Finland needs more measures in order to remain attractive to big investments

The development of offshore wind power has started well in Finland, but many competing countries are moving even faster. Finland is facing challenges in international competition for large investments. According to the recently appointed director of Metsähallitus Property Development Otto Swanljung, this may slow down for instance the much-needed development of the hydrogen economy.

The operating environment for offshore wind power projects has been under development on many fronts in Finland over the past couple of years. The national working group set up by the Ministry of Economic Affairs and Employment, completed its work in August with suggestions for measures to strengthen the competitive advantages of the sector in Finland.  

One of the proposals was to establish a coordination group for information sharing on offshore wind issues. The group will most probably start its work already by the end of the year. It is also likely that the preparation of legislation regarding the use of exclusive economic zone (EEZ) for offshore wind construction will be finished by the end of the year.

Competitor countries already racing like the wind

Finland’s western sea areas are well suited for construction of offshore wind projects.

‘We have enormous potential for major investments. However, Finland should bring projects to the market in a coordinated and predictable way, and on competitive terms that also safeguard investment security. In addition, a more agile and predictable permit procedure is needed. The international competition for investments in the sector has quickly heated up,’ says Otto Swanljung.

Swanljung started working as the director of Metsähallitus Property Development in July. In his position, he is responsible for the development of offshore wind power projects. In addition to the tendered Korsnäs offshore wind power project, Metsähallitus is currently selecting partners for two projects. The next new tenders are expected around 2025-2026.

Big issues still remain unresolved in Finland.

‘It will easily take a few more years after the completion of the legislative work on the exclusive economic zone until the results of the next competitive tendering processes are clear and the new projects can progress,’ says Swanljung.

The evident risks of two separate markets

The project areas in the EEZ area are located further from the coast than territorial waters and have not yet been surveyed from the perspective of offshore wind power, which will also take some time. In addition, the electricity transmission cables will be tens of kilometres longer and the construction as a whole more expensive, which is why these investments are heavily dependent on general market and cost developments.

‘In more developed offshore wind markets, the most cost-effective areas have always been built first. Areas closer to the coast have been put into use first before moving further away. The first point of order should be accelerating the development of projects in territorial waters, as construction conditions are known, the distance to grid access is shorter, and investment costs are more competitive. In that race, we have every opportunity to succeed,’ says Swanljung.

At the same time, Swanljung is concerned about the potential emergence of two markets and the overall coordination of offshore wind power projects.

’If territorial water projects are competing with EEZ projects, Finland will end up tendering projects against each other in its own areas. This is not a sound solution from the overall economic perspective’, Swanljung explaines.

Grid connection must be ensured

According to Swanljung a key obstacle to large-scale investment is that we are still unable to offer investors certainty of the transmission grid connection in the coming years.

’In discussions with international energy operators, the certainty of a connection to the grid and the cost model are very key issues. In Sweden, major players have suspended some projects because of the high costs of grid connections. The same may happen in Finland soon, unless we find new openings for the game’, Swanljung predicts.

In Finland, electricity is most needed in the south, but it must be transferred from the North, the coast of Ostrobothnia. Currently, there aren’t enough plans to build the needed amount of grid connections for the projects.

‘This is another challenge we must be able to solve soon in Finland, as the development of connections is not a quick trick. Germany, Denmark, the Netherlands and the United Kingdom have been able to create interesting combinations of incentives for investment and some offshore wind farms are already in operation.’

Other countries on the Baltic Sea are also racing like the wind after offshore wind power projects. The Swedish Government recently announced measures to provide municipalities with an incentive similar to the Finnish real estate tax to approve offshore wind power in their areas. In addition, the Finnish Government Programme includes the objective to be number one in wind power in the Baltic Sea region; now, the leading position is threatening to turn into the second place.

Major investments attract each other

The future demand for zero-emission energy is undoubtedly very strong. Industry is electrifying its processes and investments in the green economy are eating up zero-emission electricity in an unprecedented way.

‘The development perspective of offshore wind power is about ten years, so if we want to get big industrial investments here, decisions on operating environment must be made urgently,’ says Swanljung. 

We are at a particularly critical point in the development of the hydrogen economy. Offshore wind power and the investments it enables in the hydrogen economy are one of the greatest opportunities for Finland as it struggles with growing pains.

‘If we can get industrial-scale, emissions-free energy production, we will also succeed in hydrogen investments. Naturally, producers of green hydrogen will not wait long for Finland to make its moves,’ Swanljung notes.

‘If the offshore wind energy investment is around EUR 2 billion, it creates an added value of hundreds of millions of euros every year during its life cycle. It is difficult to see how we could otherwise create similar economic impacts on Finnish business life and strengthen regional vitality,’ says Otto Swanljung.  

In profile: Otto Swanljung

Who:                Metsähallitus Property Development, Director, from 1 July 2024
Age:                  44 years
Education:      Master’s Degree in Law
Career:            Has worked at Metsähallitus since 2011, the past four years as Director of Wind Energy, previously in Metsähallitus’ Legal Department in various roles
Strengths:       Contract law, social and environmental responsibility issues
Family:            Married, two children
Hobbies:         Cycling, hunting, fishing