The European Commission has approved, under EU State aid rules, a €150 million Finnish capacity mechanism to safeguard security of electricity supply in Finland.
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The measure will also help reducing CO2 emissions in the electricity sector, in line with the EU Green Deal, and it will contribute to the objectives of the REPowerEU Plan to reduce dependence on Russian fossil fuels.
Finland notified the Commission a €150 million Finnish capacity mechanism in the form of a strategic reserve. Capacity mechanisms have the important objective of ensuring security of electricity supply. A strategic reserve is a type of capacity mechanism and has to be set up in line with the requirements of the Electricity Regulation.
The measure aims to ensure a balance between electricity demand and supply during peak consumption periods in Finland. Consumption peaks typically occur during winter months, influenced by the outside temperature and the length of the cold spell.
Finland has historically relied on electricity imports from neighbouring countries to manage such peaks. Until 14 May 2022, about 1,400 MW of the approximately 5,000 MW interconnection capacity between Finland and its neighbouring countries was served by Russia.
However, in the context of Russia's war of aggression against Ukraine, Russia decided to cut off electricity exports.
The strategic reserve measure, which will be in place until 2032, will support electricity generation units, demand-side response units and storage units, with the objective of ensuring their availability when the balance between supply and demand may be at risk of creating shortages.
Electricity generation and storage units will offer their availability to start supplying electricity, while demand-response units will offer their availability to reduce electricity consumption.
Capacity funded through the measure will not participate in electricity markets for the duration of the strategic reserve, thus limiting the distortion on these markets.
The projects that will benefit from the aid will be selected through a transparent, non-discriminatory competitive bidding process, where beneficiaries will compete on the basis of offers relating to the lowest amount of aid per MW of capacity (also considering technical and environmental aspects, such as flexibility of the units and CO2 emissions). ■