A t t o r n e y s a t L a w Wind Energy Finland Business Opportunities 2015 www.bergmann.fi
pipeline. Offshore projects are still further down the line. Despite the boost triggered by the new feed-in tariffs, Finland is still very much of a virgin market for wind power with currently only 1% of the total energy being produced from wind power. Accordingly, there are opportunities for foreign businesses to get involved in a variety of ways: Claudia Greiner Finland invests in Wind Energy An overview In recent years, Finland has seen a significant boost in the wind energy sector: A lucrative feed-in tariff scheme for renewable energy was introduced in 2011 and the number of wind power projects in planning and construction has since multiplied. The Finnish Government has also taken active measures to promote the development of wind parks by issuing guidance and simplifying the administrative permit system for wind power projects. Opportunities for foreign businesses The most immediate developments in the wind energy sector will be onshore with more than 200 projects currently in the Private investment funds and institutional investors: The lucrative feed-in tariff presents a considerable incentive for investing in Finnish wind power. From the total quota of 2,500 MVA that is currently available, approximately 30% are used up so far. The feed-in tariff provides a reliable basis for calculating the economic feasibility of a project. Banks and Financing Institutions: While Project financing has been used successfully in the international wind power sector for many years, it is still a very new concept in Finland. The first significant project financing involving Finnish banks was agreed only in 2013. Until project financing has become established in Finland, there is a significant market for foreign banks to provide project financing either alone or in collaboration with Finnish banks. Turbine and Component Suppliers: While some developers are already committed to specific turbine manufacturers, there are many projects in the pipeline where turbines still have to be agreed and contracted. Following the bankruptcy of WinWinD, the only Finnish wind turbine supplier is currently Mervento who is developing nearshore and offshore applications. 2 3
Feasibility, Construction, Service and Maintenance: Since wind power know-how is just developing in Finland, there are collaboration opportunities at all stages of wind park projects for foreign companies who are experienced in the sector. This includes feasibility studies, technical planning, various consulting services as well as service and maintenance. Major Wind Energy Projects Onshore wind The west coast of Finland and Lapland are perceived as the most advantageous areas for wind power production, which is also highlighted by the total share of wind energy projects under construction and in planning phases in these regions. In the end of 2014, the largest wind park in operation was located in Pori in the west coast of Finland. The wind park is operated by Finnish wind power company Tuuliwatti Oy. The nominal output of the wind park comprising of 12 wind turbines is approximately 54 MW. The largest wind park under construction was that of Finnish investment company Taaleritehdas Oyj in the municipality of Ii. The wind park consists of 27 wind turbines. There are several wind power projects under development that are significantly larger than those currently in operation or under construction: One of the largest wind power projects under development is located in the municipality of Lestijärvi in Western Finland. The project is developed and constructed by major Finnish building company YIT Rakennus Oy (YIT Wind power projects under development in Finland MW 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 In initial planning EIA phase Spatial planning phase EIA approved Applying for permits Preparing for / under construction Accepted into FiT scheme Offshore (MW) 293 0 1398 500 0 3 0 Onshore (MW) 875 3245 3477 21 533 682 790 Source: Data compiled by the Finnish Wind Energy Association (June 2014) and the electronic production subsidy system (SATU, February 2015) Construction Ltd) who acquired the rights to the project from Lestijärven Tuulivoima Oy. The wind park is envisaged to comprise of 87 118 wind turbines with a nominal output of 300 400 MW. Construction works are planned to be started in 2015. Another major wind park project under development comprises of 90 wind turbines located in the municipalities of Toholampi and Lestijärvi in Western Finland. This project is under joint development by wpd Finland Oy and Scandinavian Wind Energy SWE Oy. The project is currently in the Environmental Impact Assessment and spatial planning (zoning) phase. The construction works are planned to be initiated in 2016. Metsähallitus, which is a state enterprise administrating the state owned land and water areas in Finland, develops 4 5
