Low carbon energy boost for the Finnish economy

Finland’s energy system is rapidly shifting to low-carbon energy sources. The solutions to decarbonize electricity and district heating are available and being implemented by energy companies around the country. While decarbonizing by 2035, the energy sector is now looking to contribute to the well-being of the Finnish society, customers and the environment. This requires accelerating the investments in energy production, networks and services from around 3 € billion to almost 7 € billion annually up to 2040. An advanced and clean energy system will be based on flexible cooperation between production and consumption through strong networks.

Current and target state

Finland uses currently approximately 80 TWh of electricity per year, of which already 94% is from non-fossil sources. District heating, the main heating solution in Finnish buildings, uses 70% non-fossil energy sources.

For clean energy to become the enabler of green growth, society needs to electrify. The share of electricity in energy consumption will need to grow from 25% to at least 50% and preferably 66%. Where direct electrification is not feasible, fossil fuels will largely be replaced by hydrogen-based solutions. Electricity generation in Finland should grow 2.8 times from 2023 to 2040.

District heating gives and edge to Finland as the heat from hydrogen production, nuclear power or data centres will have a valuable use instead of going to waste

By capturing and utilizing the remaining carbon emissions from biomass and waste-fueled power plants, the Finnish energy sector can become carbon negative by 2040.

Main solutions

Growth in electricity generation will come from onshore and offshore wind, solar and small-scale nuclear power. Wind power generation can grow 10-fold by 2040. Wind power density would still be lower than it is in Denmark today, for example. One of Finland’s assets is its plentifully available land area. Additionally, energy production will be based on today’s technologies like combined heat and power from biofuels, conventional hydropower, nuclear power, electric boilers and waste-to-energy plants. Developing technologies include pumped hydro and industrial heat pumps.

Much of the electricity will be used by growing energy-intensive exporting industries and their electrification. Additionally, Finland aims to produce and use 10% of Europe’s clean hydrogen in industrial processes and clean fuel production.

High share of variable power generation requires a range of balancing solutions, which include strong interconnections and internal networks, hydro power, nuclear power as well as demand-side flexibility in heating, charging, industries and data centres.

The growing electricity generation and changing consumption need to be connected through strong grids. Finland is going to need over 10 new north-south grid connections, doubled interconnection capacity, 160% increase in distribution network capacity, doubled heat network capacity to utilize the excess heat and a national hydrogen grid.

Natural gas has a less central role in Finland as it is not widely used in heating. While producing minor volumes of electricity, gas continues to provide flexibility in the power system. Biogas and, from 2030s onward, hydrogen and its derivatives have a role in replacing the natural gas use in power generation and in providing new transport fuels.

Needs and requirements

The route ahead is based on ambitious EU-level and national climate targets. Finland aims to be carbon neutral by 2035, and the EU is discussing a 90 per cent emissions reduction by 2040. These are well in line with the energy sector vision, if all technologies are made available, and decisions are made to improve the investment environment.

To make Finland the best location for energy-intensive industry, we need development of the main economic drivers like emissions trading and carbon taxes. Permitting procedures are already being accelerated. Finland should continue relying on a diverse energy supply, where hydro, nuclear and bioenergy balance out the big weather-dependent energy sources. A market for captured carbon and its end-products are needed.

Finland should ensure the fluent build-out of energy networks by clarified roles and rules fit for a more connected future. For customers, market rules to ensure diversity of products and opportunities as well as transparent ways to easily hedge energy bills should be to way forward.

In the end, finalizing the well undergoing energy transition needs a growing number of skilled workers. Both top talent and skilled technicians are to be educated, trained and welcomed from around the world.

Future and positive impacts

A clean energy future with growth in the export industries can provide the means to continue funding the Finnish welfare society. Tens of billions of euros can be contributed to the gross national product and up to a hundred thousand jobs made available. Meanwhile, the diversity of Finnish nature is to be maintained and nurtured.