Power policy

Finland has no scheduled auctions for renewables subsidies, as of 2021. The last auction was held in 2018, when Finland’s Energy Authority tendered 4 terawatt-hours (TWh) of capacity through a technology-neutral auction and awarded seven wind farms with 12-year feed-in-premium contracts. Until 2017, Finland offered a feed-in premium for wind and various bioenergy technologies.

The government submitted a bill in October 2018 to ban the use of coal for energy, with a draft deadline of May 2029 for most plants. It has agreed a 90 million euro ($101 million) investment support scheme for plants that switch away from coal before 2025. Domestically mined peat generation – which has similar carbon emissions as lignite – will, however, be slowly phased out only in the 2030s. Policymakers envision that nuclear will replace at least part of the outgoing coal capacity, and two new reactors are expected to come online by 2022 and 2028.

Power prices and costs

Finland’s power prices rank among the three cheapest countries in the EU. This is largely due to a well-functioning, integrated Nordic electricity market with cheap hydroelectricity making up a large share of generation.

Power market

Finland’s power system is fully liberalized and in line with EU standards. The country has a competitive power market, as well as an open retail market. Any licensed company is allowed to own generation assets or to sell electricity to consumers.

The generation mix is dominated by hydro, nuclear and combined heat and power (CHP) plants. The CHP plants are mainly fueled by biomass and waste, with coal and peat making up a smaller share of the fuel mix. These plants supply Finland’s many district heating networks, as well as the power system. The share of wind generation has grown rapidly, from around 3% in 2015 to 12% in 2020.

Around 1 gigawatt (GW) of subsidy-free wind farms are either in the pipeline or newly commissioned, as 14 corporate power purchase agreements (PPAs) have been signed between 2015 and mid-2021. Utility-scale solar has not taken off, but distributed solar capacity reached 290 megawatts (MW) in 2020. This is set to grow even further, as legislative changes introduced in early 2021 are making solar more attractive for blocks of flats.

Doing business and barriers

There are no substantial barriers to developing renewable energy projects in Finland. Similar to many other EU countries, securing a permit for building onshore wind farms can sometimes be challenging due to local opposition. However, this issue can largely be avoided due to the availability of large, sparsely populated areas and a thus far smaller wind power fleet.

Fossil fuel generators must pay for their emissions under the EU Emissions Trading Scheme, which covers all large combustion facilities in the region.

EV market

Plug-in-hybrid electric vehicles (PHEV) and to a lesser extent battery electric vehicles (BEV) increased in popularity in Finland between 2015 and 2020. In 2015, PHEV and BEV sales together made up only 1% of new passenger car sales, and this had risen to 18% in 2020.

EV policy

Finland is aiming for 30% of final energy consumption in the transport sector to be from renewable sources by 2030. As part of this, it has set a target for 250,000 electric vehicles (EVs) to be on the road by 2030, which represents 6% of Finland’s passenger car fleet of 3.6 million. In 2020, EVs made up 1.7% of Finland’s vehicle fleet. According to the Finnish ministerial working group, 700,000 EVs are needed on Finland’s roads by 2030 to meet the country’s 2035 carbon neutrality target. However, increased use of biofuels could also help achieve the country’s renewable energy in transport target.

Finland’s tax regime favors low-emission vehicles, as the purchase tax is determined by the CO2-intensity of the vehicle. The purchase tax is charged in addition to value added tax and can be as high as 30% of the purchase price for cars with emissions over 200 grams of CO2 per kilometer. That compares to just 2.7% for BEVs.

There are also subsidies on offer to encourage EV adoption and the installation of chargers. Between 2018 and 2021, private individuals can benefit from a grant of 2,000 euros when buying a fully electric car. Meanwhile, housing associations managing multi-family buildings can receive support for 35% of the installation cost for EV chargers, up to a maximum of 90,000 euros. Public charging infrastructure is eligible for assistance through a tender scheme running from 2018 to 2021.

Buildings market

There is financial support available for upgrading the heating system of buildings to clean alternatives. Finland has a scheme for scrapping oil boilers in residential homes with support of up to 4,000 euros. A grant of up to 6,000 euros, or 50% of the investment cost, is also available for energy efficiency renovations in residential buildings, and this can be used for heat pumps. A separate grant scheme for heat pumps is available for commercial entities, supporting up to 15% of the cost of installation, or up to 25% if the investment is procured from an energy service company.

Buildings policy

Finland has implemented EU legislation on energy efficiency in buildings. Under the EU’s energy and climate target, member states have committed to increase the share of renewables supplying heating and cooling energy consumption by 1.1-1.3 percentage points each year until 2030.

In line with the EU directive for energy efficiency in buildings, minimum energy standards apply for new buildings in Finland as well as any existing buildings undergoing large renovations. In addition, Finland's 2015 Climate Change Act sets a legal framework for reducing emissions from buildings and heating. The law is set to be updated in January 2022. Finland has a long-term renovation strategy aiming at decarbonizing all buildings by 2050.