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Minister Mauri Pakkarinen speech at Bioenergy 2009

Mauri Pekkarinen, Minister of Economic Affairs 

Finnish Bioenergy Policy 

Distinguished Conference Participants, 

In the following, I will give a short presentation on Finland’s bioenergy policy. I will also raise some key bioenergy issues of topical interest to Finland.

A large share of Finland’s land area is covered by forest. Our experience of how to exploit the timber and wood fuel extracted from our forests dates back several decades, even centuries. Forestry and wood processing are also an important part of the Finnish national economy.

For this reason, Finland has been laying down forestry policies and guidelines related to wood-based fuels for some time. This country has also seen long-term investments in the development of production and utilisation technologies for biofuels.

In Finland, the key policy lines regarding bioenergy and energy policy in general are presented in the national climate and energy strategy submitted by the Government and considered by Parliament.

The preparation of the national climate and energy strategy is being managed by a ministerial working group, chaired by the Minister of Economic Affairs. This preparation process is being coordinated by the Ministry of Employment and the Economy.

Our latest national strategy was issued in November 2008, when the Government submitted a proposal for a long-term national climate and energy strategy before Parliament, in the form of a report.

Parliament issued its response concerning the report in June 2009.

The strategy addresses climate and energy policy measures in rather concrete terms and great detail up to 2020, and in brief thereafter, up to 2050. The strategy’s objectives are highly ambitious.

As concerns the key contents, the strategy is built on Finland’s own needs and opportunities. Nevertheless, it takes account of the targets and obligations of the EU climate and energy package.

As part of the EU climate and energy package, Finland aims to increase renewable energy’s share of final consumption by some 9.5 per cent compared to 2005. In 2005, renewable energy had a 28.5 per cent share. The target for 2020 is 38 per cent.

Finland must decrease greenhouse gas emissions in sectors outside the emission trading regime, such as housing, agriculture and traffic. It must also achieve a 16 per cent reduction by 2020, from 2005 levels.

For companies within the emissions trading regime, an EU-wide emission cap has been proposed. In 2020, this cap will be set at minus 21 per cent of the 2005 emission level. This would represent a significant change to the current emissions trading regime.

Finland’s new Long-term Climate and Energy Strategy clearly shows that the objectives proposed for Finland regarding the reduction of emissions, promotion of renewable energy, or enhancement of the efficiency of energy consumption, cannot be attained without new, prominent climate and energy policy measures.

Simultaneously, we also need to continue our strong investment in, for example, the development of new technologies.

Today, some 70 per cent of all renewable energy in Finland is generated from by-products of the forestry and sawmill industry, including bark, sawdust and waste sludge.

This corresponds to a wood volume of some 35 million cubic metres of energy wood. Opportunities to exploit these by-products are totally dependent on the development of forest industry production.

The forest industry’s current situation makes meeting Finland’s obligations even more of a challenge. Between 2005 and 2009, major cutbacks have been made in Finland’s wood processing capacity. These amount to 10–20 per cent in the pulp and paper industry and slightly under 10 per cent in the sawmill industry. No new investments are in sight.

We therefore need substitute approaches. Advanced second-generation biofuels and the biorefinery concept as a whole might constitute such a new opportunity. In connection with this, we could expedite the implementation of the renewable transport fuel obligation from the pace originally determined by the EU.

In my view, the planned production projects of so-called second generation wood-based transport fuels would facilitate raising the target higher than 10 per cent. Accordingly, Finland’s target could be, for example, 10 per cent as early as 2015/2016 and 15, or even higher, per cent by 2020.

For their part, such targets would stimulate demand for renewable traffic fuel by Finnish actors, thus contributing to the generation of major projects. This could eventually turn Finland into a “lead market” for biofuels.

However, it is now time to take a step up from pilot facilities to large, commercial-scale demo facilities. For example, a few commercial-scale facilities refining forest industry waste into fuel would mean billions of euros in investments. This would generate a significant number of direct and indirect jobs at the facilities themselves and in the procurement of raw materials.

In Finland, we are also conducting an extensive technology programme, BioRefine, in the development of biorefinery technology. This programme is worth approximately EUR 130 million and will continue up to 2012.

The exploitation of forest chips offers vast, untapped bioenergy potential for Finland. Our strategy therefore includes the target of increasing the use of forest chips in energy production and as an industrial raw material.

This will increase their use from the current level of around 4 million solid cubic metres to over 12 million solid cubic metres by 2020.

Such an increase would attain half of the targeted total increase of 9.5 per cent in the use of renewable energy. With respect to final felling and stumps, the availability of forest chips also depends on industry’s overall wood requirement.

Therefore, the importance of forest chips made from small timber harvested in connection with forest management will increase, since the availability of this raw material is not dependent on the forest industry.

In order to promote renewable energy sources, the National Climate and Energy Strategy laid down a policy concerning the introduction of a cost-efficient and market-based feed-in tariff system for electricity. In November 2008, a working group was set up to prepare the establishment of this system.

The working group submitted its interim report concerning wind power in April 2009. In this report, the group proposed that a market-based guaranteed price be introduced for wind power in Finland.

Under this scheme, the target price for wind power, as determined by the authorities, would be EUR 83.5/MWh. The difference between the market price of electricity and this target level would be paid to wind power producers as a feed-in tariff. For instance, at a market price of EUR 50/MWh, the premium guaranteed by the feed-in tariff would be EUR 33.5/MWh.

The producer would gain the remaining portion of income from selling the electricity produced. However, in the initial stages, the tariff levels would be somewhat higher in order to facilitate the rapid launch of investments. The working group will prepare a proposal on the tariff level in connection with its final report.

With respect to wind power, the goal is to introduce the feed-in tariff as early as during the first half of 2010.

The work of the feed-in tariff working group continues, in assessing the need, and forms of support, for other renewable energy sources, biogas and energy wood in particular.

The Ministry of Employment and the Economy launched its two-year Strategic Programme for the Forest Cluster in March 2009. Taking the prevailing economic cycle into account, this programme monitors and predicts structural changes taking place in the forest cluster.

It also coordinates the preparation of measures within various administrative sectors, which might have a rapid impact on the situation.

The expansion of wood-based energy production is also one of the focus areas of the programme. Within this focus area, key issues include proposals for measures promoting the market entry of forest chips and identifying solutions to labour and equipment issues in the harvesting and transport of energy wood. Another proposal was for the development of harvesting and transport technologies for forest chips.

Distinguished audience,

Finland possesses large forest and bio mass resources and versatile traditions in their advanced utilisation. We already have sophisticated technology for refining this raw material, while new technologies are being developed.

Renewable and bio-based raw materials for energy production and the capability to refine them efficiently provide us with an excellent basic readiness to meet the challenges of global climate change.

Finland and Finnish companies are offering their own technological expertise for international use, as part of this joint effort.

Thank you!