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Record subsidies for old wind turbines this year

Renewable energy subsidies are rising this year, partly due to windy conditions and low electricity prices.

Older wind farms such as this one in Kalajoki, Northern Ostrobothnia, are still eligible for higher subsidies. Image: Timo Nykyri / Yle

Finland's energy watchdog estimates that renewable energy subsidies will soar by nearly a third this year, partly due to windy conditions and low electricity prices. Still, experts say the subsidies, which are being phased out over the next decade, represent a net benefit to society.

The Energy Authority estimates that renewable energy feed-in tariffs will rise to a record 335 million euros this year. That is over 100 million euros more than last year.

If the price of electricity stays under 30 euros per megawatt-hour (MWh) and wind power production remains around the same level as the past few years, spending on feed-in tariffs will climb to about 335 million euros, the agency says.

More than 95 percent of that goes to wind power, with the rest in subsidies for biogas, wood-based fuels.

Last year the corresponding figure was just over 228 million euros.

"This year's figure is being primarily impacted by two factors: the low price of electricity and the windy start to the year," says Pekka Ripatti, head of the renewable energy team at the Energy Authority. It is a licensing and regulatory authority tasked with enforcing Finnish and European energy and climate policies.

Strong winds shrink electricity bills

Strong winds lead to higher power production, which sinks the price of electricity. If the price is under 30 euros/MWh, utilities are eligible for the maximum level of subsidies, known as feed-in tariffs, which is 53.50 euros/MWh.

The subsidies date back to the early years of wind power in Finland, when the state aimed to foster the fledgling industry before it became broadly profitable under market conditions, as it is now.

Higher use of wind power lowers both the country's greenhouse gas emissions and dependence on foreign energy, which primarily comes from Russia. Finland still lags behind its Nordic neighbours in wind power capacity, though.

Companies are eligible for the subsidies for 12 years from the beginning of operations of turbines that went online between 2011 and 2017. This covers about 750 turbines at 125 sites.

They will begin to drop out of the subsidy system in 2023, and by 2030 the industry will be entirely self-sufficient. Newer wind farms built since 2018 are larger and more efficient and able to operate profitably without state support.

Prices fall into negative territory

The energy watchdog says that due to blustery conditions, Finland's wind power generation was nearly 40 percent higher in early 2020 than a year earlier. On a stormy day in February, for instance, Finland's electricity price went briefly into negative territory, meaning that customers were in effect paid to use power.

"It's always worthwhile generating wind power, since it doesn't use any fuel. And that's why it's also the primary alternative for electricity production," explains Professor Peter Lund, a renewable energy expert at Aalto University.

This spurs two complementary mechanisms.

"The price of electricity drops due to the abundant supply of wind power. But at the same time, when there is a lot of wind power generation, feed-in tariffs also rise," Lund says.

While the subsidies are paid out of tax revenues, both Lund and Ripatti say they have been effective in helping the industry get off the ground and a financial plus for society.

Nordics may be 30% wind-powered by 2030

"Thanks to the expansion of wind power, consumers' electricity bills have declined by more than has been paid out in subsidies," says Ripatti.

Lund predicts that a decade from now, as much as 30 percent of the five Nordic countries' electricity will come from wind power. In Finland the figure is now just under 10 percent.

According to a report published in May by the intergovernmental Nordic Energy Research (siirryt toiseen palveluun) think-tank, "the Nordics are on track to a fully carbon-neutral electricity sector by 2050, driven by the fall of fossil fuel use and the increased production of, and investment in, renewable energy".