Rovaniemi bio power plant project in danger of collapsing owing to messy subsidy system

The EU does not wish to pay energy support to producers of low-grade timber

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The largest investment undertaking in the history of the Lapland capital of Rovaniemi, a more than EUR 200 million bio power station project, threatens to be toppled over an energy subsidy issue related to the use of low-grade timber.
      In the view of the European Union, a forest owner carrying out an initial felling in an area is not entitled to a direct subsidy.
      In its place, for example subsidies for the use of wood chips as a source of fuel have been envisioned, but the extent and method of allocating such subsidies are still a question mark.
      “Without a proper support package in place, energy wood cannot be harvested from the forests of Northern Finland, where the encumbrance is the long distances involved”, says Rovaniemen Energia Oy CEO Markus Tykkyläinen.
      According to the initial plan, the CHP plant, designed to produce both electricity and heat (net electrical power output of 90 MW and 95 MW of district heating) was meant to go into operation already last year.
      In Tykkyläinen’s view, the present needlessly affordable market price of electricity does little to speed up the investment decision.
     
Tykkyläinen hopes that the possible subsidies for the use of wood chips as a source of fuel would not be allocated to inefficient roadside chipping.
      It would be more worthwhile to carry out the chipping of the wood at the plant.
      The collapse of the large bio power plan project would be an unpleasant setback for the government, which has committed itself to raising the share of renewable energy in total energy consumption to 38 per cent by 2020.
      At present the corresponding figure stands at around 32%.
      “The aim is to bridge this gap with the help of bio power plants. For that tree stumps and timber leftovers are not enough. Instead we need wood from initial thinnings”, says Professor Satu Helynen, technology director at the Technical Research Centre of Finland (VTT).
      “In Southern Finland, around 70 per cent of energy wood comes from stubs and stumps and timber leftovers. In the north of the country, on the other hand, the emphasis is on fully grown timber, 1.1million cubic metres of which was felled for energy production purposes last year”, explains director Jukka Aula from the Forest Owners’ Union of Northern Finland.
     
In Northern Finland, there are enough trees to be felled, for the annual growth of the forests is in the region of 28 million cubic metres. Of this, the wood processing industry used 7.5 million and the sawmills 2.5 million cubic metres last year.
      According to Aula and Tykkyläinen, the current capricious subsidy policy system is not the right way to go about launching bio power plant projects.
      In the buried subsidy model, the support per cubic metre for initial thinning would have been eight euros.
      Furthermore, the subsidies would have been limited to cover only 40 cubic metres per hectare.
     
Finnish Forest Industries Federation chairman Juha Vanhainen is not in favour of the subsidy system.
      In his opinion, the subsidy system will result in mass wood ending up in furnaces instead of going to the use of the forest industry, which employs more people.
      “A fifth of the wood used by the forest industry originates from initial thinnings of stands marked for harvesting”, Vanhainen says.
      Finnish Sawmills Association chairman Juha Junnikkala from Kalajoki in Western Finland is astonished at the peculiarities of the subsidy system.
      “The by-products of sawmills do not receive electricity production subsidies, as they do in Central Europe. Instead, some plants have actually imported rubber trees from West Africa to be chipped and burned here. This activity has been subsidised”, Junnikkala says in disbelief.


Previously in HS International Edition:
  Helsinki Energy considers bio-fuel for Hanasaari power plant (29.2.2008)
  Politicians want to speed up decision on Hanasaari power plant (1.12.2011)
  Replacing coal in power plants would take years (28.10.2010)

See also:
  Renewable energy targets pose problems for cities (25.2.2008)

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