Feasibility study EIA ~ 14 months Spatial planning ~ 4 years Acquisition of permits 2 to 6 months Main development phases of an onshore wind park project Wind measurements and turbine selection (1 to 2 years) Preliminary negotiations with grid operator and landowners Environmental impact assessment Permitting phase: Building permit Flight obstacle permits Environmental permit Clearance by the Finnish Defence Forces Etc. Spatial planning - Partial local master plan for the wind park Grid connection agreement Decision for reservation of feed-in tariff quota wind park projects to be constructed and operated on state land. Metsähallitus has announced that it will not engage in wind energy production, but will develop and lease the state land for wind energy projects. Metsähallitus currently develops a large-scale wind park project comprising of 81 turbines (243 MW) in the Piiparimäki Murtomäki region in the municipalities of Pyhäntä, Kajaani and Vieremä. Metsähallitus has previously developed two pre-construction stage projects Joukhaisselkä (27 MW) and Kuolavaara-Keulakkopää (51 MW) in Lapland in cooperation with Fortum Power and Heat Oy. These projects were acquired by Impax Asset Management. In addition to such large-scale projects, there are a great number of smaller wind park projects in different stages of development. While the demand for projects close to ready-to-built is currently very high, opportunities exist especially for companies who are prepared to invest at an earlier stage of development and carry part of the development risk. Construction works 1 to 1.5 years Wind park put into commercial operation Advance notification (feed-in tariff scheme) Application to feed-in tariff scheme Construction decision Construction works, turbine installation and grid development works Power Purchase Agreement Transmission services agreement Installation to the grid after authorization for installation is received from Grid Operator Offshore wind The first offshore wind park is yet to be constructed in Finland. Currently, there is only one individual offshore turbine of 2.3 MW that was constructed as a pilot by Suomen Hyötytuuli Oy in Pori in 2010. Furthermore, there is one wind park situated partially offshore on artificial islands and partially onshore in Ajos in Kemi. The Ajos wind park is operated by Innopower Oy. Finnish waters are not as deep as in the North Sea but ice poses a challenge. By the end of 2014, offshore wind park projects under development corresponded to approximately 2,000 MW. The big- 6 7
gest projects are envisaged to comprise of 80 turbines (650 MW). Most of these projects are currently in the Environmental Impact Assessment and spatial planning phases. The current feed-in tariff scheme is applicable also to offshore wind parks. However, the scheme has been planned to correspond to the requirements of onshore wind parks. Hence, the tariffs currently in place do not cover the higher costs involved in construction as well as operation and maintenance of offshore wind parks. In order to evaluate and investigate the risks involved in offshore wind power construction and production as well as to develop offshore wind power best practices and technology, the Finnish Government granted an investment subsidy of EUR 20 million for an offshore wind park developed by Suomen Hyötytuuli Oy in November 2014. As a precondition for the investment subsidy, Suomen Hyötytuuli Oy must share with other developers the acquired know-how regarding offshore wind power construction, operation and maintenance gathered through implementation of the project. The offshore demonstration wind park is envisaged to comprise of 10 11 turbines with combined output of 40 44 MW situated approximately 0.6 2.5 km offshore. Suomen Hyötytuuli Oy estimates that the project will be completed by the end of 2016. Sanna-Mari Seppälä The Finnish feed-in tariff for wind energy Finland has an attractive subsidy scheme (the feed-in tariff scheme) targeted at the promotion of wind power and other renewable energy sources. In order to be eligible, projects need to fulfil certain operational and economic prerequisites. Further requirements are set forth for wind power plants: A wind power plant is eligible for the feed-in tariff if the plant has not received other state grant, it is built entirely of new parts and the combined nominal capacity of the generators is at least 500 kva. The amount of the feed-in tariff is the difference between the fixed target price and the average market price (minimum of EUR 30 per MWh) of the previous three months. Wind energy producers are paid an increased feed-in tariff until end of 2015. The target prices are set forth in the Act on Production Subsidy for Electricity Produced from Renewable Energy Sources (1396/2010) as follows: Increased target price until 2015: EUR 105.30 per MWh Target price from 2016 onwards: EUR 83.50 per MWh The feed-in tariff is paid for a period of 12 years. 8 9
