Finland: a global leader in forest-based biomass for energy

According to estimates by the Finland’s Energy Authority(Energiavirasto), renewable energy sources (RES) produced more than 130 terawatt-hours (TWh) of electricity, heat and biofuel for traffic in 2016. Irrespective of the calculation method used, the share of renewable energy of total end consumption is set to exceed 40 percent. This would be a new production record and about five percent more than in the previous year.

Exceptionally FIT forest sector

The biggest increase in renewable energy production came from energy produced from forest industry black liquor and by-products, which made up over 60 percent of total renewable energy. In Finland, industrial scale use of renewable energy is incentivised using a feed-in tariff (FIT) scheme.

Administered by the Energy Authority, the FIT came into force in March 2001. Since then 161 power plants have been accepted into the system, of which 53 are forest chip plants and 103 are wind power plants.

– Finland has become a global leader in the utilisation of forest-based biomass for energy production, thanks to our exceptionally strong forest sector and extensive investments in bioenergy R&D&I since the 1980’s. We have here a unique platform for bio-based production and partnering, said Jari Tielinen, Senior Advisor at Finpro’s Invest in Finland unit.

In 2016, the plants in the FIT system produced about 2 TWh using forest chips and almost 3 TWh came from wind. In 2016, a total of EUR 172 million was paid out in feed-in tariff subsidies, of which EUR 34 million went to forest chip plants, EUR 136 million to wind power plants, and the remaining EUR 2 million to firewood and biogas plants.

The target is that by 2020, 5.3 TWh of electricity will come from forest chips and 6 TWh from wind power. The system has no specific quota for the number of forest chip plants.

– Our electricity system can cope with this amount of variable production as well as the additional 2 TWh of production proposed in the climate strategy. Maintaining the security of supply requires some measures, however, both in terms of technological development and market rules. The Energy Authority has increased the peak load capacity, demand-side management is under constant development, and transmission links between Finland and Sweden will be increased, said Simo Nurmi, Director General of the Energy Authority.

Tech-neutral FIT going forward

Some of the market rule measures, alluded to by Nurmi, were proposed by the Finnish government in its “Energy and Climate Strategy for 2030 and Beyond” announced November 24 last year. This includes a proposal to discontinue the FIT for wind in its current form whereas the government notes the that FIT for electricity produced from wood chips is a cost-effective way of promoting the use of forest chips.

As a result projects are to be implemented on “market terms” with technology-neutral competitive tendering going forward. This means that the FIT will only be paid for the most cost-effective and competitive production investments of renewable electricity.

The FIT scheme will remain as it is at present until the Commission’s state aid approval expires. The future of the scheme will be evaluated in 2018 and for 2018–2020, a total of 2 TWh will be subject to an open tendering process. In addition the Ministry of Economic Affairs and Employment will commission an “independent and comprehensive study” on the “adverse health and environmental impacts” of wind power before the preparation of the act concerning the production aid.

– Utilising the potential of Finnish renewable energy to produce electricity at an industrial level is one of the central questions in achieving long-term energy and climate goals. The national climate and energy strategy decided in the Cabinet meets the tough targets from a Finnish standpoint, said Oli Rehn, Minister of Economic Affairs and Employment.

Phase out coal by 2030

The announced strategy takes aim at carbon-neutral energy production by 2050. It proposes phasing out the use of coal for energy by 2030 while noting that its discontinuation will “require strong tax steering or legally prohibiting” its use. Energy taxation will be used to encourage primarily using forest chips and forest industry by-products for the combined heat and power production (CHP) and the separate production of heat.

The increased domestic production of advanced transport biofuels will also increase the use of forest-industry by-products and forest chips. Taxation will be used to further ensure that peat will not be more competitive than forest chips or forest-industry by-products but that it will be more competitive than coal and other imported fossil fuels.

The strategy highlights that the availability of forest biomass and the value added in different applications will be taken into account when developing policies as expected new investments by the forest industry will “significantly” increase the use of wood in Finland in the near future. Thus policies must not lead to market distortion with raw material suitable for the wood processing industry directed to energy production as a result of a subsidy scheme.

Increasing biomass and biogas

An eventual decline of carbon sinks in Finnish forests, as a result of increased use, will be avoided by fortifying the growth and carbon binding capacity of forests in the long run, by mapping out the afforestation of treeless areas and reducing the clear-cutting of forests in connection with infrastructure and transport construction.

The production and use of biogas not least in the transport sector is also to increase with promotion and support. National provisions and permit procedures are to be clarified to promote the production and use of biogas. In addition, solutions supporting biogas will be supported when influencing EU legislation and the preparations for state aid rules for post-2020.

Helsinki timely host

Finland’s leadership role in forest-based biomass taken together with the other Nordic and Baltic countries places the Baltic Sea Region in a league of its own when it comes to implementing EU’s 2020 renewable energy targets. Several have already exceeded one or more of these targets, pioneered fiscal steering instruments such as carbon tax and decoupled economic growth from greenhouse gas (GHG) emissions. Thus it is a very fitting centennial event that Helsinki should play host to this year’s edition of the Nordic Baltic Bioenergy conference at the end of March.