• Approved by the Government in November 2016 as a Report to the Parliament• The aim is to reach Government and EU 2030 targets• Emphasis on reducing CO2 emissions and promoting renewable energy

• Investment subsidies to new technologies: biorefineries etc.• Limited production aid for renewable electricity in 2018 - 2020 (tendering, technology

neutrality)• Transport fuels: at least 30 % renewables by 2030 (especially by biofuel blending obligations)• Phasing out the use of coal in energy production by 2030 (with some conditions regarding i.a.

security of supply)• Halving the use of imported oil for energy• Promoting biogas• etc. …


Final energy consumption

02.05.2023Työ- ja elinkeinoministeriö • www.tem.fi 8

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TWh

Final energy consumption

Policy scenario

Statistics


Electricity demand

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Electricity demand

Policy scenario

Statistics

Renewable energy, share of final consumption



Domestic energy, share of final consumption

Non-ETS* greenhouse gas emissions


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Mt CO2 ekv

Non-ETS sector* greenhouse gas emissions

Ghg emission reduction, Energy and Climate Strategy measuresGhg emission reduction, measures to be decided 2013 - 2020 maximum ghg emissions 2021 - 2030 maximum ghg emissions incl. one-off reduction 2021 - 2030 maximum ghg emissions

* emission trading scheme scope of 2013

2030- 37 %- 39 %

2020- 16 %

Oil demandPolicy scenario


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Oil demandbioliquids

biofuels

diesel fuel, fossil component

motor gasoline, fossil component

light fuel oil, fossil component

jet fuel and aviation gasoline

heavy fuel oil

2030- 50 %

Electricity in the Strategy (1)

• Market-based approach: Well-functioning regional and European electricity markets and sufficiently strong cross-border connections are the most efficient and cost-effective way of guaranteeing competitive electricity prices and security of supply. To ensure the targeting of investments at capacity that makes sense for the system as a whole, the price signals in short-term markets must also genuinely reflect the demand and supply of electricity. In order to activate consumers, consumer prices of electricity should be more responsive to wholesale price fluctuations.

• Regional and European context: The operation of the electricity market will be developed from the perspectives of regional and European markets. The new alternating current connection planned between Northern Finland and Northern Sweden is a key project for securing sufficient transmission lines. The aim is to have the new 800 MW transmission line between Finland and Sweden included in the EU’s PCI list in 2017.



• Retail market: Work aiming to create preconditions for a common Nordic retail electricity market will be continued.

• Flexibility and smart grids: Flexibility in consumption and production and active participation in the electricity market through smart solutions will be promoted, and the country’s pioneering position in the development of smart grids will be maintained. Smart grid development will play a key role in strengthening the consumers’ role, integrating renewable electricity production in the electricity system, improving security of supply and creating new business models. Flexibility of demand plays an essential part in energy efficiency.

• Smart grid working group 2016 – 2018.


Smart grid working group, action plan

Proposal from Fingrid

2015

Decision by the

ministers 17.2.2016

Nomination of the WG in MEAE

12.9.2016

Meetings ca. once a month

Topics in the first phase, e.g.• Smart grid vision 2025• Roles and business models in

demand response• Energy communities• Storage • Taxation • Distribution tariffs• Requirements for distributed

resources• Data exchange• AMR 2.0

Interim report 2.10.2017

Possible topics in the second phase, e.g.:• Cyber security, building codes,

real time datahub, big data, network regulation model for demand response, electrical vehicles as a part of the markets

Final report 30.9.2018

Already

covered

Defining measures on how smart grids can facilitate customers to participate in the markets as well as increase security of supply.

Vision for smart grids in Finland 2025Smart grids will work as a service platform in the transition towards a more distributed and carbon-neutral power system. They will give the customers better possibilities for participating in the electricity market, improve security of supply and create new business opportunities for companies, while also ensuring cost-efficiency.

30 October 2016Ministry of Economic Affairs and Employment • www.tem.fi 17

Secure, two-way distribution of electricity

Innovative and functional conditions for developing

business and services

Power balance and security of supply varies as generation

increases

Cost-effective achievement of energy and climate policies

Attractive business environment and

internationally competitive business sector

Technologyindustry

Supplier /service provider

Electricityproducer

DSO

Society

TSO

CustomerPossibility of value choices,

generation and lower electricity consumption costs

More efficient optimisation of generation in a rapidly

changing operating environment

Electricity in the Strategy (3) – Security of Supply

• A national target: A target for the security of supply in electricity associated with the adequacy of production capacity will be defined.

