Energy Saving Cooperation in the Baltic Sea Regions

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Energy Saving Cooperation in the Baltic Sea Regions.

Social, economical and environmental approach in

regional planning of rational energy use”

Energy System in Finland


Abstract 3

Country overview 6

National structure of energy production and demands 7

National Energy use 7

National Strategies 10

Finland’s energy policy 10

Energy Taxation 22

National institutions in Finland related to Energy Policy 25









Financing of Energy and Energy Efficiency 27

Energy financing by the Ministry of Trade and Industry 27

The National Technology Agency - Tekes. 27

Motiva Oy 27

EU financing 27

The Ministry of Agriculture and Forestry 27

The Ministry of the Environment 28

The Ministry of the International Affairs 28

The Ministry of the Environment grants aid to international cooperation also in energy field. 28


References 29


This paper describes the structure of the national energy production and demand in Finland, main issues of national strategy and main players of energy market.

Energy policy in Finland has the exceptional importance, because Finland has cold climate and industry with high energy demand and absence of indigenous oil, coal and natural gas resources. Finland has a very high per capita electricity consumption - some 16600 kWh per head per year. It pushed Finns to develop efficient ways of managing energy.

Finnish energy policy is characterized by three issues:

1. The holistic approach to energy, so called three E's– Energy security, Economic development

and Environmental sustainability.

2. Energy policy employs international trade to lower energy costs and enhance energy security.

3. A light-handed approach to energy regulation. The electricity sector is one of the least regulated in the world, with companies free to develop energy business and customers free to choose their supplier.

The main energy consumers in Finland in 2004 are the Industry 51%, Space heating 21% and Transport 16%.

The high statistical demand of industry consumers is a result of extended Wood processing industry a lot of energy is required in the mechanical pulp production process, however, no outside energy is needed to make chemical pulp, because the wood waste and sludge produced on the side is used as fuel. Metallurgy and the chemical industry are also important in Finland and consume a lot of energy. The energy in industry is used with economically efficiently and so called waste energy is utilized by district heating systems for space heating of industrial and residential facilities. Last years the electronics industry, shipbuilding, mechanical engineering has reduced the relative energy consumption in Finland, but still country has one of the highest relative energy consumption in the World.

Since the 1950s, city housing has mainly used district heating, where electricity and heat production are usually effectively combined. District heating improves flexibility of fuel used by systems which can optimize the selection of most efficient primary fuels. District heating systems traditionally used coal, peat and oil as fuel. In South regions of Finland district heating incresed use of natural gas,, when gas pipe from Russia was built in 1973, in regions with forest resources district heating systems today raise use of biofuels and reduced use of peat. Electricity and light fuel oil are used widely to heat single-family houses in rural districts, but many farmhouses still also use secondary wood from their own forests.

Until the 1950s, Finnish energy policy relied on the electricity produced by hydropower stations and extensive decentralized use of wood for energy. In 1960s Finnish energy policy was developed with consideration of use combined heat and power production by industry and district heating systems.

In the end of 1970s Finland started to develop nuclear energy. Four nuclear units in power plants were commissioned Loviisa 1977 and 1981 and Olkiluoto in 1979 and 1982.

The importance of saving energy and using renewable energy resources has been stressed in Finnish environmental debate since the 1970s. Industry, in particular, has achieved considerable energy savings, largely prompted by rises in the real prices of energy, particularly in the '70s. At that time, heat use in buildings was improved by using good thermal insulation, triple and double glass windows, efficient heating, and ventilation systems.

Under the Kyoto Protocol, Finland has agreed to keep its Green House Gas (GHG) emissions at 1990 levels during the 2008-2012 target period.

In June 2001, the Parliament passed the National Climate Strategy (NCS) to curb GHG emissions. The NCS focuses on domestic measures, like development of renewable, and energy efficiency measures, as the best way to reduce Finland’s GHG emissions, and includes an impressive array of programmes in all emission-producing sectors. In addition to reduction of emission by domestic measures, Finland should also rigorously explore the use of international mechanisms, especially emissions trading taking into account the emissions trading in the European Union and the Kyoto mechanisms. Large emissions cuts are expected to come from the nuclear plant.

