Premium tariff

Updated: 07.01.2019

Author: Karl Wikberg

Producers of electricity from wind, biogas and biomass receive a variable premium tariff on top of the wholesale electricity price for a period of 12 years. The generators get a fixed target price for their electricity. Wind energy plants are eligible for an increased target price until the end of 2015.

Eligible technologies

All technologies used for the generation of electricity from wind, biogas, wood chips or wood fuels are eligible if they meet the following requirements: 
  • The plant/system must be located in Finland or in Finnish waters and be connected to the grid (§ 7 Act No. 1396/2010).
  • The project must meet economic and technical requirements for electricity generation (§ 7 Act No. 1396/2010).
In addition, generators must meet certain requirements according to the technology employed (see below). 

Wind energy

Both onshore and offshore generation is eligible as long as the following criteria are met: 

  • The plant must not have received other state grants (§ 9 Act No. 1396/2010; § 1 Decree No. 1397/2010). According to the Finnish Energy Authority, this requirement does not apply to pilot projects for offshore wind farms. 
  • The plant must be built entirely from new parts (§ 9 Act No. 1396/2010; § 1 Decree No. 1397/2010).
  • The nominal capacity of the generator must be at least 500 kVA (§ 9 Act No. 1396/2010).

Biogas

Eligible under the following conditions: 

  • The plant must not have received other state grants (§ 10 Act No. 1396/2010; § 1 Decree No. 1397/2010).
  • The plant must be built entirely from new parts (§ 10 Act No. 1396/2010; § 1 Decree No. 1397/2010).
  • The biogas used must have been produced in a plant which was not government-subsidised and was built entirely from new parts (§ 10 Act No. 1396/2010).
  • The nominal capacity of the generator must be at least 100 kVA (§ 10 Act No. 1396/2010).

Electricity generated by a biogas plant may be eligible for an increased "heat bonus" if the following conditions are met: 

  • The plant must produce both electricity and usable heat.
  • The plant must achieve an efficiency rate of at least 50%, or even 75% if the capacity of the generators is equal to or exceeds 1 MVA (§ 10 Act No. 1396/2010).

Biomass

Wood-chip plants are eligible if they meet the following conditions: 

  • The plant must not have received the premium tariff before (§ 8 Act No. 1396/2010).
  • The nominal capacity of the generator must be at least 100 kVA (§ 8 Act No. 1396/2010).

Electricity generated by a wood-chip plant may be eligible for an increased "heat bonus" if the plant includes a pulverized coal boiler that uses wood-chips for fuel.

Wood fuel plants are eligible if they meet the following conditions: 

  • The plant must not have received other state grants (§ 11 Act No. 1396/2010; § 1 Decree No. 1397/2010).
  • The plant must be built entirely from new parts (§ 11 Act No. 1396/2010; § 1 Decree No. 1397/2010).
  • The nominal capacity of the generator must be between 100 kVA and 8 MVA (§ 11 Act No. 1396/2010);
  • The plant must produce both electricity and usable heat. The plant must achieve an efficiency rate of at least 50%, or even 75% if the capacity of the generators is equal to or exceeds 1 MV (§ 11 Act No. 1396/2010).

Amount

The premium tariff is equal to the difference between the fixed target price and the average market price of the previous three months. However, if the market price  for the previous three months is below 30 €, the  premium will be fixed at target price minus € 30 (§ 25 Act No. 1396/2010).

Wind energy

The target price is € 83.5 per MWh (§ 23 Act No. 1396/2010). Until 31.12.2015 (for three years at maximum), there will be an “early bird rate“, i.e. an increased target price of € 105.3 per MWh (§ 62 Act No. 1396/2010).

According to the Finnish Energy Authority, there are several limits for receiving support under the premium tariff scheme as of 1 March 2016:

  • When the combined capacity of the generators exceeds 2500 MVA
  • When production exceeds the amount confirmed in the acceptance decision
  • When the price of electricity is below € 30 /MWh, the subsidy to be paid amounts to the target price less €30/MWh
  • Subsidy is not paid per hour when the price of electricity is negative

Biogas

The target price is € 83.5 per MWh (§ 23 Act No. 1396/2010).

Plants that qualify for the heat bonus receive € 50 per MWh on top of the target price (§ 26 Act No. 1396/2010).