• A political decision. Future EU provisions?• Strategic reserve: The power reserve system will be preserved and

developed towards greater flexibility. It will be justified to increase the power reserve subjected to a tendering process by the Energy Authority from the current 299 MW to some 600 MW.

• The reserve will be 729 MW in 2017 – 2020.• The importance of co-production: The prerequisites for CHP production will

be maintained as part of an energy-efficient and low-emission energy system with a high degree of security of supply.

• General factors, such as electricity price and taxation are decisive in the long run.

• Electricity distribution: Attaining the security of supply target set for distribution networks, a good security of supply level of the grid, and replacement investments will be secured.

• Large investments towards 2028 (in accordance with Electricity Market Act)



• A government bill on a data hub will be drafted and debated in the Parliament during the spring session 2017.

• The data hub prepared by Fingrid will enable more efficient and consistent data communications, which will be essential for future electricity markets. Legislative amendments are being drafted and will be proposed in early autumn. They will be complemented with necessary data protection rules.

• The cybersecurity of the electricity system will be ensured.• Preparedness is necessary at all levels, especially for TSO operations (security of

networks against cyber attacks etc.).


Nuclear energy in the Strategy

• A significant part of Finland’s increasingly carbon-neutral energy production will continue to rely on nuclear power, also in the future. The question of extending the life cycle of the currently operational nuclear power units will become topical towards the end of the 2020s at the latest. Teollisuuden Voima’s Olkiluoto 3 unit, which is under construction, will considerably improve the country’s self-sufficiency in electricity production. A decision on the construction licence of Fennovoima’s Hanhikivi nuclear power plant is due in 2018.

• No new decisions on NPPs in the strategy.• The normal licencing procedures will be followed.• The precise schedule for Government decision on Hanhikivi NPP construction licence

depends i.a. on the safety assessment by STUK (the Finnish nuclear safety regulator). STUK must have full documentation by the operator.


The EU clean energy package

• In November 2016, European Commission’s legislative proposals on:• Energy Union governance• Renewable energy• Energy efficiency (2)• Internal electricity market (4)

• The Finnish overall position is positive.• However, there are concerns e.g. on some proposed provisions concerning

biomass/biofuels as well as some governance issues.


Clean energy package, electricity market design initiative

• Key aspects very positive:• Placing customer in the centre of the market: smart grids,

dynamic pricing, demand response, removing regulated prices etc.

• Market based pricing, market based dispatch, balancing responsibility…

• Restrictions and procedure for capacity mechanisms• Emphasis on the markets in risk preparedness

• Some concerns• Emission limit (550 g/kWh) for capacity mechanisms: would

include strategic reserves• TSOs possibility to own reserve plants• Unclear definitions, e.g. independent aggregators, local

energy communities, value of lost load


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The regional market – a success story


• Finland, Sweden, Norway, Denmark and the Baltic States

The joint market • Advantage of different production

resources and consumption patterns • Better market functioning

• Higher liquidity, better price formation • Bigger market, more attractive to

investors • More effective competition

• Increased cost-efficiency • Access to larger production base • Long term predictability for investors

through politically stable system, reduced risk

The regional market – next steps

• A “Renaissance” of Nordic cooperation?• Evolving EU energy policy, common Nordic views• Integrating renewable energy sources to the system• Development in the nuclear energy field (Finland, Sweden)• Grid inertia and frequency control as a challange• Interconnections• Clean Energy Ministerial and Mission Innovation, meetings hosted by Nordics in 2018• Under the Nordic Council of Ministers, Mr. Jorma Ollila’s strategic review of Nordic co-operation:

final report in June, a strategic vision

• The Baltics:• Further integration to the Nordic/Central European markets• Desynchronisation from the former Soviet grid (IPS/UPS) in the 2020’s• Interconnections


Thank you

Riku Huttunen Fingrid Current 5.4.2017

Engineering