What started as a policy-driven shift has in recent years become a market-driven one. Clean energy technologies have advanced by leaps and bounds, many of which are more affordable and desirable to customers than previous alternatives.
Investments in wind power are made because it is cheap. The automotive industry wants emission-free steel and fertilizer manufacturers want fossil-free ammonia because their customers want climate-friendly products. Market forces are increasingly driving the economy alongside politics.
Finland has great potential to produce a lot of clean electricity for hydrogen production and to bring new export industries to our country, and with that, prosperity, jobs and economic growth.
Additional electricity is mainly weather-dependent production and the question becomes how to maintain the reliability of the electricity system, how to ensure security of supply and a competitive price. Prices already vary a lot.
Any kind of flexibility becomes of great value due to price fluctuations in the electricity market. The market is looking for the best ways to bring flexibility into the system. It can be in electricity or other energy storage, electric boilers in district heating systems or control power. But it can equally well be in industrial processes or even product storage.
Our thinking is guided by the idea that the new energy system would work the same as the old one. However, this thinking needs to be challenged. Coal cannot be replaced one for one with wind, nor gas with solar. The entire system and energy use will also change. Sometimes energy is abundant and very cheap, and sometimes it is scarce.
I find it impossible to think that we could move to a fossil-free energy system without a major change in energy use. Flexible energy use is much cheaper than flat. A flexible production process is more competitive than flat. Although industry will certainly continue to hedge its electricity prices in many ways, it is still worthwhile to develop process flexibility.
In addition to demand flexibility, we also need much more to ensure the reliable operation of the electricity system and security of supply. We need to build on our current strengths and ensure a diverse production portfolio, including nuclear, hydropower and thermal power. New regulating power is also needed. Several companies have significant pumped storage projects.
Energy grid investments are at the heart of the agenda. We need a lot of both the grid and the distribution networks. Hydrogen infrastructure needs to be built from scratch. Energy markets need to be broad to provide more flexibility: we are increasingly dependent on a common energy market, even if we produce much more electricity than we consume.
Right now, we are considering which part of the above will be realized on market terms and which part will require state intervention in the form of subsidies or market arrangements. Views still vary. The problem is that any solution will only have an effect long into the future, and on the other hand, future needs are difficult to predict in a changing world.
However, we have an excellent starting point and can be very confident that the average price of electricity in Finland will remain competitive. Prices fluctuate a lot in the short term, which is either an opportunity or a threat – depending on the operator and the perspective.
Jukka Leskelä
Managing director, CEO
Finnish Energy Industries Association