According to the Finnish Energy Authority, there are several limits for receiving support under the premium tariff scheme as of 1 March 2016:

  • When the combined capacity of the generators exceeds 19 MVA
  • When production exceeds the amount confirmed in the acceptance decision
  • When the price of electricity is below € 30 /MWh, the subsidy to be paid amounts to the target price less €30/MWh
  • Subsidy is not paid per hour when the price of electricity is negative
  • The final application deadline for the tariff system for Biogas plants is the 31 of December 2018 (§ 14 Act No. 1396/2010).

Biomass

The target price is € 83.5 per MWh for electricity from wood fuels (§ 23 Act No. 1396/2010). The premium tariff allocated to electricity and CHP plants working on wood chips is variable and is calculated according to the cost-effectiveness of peat and wood-chips in power production; the applicable taxation to peat  and the  emissions allowance costs applicable on the market (§25 Act No 1396/2010). The exact figures taken as a basis for calculating the premium tariff are provided in § 4 of the Decree No. 1397/2010).

Plants that qualify for the heat bonus receive € 20 per MWh on top of the target price (§ 26 Act No. 1396/2010).

According to the Finnish Energy Authority, there are several limits for receiving support under the premium tariff scheme as of 1 March 2016:

  • When the number of generators exceeds 50 and the combined capacity of the generators 150 MVA
  • When the subsidy exceeds € 750 000 over four consecutive tariff periods
  • When the price of electricity is below € 30 /MWh, the subsidy to be paid amounts to the target price less €30/MWh
  • Subsidy is not paid per hour when the price of electricity is negative

According to the Energy Authority, as of 1 March 2016, the premium tariff changes according to the price of the emission allowance and the peat tax. The basic subsidy ranges from € 0 to € 18 per MWh. A condition for receiving the subsidy is that the plant has not been included in the premium tariff scheme. 

There are several limits for receiving the subsidy:

  • When production exceeds the amount confirmed in the acceptance decision
  • No basic subsidy is paid if the subsidy is less than € 1/MWh 
  • Subsidy is not paid per hour when the price of electricity is negative

According to the Energy Authority, starting from 1 January 2019, the feed-in-tariff is 60 % of the basic subsidy, if wood chips are made of roundwood obtained from a logging site of large-sized timber suitable for processing.

  • The final application deadline for the tariff system for wood based biomass plants is the 31 of December 2018 (§ 14 Act No. 1396/2010).

 

 

Addressees

Entitled party. Producers who use wind, biogas, wood chips or wood fuels for the generation of electricity and whose plant is connected to the grid and located in Finland or in Finnish waters are entitled to receive the premium tariff (§6 , §7 Act No. 1396/2010).

Obligated party. The support system is financed by the state budget and managed by the Ministry of Economic Affairs and Employment (§2, §4 Act No. 1396/2010). 

Procedure

Process flow

  • Application. A given producer shall apply to the Energy Authority for the premium tariff. All applications except applications regarding wood-chip plants must be submitted before the plant starts commercial operation. The application must contain certain information specified by law (§ 14 Act No. 1396/2010).
  • Allocation of support. The Energy Authority awards a premium tariff if the applicant meets the formal and technical requirements (§ 15 Act No. 1396/2010).

Competent authority

The Ministry of Economic Affairs and Employment manages, supervises and assesses the premium tariff scheme. The Energy Authority assesses compliance with all legal requirements (§ 14 Act No. 1396/2010).

Cap

Premium tariffs will be available only until the total capacity installed and/or the number of generators installed reaches a certain maximum. This maximum depends on the technology used. The following caps apply:

  • Wind energy: 2,500 MVA
  • Biogas: 19 MVA
  • Energy from wood fuel: more than 50 generators with a nominal capacity of 150 MVA

(§ 6 Act No. 1396/2010).

In case the market price for electricity for the previous three months is below 30 €, the tariff will be capped at target price minus € 30 , i.e.€ 53.5  per MWh (§ 25 Act No. 1396/2010).

Eligibility period

Eligibility ceases after 12 years of operation or

  • for wind, biogas and wood-chip plants if the amount specified in the grant award notification is reached,
  • for wood fuel plants, if a plant has produced gains of more than € 750,000 in four consecutive obligation periods (§ 16 Act No. 1396/2010). 

Distribution of costs

State

The Energy Authority pays the tariffs and bonuses (§ 29 Act No. 1396/2010). These costs are covered by the state budget (§ 2 Act No. 1396/2010).

Finland

Further information

Basic information on legal sources