At the moment, funding is only available up to a total capacity of 2,500 MVA. In early 2015, the total installed capacity accepted into the scheme amounted to 800 MVA, which corresponds to 30 % of the total quota available. The total capacity of wind park projects in the pipeline is estimated to amount to 11,000 MW (as of June 2014) with roughly 500 MW being in the permitting phase. This means that the development of wind power projects is currently under a certain amount of time pressure. Since last year, wind park developers have had the possibility to reserve a share of the 2,500 MVA quota for a specific wind park project for up to 2 years. The respective application can be filed once the necessary construction permits have entered into legal force and a binding grid connection agreement has been concluded with the electricity network operator in question. In early 2015, approximately 190 MVA of the quota had been reserved. The feed-in tariff scheme is administered by the Finnish Energy Authority, which is also the responsible administrative body for the supervision of compliance of the electricity network operators with the Finnish energy market regulations. The Energy Authority oversees, for instance, that the connection fees and fees for reservation of electricity network capacity imposed on power plant operators are reasonable. The regulatory framework Currently, there is no centralized permitting procedure for wind park projects and addressing the issues coming up in various stages of the process is still very much a learning curve for all parties involved. However, based on the experiences gathered in recent years, the Government is continuously developing the Finland Facts Finland has been a European Union member state since 1995 and is the only Nordic state to have joined the euro. Key industries are electronics, metal, forestry and chemical industries. The main import partners are Russia and Germany followed by Sweden, the Netherlands, China and the US. Population: 5.4 million (2014 estimate) Total area: 338,424 km2 Largest cities by population: Helsinki (622,848), Espoo (265,900), Tampere (223,200), Vantaa (211,050), Oulu (196,382) and Turku (184,154) (January 2015) Currency: Euro (, EUR) GDB: EUR 201 bn (2013 estimate) GDB per capita: EUR 37,138 (2013 estimate) Official languages: Finnish and Swedish Corporate tax rate: 20 % Trade organizations: EU (1995), WTO (1995), OECD (1969) Source: Statistics Finland and Population Register Center regulatory framework so as to promote a smoother and more centralized permitting procedure as well as to remove obstacles for wind park development. For example, the Government amended the permitting prerequisites so that building permits for wind parks may be granted even if the relevant master plan has not gained legal force due to pending appeals. Likewise, Finland adopted legislation that 10 11
exempts wind parks in certain areas from a prior radar clearance by the Defense Forces against a compensation fee to be paid for the development of the local radar system. In 2014, new Environmental Protection Act and further legislative amendments were enacted including several measures targeted at expedited and smoother environmental permit processing. The general reform of the Finnish environmental protection legislation is still on-going with further measures on the way for improving the environmental permitting procedure. Finally, the Ministry of the Environment is currently preparing a decree on noise limits specifically designed for wind parks in order to clarify the environmental permit conditions. The Finnish energy sector in brief Finland is one of the leading nations in renewable energy. The national target set forth for the total share of energy from renewable sources in final consumption by 2020 for Finland is 38%. In 2013, the share of energy from renewable energy sources in final consumption in Finland was already at 31%, whereas production from renewable sources amounted to 36%. Indeed, the share of wind power is still very modest, with hydro and bioenergy (especially wood and wood-based fuels) being the most common renewable sources. The Finnish energy strategy also includes the construction of new nuclear power plants. Alongside the Olkiluoto 3 reactor, which is currently under construction, political decisions have been made to authorise two additional nuclear reactors. Electricity generation by energy source 2013 6 % Nuclear power 10 % Hydro power 33 % Biomass Wind power 15 % Hard coal Natural gas Other energy sources 1 % 16 % 19 % Source: Official Statistics of Finland (OSF): Production of electricity and heat [e-publication]. 12 13
The Finnish transmission grid is connected to Sweden, Estonia, Norway and Russia. The Finnish Transmission System Operator responsible for the nation-wide high-voltage transmission grid is Fingrid Oyj. The regional electricity and distribution networks are operated by 12 regional electricity network companies and 81 distribution network companies. The transmission grid, which currently covers around 14,000 km, is going to be significantly extended over the next few years. In its investment plan, Fingrid envisages constructing 1500 km of 400 kv lines and 1000 km of 110 kv lines between 2014 and 2024. Cross-border connections will also be enhanced. In total, around EUR 1.7 billion will be invested in the transmission network over the course of the planning period. Important contacts Events Vaasa Wind Exchange & Solar International wind power event arranged in the city of Vaasa in Finland as part of the annual Vaasa EnergyWeek. www.energyvaasa.fi Energia 2016 Energy Fair Finland 2016 25 28 October 2016 International energy event arranged in the city of Tampere. www.expomark.fi/w/en/fairs/energia/ Wind Finland 2015 29 October 2015 Seminar organized by the Finnish Wind Power Association. http://www.windfinland.fi/ Networks and advisors Bergmann Helsinki-based law firm with a strong specialization in industrial projects in construction and engineering, energy, and infrastructure. Eteläranta 4 B 9 00130 Helsinki office@bergmann.fi www.bergmann.fi The Finnish Wind Power Association (Suomen Tuulivoimayhdistys ry.) Association founded in 1988 for promotion of wind energy in Finland with approximately 220 private individual members and 170 member companies and associations. Asemakatu 11 A 40100 Jyväskylä tuuli@tuulivoimayhdistys.fi www.tuulivoimayhdistys.fi/ Invest in Finland Government agency aiming at the promotion of foreign investments in Finland. Porkkalankatu 1 00180 Helsinki info@investinfinland.fi www.investinfinland.fi Finnish Energy Industries (Energiateollisuus ry) Sector organisation for the industrial and labour market policy of the energy sector, with about 250 member companies. 14 15
