Finland expands energy co-operation with Russia

With Finland unveiling plans to export electricity to Russia starting next year, and the country’s leading energy group, Fortum, aiming to invest €4.2 billion in Russia by the end of 2015, the ties between the Finnish and Russian energy sector are expected to further strengthen, and Russia is poised to bolster its foothold in Finland’s energy sector.

 Starting on the 1st of January, 2015, Finland and Russia will launch a two-way electricity trade, with 350 megawatts (MW) of capacity available for exports, according to the information obtained by Reuters. As the Finnish government is fostering lower energy use in the country, Finland’s dependency on electricity imports from Russia has steadily decreased over the past years, and Helsinki is now left with a surplus which can be exported to neighbouring markets.

 Between 2011 and 2013, Russian annual electricity exports to Finland dropped from about 11 terawatt-hours (TWh) to some 4 TWh. Local industry representatives say that Russian imports are expected to total between 3 and 4 TWh in 2014, with most electricity expected to be imported during night hours and weekends.

 Meanwhile, the structure of Finland’s total energy consumption remains highly diversified, with nuclear power representing a share of 18%, hydro and wind power generating a combined 4%, coal holding a 10% stake, wood fuels generating 26%, natural gas and oil representing a 7% and 21% share, respectively, peat generating a further 5%, and net imports of electricity and other sources covering the remaining 9%, according to data released by Statistics Finland in September, 2014.

 As nuclear power generates a significant share of Finland’s energy consumption, the recent decision by local venture company, Fennovoima, - which is to build a nuclear power plant in Pyhäjoki, in the country’s north - to drop the French-German consortium of Areva and Siemens as the project’s technological partner in favour of Russia’s state-owned Rosatom, is of strategic importance. The Russian firm holds a 34% stake in Fennovoima, whilst Voimaosakeyhtiö, a joint venture of Finnish energy companies, owns the remaining 66%.

 Finland has maintained good economic relations with Russia, and the two countries are partners on a number of projects in the energy sector. However, the latest decision by Helsinki was criticised by the European Parliament, in a resolution passed in September, 2014. The EP “calls on the EU to consider excluding Russia from civil nuclear co-operation” in relation to the country's military intervention in Ukraine and the resulting sanctions imposed on Moscow, according to the resolution.

 That said, Finland’s dependency on Russian gas could be reduced by an agreement recently signed by the Finnish and Estonian governments. The two countries aim to build two liquefied natural gas (LNG) terminals connected by a pipeline across the Gulf of Finland. The project is to be completed by 2019, with a large regional terminal to be built in Finland, and a smaller gas distribution terminal to be set up in Estonia. Helsinki and Tallinn expect the EU will cover 75% of the pipeline’s estimated cost of €200 million. Together with the two terminals, the investment is reportedly said to be worth some €500 million.

Witold Nieć, Jarosław Adamowski, specialists, Grupa LOTOS