Finland is Europe's leading country in the use of bio energy. In its energy policy Finland make an impact on development of renewable sources of energy, like biofiels, wind, hydro power and solar power in some contents. About 28% of Finland's total energy consumption comes from renewable energy sources. Wood is the most important renewable energy source in Finland. About a tenth of the electricity is produced from in most cases in cogeneration process. The proportion of renewable energy sources in relation to the overall consumption of energy in Finland is one of the highest in Europe. . Wind power is gaining popularity.

In May 2002 Finland's parliament approved building a fifth nuclear power plant. The vote is the first such decision to build a new nuclear power plant in the EU for more than a decade. The energy company who will operate the plant is TVO. The contractor is consortium of Framatome ANP's and Siemens AG they will supply 1600 MWe European Pressurised water Reactor (EPR). Construction started mid 2005 and the reactor is expected to come into commercial operation in 2009.

The Nordic countries have been world leaders in deregulating their energy markets. Finland liberalized electrical supply systems in second half of 1990s. Today any electrical purchaser can purchase energy from any electrical vendor. Finland, Sweden, Norway and Denmark together make up a single electricity market. In the Nordic electricity market, the market price of electricity is established at the electricity exchange. Since in Finland electricity retailers don’t need a license or registration, anyone can act as an electricity vendor. There are more than a hundred electricity vendors in Finland, the majority of which are also active in distribution network business. The largest electricity wholesalers are Fortum Oy, TXU Nordic Energy Oy, and Vattenfall from Sweden. They sell electricity directly to large-scale customers and electricity retailers. Fortum Power and Heat Oy and Vattenfall own distribution companies as well. The electricity networks are linked between the Nordic countries and interconnecting with the Russian Unified Energy System, together with Poland and Germany. The three Baltic countries are also planning of plugging into the Nordic power network.

The Ministry of Trade and Industry of Finland is responsible for the Government's energy policy and in issues of energy sector it cooperates with the Ministry of Environment, Minstry of Foreign relations and with some governmental regulation bodies. Today Finland develops its energy policy according the EU policy. Company Motiva Oy, which is owned by Finnish Government implements the government's decisions on energy conservation and promotion of renewable energy sources.

To carry out the strategies and policies the Finnish Government use fiscal, like taxation, grant and supports measures and public relation instruments, like training, promotion of rational energy use and renewable sources of energy.

Other important organizations in Finland related to energy use are:

  • Finnish Energy Industries (Energiateollisuus ry) - The Association of Finnish Energy Industries, is an energy sector industrial policy and labor market policy organization that represents companies involved in the production, sourcing, transmission and sale of electricity, district heating and district cooling, as well as related services.

  • The Energy Market Authority is an expert body subordinate to the Ministry of Trade and Industry. Its operation started as the Electricity Market Authority on 1 June 1995, at the same time the Electricity Market Act took effect, opening stepwise the electricity market to competition.

  • Finnish Energy Industries Federation, FINERGY

  • Finnish Electricity Association, SENER

  • Finnish Natural Gas Association

  • Finnish Oil and Gas Federation, ÖKKL

Most significant companies in Energy sector of Finland:

  • Fingrid Oyj is the national grid operator in Finland. It is responsible for ensuring the technical reliability of the electricity transmission system in Finland.

  • Fortum Oyj - is public listed company its business covers production of oil, gas, power and heat to refining, distribution and marketing, to energy related engineering, operation and maintenance. In 2003, the company’s net sales totaled $10.1 billion, and it employed 13,300 people in about 30 countries.

  • Pohjolan Voima Oy is a privately owned group of companies in the energy sector, which produces electricity and heat for its shareholders in Finland. The Group also develops and maintains technology and services in its sector.

  • Teollisuuden Voima Oy (TVO) is a privately owned electricity generation company, owned by Finnish industry and power companies. The company supplies electricity to its shareholders at cost. The company owns and operates two nuclear power plant units at Olkiluoto, and has a share in the Meri-Pori coal fired power plant.

  • Vattenfall AB is a Swedish company who produce and distribute electricity and district heating.

  • VAPO is Finnish company specialist in production and distribution of peat and biofuels
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