PL 100 (Fredrikinkatu 51 53 B) 00101 Helsinki info@energia.fi www.energia.fi ScotWindFin ScotWindFin develops supply chain opportunities between Finnish and Scottish companies in both onshore P. O. Box 530 (Läkkisepäntie 21) 00101 Helsinki Tel. +358 30 395 5000 kirjaamo@fingrid.fi www.fingrid.fi P. O. Box 320 00101 Helsinki Tel. +358 29 534 5000 kirjaamo@trafi.fi www.trafi.fi/ Finnish-British Chamber of Commerce The London-based FBCC is an independent non-profit organization that is dedicated to the formation and promotion of effective business networks between Finland and Britain. Lyric House, 5th Floor 149 Hammersmith Road London W14 0QL or P. O. Box 83 00101 Helsinki events@fbcc.co.uk www.fbcc.co.uk Deutsch-Finnische Handelskammer (German-Finnish Chamber of Commerce) Being part of the network of German chambers of commerce, the Helsinki-based chamber offers various services in order to promote business relations between Germany and Finland. P. O. Box 83 (Mikonkatu 25) 00101 Helsinki info@dfhk.fi www.dfhk.fi and offshore wind. Contact: Stephen Fox, Panliska Ltd 83 Princes Street Edinburgh EH2 2ER www.panliska.com State administration and stateowned companies Finnish Energy Authority (Energiavirasto) The Energy Authority is responsible for supervision of the energy market. The Energy Authority administers the feed-in tariff scheme. Lintulahdenkuja 4 00530 Helsinki Tel: +358 29 5050 000 kirjaamo@energiamarkkinavirasto.fi www.energiavirasto.fi/ Fingrid Oyj Enterprise in majority state ownership responsible for the Finnish transmission grid. At present, the grid comprises lines at a total length of 14,000 km. Some 2,500 km of additional lines are being added in the coming 10 years. Defence Command of the Finnish Defence Forces Supreme headquarters of the Chief of Defence. Issues statements on requirement of radar impact assessment of a planned wind park and approves wind park projects in terms of their impact on military readiness. P.O. BOX 919 (Fabianinkatu 2) 00131 Helsinki Tel. +358 2 99 800 www.puolustusvoimat.fi/ Finavia Oyj Wholly state-owned company maintaining and operating the 24 traffic airports as well as Finland s air navigation system. P. O. Box 50 (Lentäjäntie 3) 01531 Vantaa Tel. +358 20 708 000 tietopalvelu@finavia.fi www.finavia.fi Finnish Transport Safety Agency (Liikenteen turvallisuusvirasto, Trafi) Trafi is responsible for transport system regulatory duties. Grants flight obstacle permits required for wind turbines. The Centres for Economic Development, Transport and the Environment (ELY Centres) Elinkeino-, liikenne- ja ympäristökeskus (ELY-keskus) There are 15 ELY Centres responsible for the regional implementation and development tasks of the central government. The ELY Centres are involved in the assessment of environmental impacts of the wind parks. www.ely-keskus.fi/ Metsähallitus A state-owned entreprise responsible for administration of the state-owned land and water areas. Metsähallitus also develops stateowned land also for the purposes of wind energy production. P.O. Box 94 (Vernissakatu 4) 01301 Vantaa Tel. +358 205 64 100 kirjaamo@metsa.fi www.metsa.fi 16 17
Energy and environment policies Ministry of Employment and the Economy (MEE) (Työ- ja elinkeinoministeriö, TEM) The ministry responsible for, i.a., energy policy and integration of the national preparation and implementation of climate policy. P.O. Box 32 00023 Government Tel. +358 29 506 0000 kirjaamo@tem.fi www.tem.fi Ministry of the Environment (Ympäristöministeriö, YM) The ministry responsible for the built environment, housing, biodiversity, sustainable use of natural resources and environmental protection. P. O. Box 35 (Kasarmikatu 25) 00023 Government Tel. +358 2952 50000 kirjaamo.ym@ymparisto.fi www.ym.fi Professional legal partner for the construction, energy, and infrastructure industries Our firm s approach is based on a keen understanding of our clients business and the sector in which they operate. Legal solutions are developed by industryfocused lawyers who are dedicated to our clients success, whether in a transaction, in court or in the everyday course of business. 18 19
Partners of the Firm Dr. Hans Bergmann Managing Partner; founder of the firm in 1992 Construction and Engineering Peter Jaspers Joined 1999, Partner 2002 Infrastructure and Technology Claudia Greiner Joined 2003, Partner 2008 Energy and Environment Associate Lawyers Sanna-Mari Seppälä Associate since 2012 Katja Heikkinen Associate since 2014 Bergmann Eteläranta 4 B 9 00130 Helsinki, Finland Phone: +358 9 6962 070 office@bergmann.fi Helsinki, 2015 www.bergmann.fi