The IEA praises Finland’s commitment to balanced and realistic energy policy, and urges the government to continue to be vigilant on energy security

(Helsinki) — 26 March 2008

“Through sound electricity market integration and despite its small size and relative isolation from continental Europe, Finland is harnessing to the extent possible the benefits of its position next to Russia and Scandinavia. The country is also building the world’s first nuclear power plant in a competitive electricity market. This enhances its security of supply and strengthens its economic competitiveness,” said Nobuo Tanaka, Executive Director of the International Energy Agency (IEA). Mr. Tanaka is in Helsinki at the launch of Energy Policies of IEA Countries – Finland 2007 Review. “It is not easy for any country to balance the competing concerns of energy security and economic competitiveness in the face of the challenge of ensuring environmental sustainability, but the government of Finland is tackling these issues in a sound and balanced manner.”

“Recognising the already solid foundation of Finnish energy policy, our report provides guidance on how to further improve both existing and developing policies,” Mr. Tanaka said. “We urge the government to take some specific actions in the field of electricity market design, peat use, energy efficiency in buildings and energy R&D, among others.”

Energy security
Finland recognises its heavy reliance on energy imports from a narrow set of sources. The government has many policies in place to manage this challenge. For example, Finland’s electricity system is integrated with the well-functioning Nordic market, and new international interconnections are being developed. By enhancing domestic power sources, the construction of a new nuclear unit at Olkiluoto will bring significant security benefits. Finland’s success in getting a new nuclear unit built – particularly without government subsidies – cannot be overstated.

While Finland’s reliance on a single link to Russia for 100% of its gas deliveries raises obvious security concerns, this source of supply has also proven to be stable and secure over the last decades. Nevertheless, the IEA is pleased to see the government explore alternative import possibilities for natural gas. Energy security could also be enhanced by increased reliance on a larger set of renewables. Biomass will of course remain an important domestic energy source in Finland; the IEA is also encouraged by the greater potential for alternative domestic renewable energy sources. On the other hand, it is concerned that current policies on regulated peak reserve power and peat subsidies do not enhance long-term security.

Energy efficiency
Notwithstanding its heavy reliance on energy-intensive industry, Finland performs relatively well on the metric of energy efficiency, which is given high priority by the government. This prominence is encouraged given the potential for energy efficiency to deliver benefits on both security of supply and environmental sustainability at the lowest cost. The recent revisions to vehicle taxation are welcome, as they tackle the thorny challenge of reducing emissions in the transport sector and do so in a market-based and flexible manner.

Enhancing the energy efficiency of buildings can bring very large – and long-lived – benefits in terms of reduced energy consumption and greenhouse gas emissions. Finland’s building codes are already quite good, but there is room for further improvement. In particular, the government should look to the types and levels of building code standards in place in its Nordic neighbours.

Energy R&D
Finland is a leader in energy R&D, leveraging its small size as it does in other energy arenas. There is stable funding for R&D, supported by strong national and regional organisations, resulting in a high level of funding on a per-GDP basis. Furthermore, the country rarely invests in research without matching funds from the private sector. In short, Finland has a sound energy R&D system in place, which underpins long-term energy security for Finland and the international community. To build on this success, the IEA recommends some improvements in energy R&D. For example, the government might provide clearer guidance to the R&D community about its energy policy and R&D priorities. Without sacrificing research independence and flexibility, clearer top-down guidance for long-term research priorities could be more explicitly linked to overall energy priorities.

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