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Legal alerts / 25 Jun 2018

Updated Legal Alert – Finnish Parliament Accepted the “Pay-as-bid” System for Renewable Energy Subsidies

The new Act was implemented by government decree on June 2018 and will enter into force on 25 June 2018. The implementation took place earlier than expected due to the Government’s decision not to apply the Commission’s notification system.

This decision is contrary to the suggestion made earlier in the government proposal to use the notification system. As such, the Commission is not yet going to verify that the new Finnish auction-based system complies with EU regulations, as the Finnish Government has deemed the Commission’s block exemption regulations to cover this tendering system for renewable energy subsidies.

The Commission will be informed of the national amendment to the legislation 20 days after the Act has entered into force. The Commission will control the functioning of the new tendering system only after it has been implemented.

Consequently, the new tendering system will be subjected to a test during the autumn of 2018. The Finnish Energy Authority will organise the first tendering round from 15 November to 31 December 2018. The Finnish Energy Authority will hold an event where it will provide more information about the new auction-based system and eligible participants in Helsinki on 20 September 2018. As the new tendering system will come into use in the autumn, the feed-in tariff system will no longer be used for new plants using biogas or wood-based fuels.

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Legal Alert, 25 May 2018: 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.

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