Finnish transmission system operator (TSO) Fingrid anticipates significantly more wind and solar generation capacity to come on line by 2030, potentially as much as 21GW (wind) and 9GW (solar), which would create new challenges for grid management. But the TSO is confident with its "record-high investment programme", it can respond accordingly.
Fingrid's strategic planning manager, Mikko Heikkila, spoke with Argus about that and other more immediate issues facing the TSO, including two legal appeals launched against decisions taken by the country's energy regulator Energiavirasto.
Is the Finnish grid prepared for the large amount of renewables, specifically wind, that is anticipated to be connected to the grid?
Fingrid is conducting a record-high investment programme. In the next 10 years, we'll build about 6,000km of power lines and conduct about 200 substation projects. The investment program totals about €4bn.
With these investments, we are enabling the growth of clean production and consumption. Obviously, we can't exclude the possibility of production curtailment in some areas and some situations. But we expect and strive to keep the volume of curtailment small, for example, compared to other TSOs.
Related to this, due to the large amount of RES being installed in Finland and neighbouring countries, would different bidding zones become a more attractive idea?
The single bidding zone approach is very popular among the Finnish electricity market players and potential investors, both consumers and producers.
Fingrid's target is to maintain a single bidding zone in the future. Fingrid also has a legal obligation to plan the grid so that it enables a single bidding zone. This obligation is set in national legislation. However, we might need some other measures to incentivise the location of production and consumption investments. These measures include, for example, locational grid connection fees and tariffs. These measures are being studied, but currently, there are no concrete plans to implement such measures.
Fingrid began a study on using wind power in its reserve market. What were the findings of the study? And does Fingrid plan to continue this for other renewable technologies such as solar or BESS?
The study and a pilot are still ongoing for the spring of 2024. So far, we've concluded that wind power can technically participate in reserve markets. However, this market seems not so well known among the wind power operators. This will require raising the awareness among the operators. We already have some wind power operators participating in the reserve market.
BESS are already participating in the reserve market, and there are about 5000 MW of grid connection inquiries from BESS. We're focusing more on solar power's participation in the reserve market in the near future, but we haven't yet decided on concrete actions.
The past year has been challenging for the wind industry, with project costs increasing significantly, causing many projects to be reconsidered. How has the Finnish wind sector fared, and how can Fingrid help to incorporate more wind into the system?
We've indeed witnessed some delays in certain investments. Now it takes a longer time for projects to reach investment decisions. However, the projects are typically not cancelled; they're just delayed or put on hold. This implies that if the investment environment improves, for example, owing to industrial investments in electricity consumption and a more optimistic outlook on general electricity demand, we can expect production investments to move forward rapidly.
With long-duration energy storage still not a developed technology, increasing dependence on RES means dispatchable power sources also become more critical in meeting peak demand. Are there plans for more thermal capacity? You mentioned no planned gas projects- why do you think that is?
There are currently no plans to build more thermal capacity in Finland. On the contrary, thermal capacity has been declining during previous years.
Last year, Fingrid conducted a study with AFRY on generation adequacy and possible measures to improve adequacy. The study concluded there are uncertainties regarding adequacy, especially in the latter part of the 2020s. Challenges in the adequacy of electricity would most likely occur if freezing temperatures and low wind conditions were combined for a prolonged period, such as several days or weeks.
The adequacy topic was also acknowledged in the recent governmental program. There's a need to consider a mechanism which would improve adequacy. As a next step, the ministry responsible for energy (Ministry of Economic Affairs and Employment of Finland) is expected to launch a study or working group on possible capacity mechanisms. The exact type of mechanism is still under debate, but there seems to be a consensus that some measures need to be taken.
Does Fingrid have an estimate for how much power demand industrial electrification might entail?
Finland is currently consuming about 80TWh of electricity a year. Roughly half of that is used by the industry. Our forecast total demand in 2030 is about 130TWh, and about 40TWh of the increase is expected from industry. The previously-mentioned investment program to our grid will enable us to connect forecasted demand.
Fingrid has received about 22GW (100-150TWh) connection inquiries from new demand. This includes data centres, hydrogen production, e-fuel production and steel factories.
Energiavirasto recently declared Fingrid is responsible for the system protection mechanism for the 1.6GW Olkiluoto 3 (OL3) nuclear plant. Will Fingrid appeal the decision?
Yes, Fingrid will be appealing Energiavirasto's decision. We expect the process to take at least a year. The decision now made by Energiavirasto requires Fingrid to come up with a proposal for cost coverage of the system protection mechanism and seek approval from Energiavirasto for cost coverage principles. The mechanism was initially based on cost-plus compensation for the disconnectable loads.
Now, the load owners — who at the same time are also owners of Olkiluoto 3 — need more compensation, and the yearly cost for the mechanism has risen from some €1mn to some tens of millions of Euro. Fingrid is still ready to pay according to the original principle but not the rising market-based compensation.
Fingrid will primarily seek a solution where the beneficiary, ie Olkiluoto 3, takes part in collecting the money. The majority of the costs should not be socialised through grid tariffs. We don't foresee direct implications to other grid development or investments at this stage.
What is Fingrid's opinion on the recent change to DSO funding made by Energiavirasto?
Energiavirasto's decision on the new regulatory model is also applicable to Fingrid. The decision on the regulatory methods significantly weakens the reasonable return of electricity transmission grid operations. In Fingrid's view, the assessment of impacts in preparing the regulatory model decision has been deficient, and there are still issues open to interpretation related to the presented decision.
Fingrid's goal is a solution enabling future grid development, allowing the hundreds of billions of Euro in green transition investments in Finland to be implemented as planned. For this reason, Fingrid is appealing the Energy Authority's decision in the Market Court.
