Legal Alert – Finnish Parliament Accepted the “Pay-as-bid” System for Renewable Energy Subsidies
On 23 May 2018, the Finnish Parliament decided to approve the government proposal (in Finnish) concerning the Act on Production Aid for Renewable Energy and thereby to adopt a new tendering system for renewable energy subsidies. Except for lowering the amount of subsidised energy production from 2 TWh to 1.4 TWh, no major amendments were made to the previously submitted government proposal.
Unlike in the current feed-in tariff system, under the new auction-based tendering system, the state will define the annual target amount of renewable energy for each tendering round, and eligible electricity producers will then file their bids with the Finnish Energy Authority. During each tendering round, these producers must determine the premiums (i.e. the amount of support from the state) they require for producing energy and the predicted annual volume of their energy production. The projects will then be ranked based on the bids, and those with the lowest premium rates will be accepted in ascending order until the annual target amount of renewable energy production is reached. The state will grant premiums for the accepted projects for a maximum period of 12 years.
Main requirements for eligible participants in a nutshell
The new tendering system for renewable energy covers wind power, solar power, wood-based fuels, biogas and wave power plant projects. Hydropower, however, is not included in the tendering system. In addition, energy producers must meet at least the following requirements in order to be eligible for the subsidy:
- The power plant must be located in Finland. Plants located in Åland are excluded from the new tendering system.
- The power plant must have valid building permits and plans.
- A final investment decision regarding the construction or procurement of the power plant has not been made yet.
- Each power unit must be capable of producing a minimum of 800 MWh up to a maximum of 10,000 MWh annually.
- The entire power plant (i.e. the building, its foundations, and any grid connection infrastructure, etc.) does not have to be completely new, but the energy technology system used in the power plant must be new, and the technical systems (for example wind turbine towers) of any existing plant should not contain used parts.
- The power plant applying for the subsidy cannot have previously received any other state aid. However, re-powering a previously used plant might constitute an exception.
What comes next?
The European Commission must approve the new tender-based premium system before it can be introduced. Consequently, the new Act will be implemented by government decree only after the European Commission has verified that the proposed system complies with EU regulations. The European Commission is likely to give its approval as the tender-based system is one of the subsidy types that the European Commission has recommended, and so far, the majority of EU Member States have adopted such a system instead of choosing any other possible alternative.
Borenius’ lawyers are available to assist in addressing any questions you may have regarding this legal alert. Please feel free to contact any of the Borenius attorneys listed in this alert or those with whom you usually work.
The previous legal alert concerning the government proposal is available here.