Industrial|The granting of subsidies and tax breaks can start a ketchup effect, in which a large number of factory projects are announced.
Renew clean transition industrial projects are underway for more than 20 billion euros, estimates the state capital investment company Teollisuussijoitus in a report published on Friday.
Clean transition refers to a change towards a sustainable economy that is not based on the overconsumption of natural resources and the use of fossil fuels.
Business life maintained by the central association (EK). the statistic according to Finland, investments of up to more than 200 billion euros are planned in various projects in the coming decades. About 80 percent of these investments will be focused on energy production, above all on wind power projects.
In Tesi’s report, EK’s listing of green transition investments has been used, but projects related to the production and transmission of wind and solar power have been excluded.
The industrial projects in Tesi’s report typically make use of the cheap and almost emission-free energy that is expected to be obtained from wind and solar power projects.
Such projects in the planning stage include, for example, “green steel” factories that produce low carbon dioxide emissions or production plants that manufacture synthetic aviation fuels.
In these projects, the investments of even individual factory investments are typically in the order of more than one billion euros.
“We are cautiously optimistic about a clean transition. A lot of good things will happen. But things are slowly getting going,” says Tesi’s investment manager Esa Koponen.
According to Koponen, there is a so-called chicken-and-egg phenomenon between energy production projects and the industrial investments that utilize them, which slows down the realization of both investments.
“The value chain must be promoted at the same time. Energy projects cannot be implemented without industrial demand for electricity,” says Koponen.
Therefore, in the state’s industrial policy, Tesi focuses on being an early-stage anchor investor in clean transition investor-led projects that consume a lot of clean energy.
It doesn’t really invest in wind and solar energy projects, because they are already estimated to be fairly well financed.
Such projects are underway in the metal and construction industry, in the industry that utilizes hydrogen and its derivatives, and in the production of bio-based materials and fuels in the forest industry, Koponen says.
“Ideally, a large clean transition investment creates local demand for renewable electricity and hydrogen, and thus promotes the entire value chain.”
The half in addition to clean energy and a skilled workforce, Finland’s competitive advantage is the large carbon dioxide emissions produced by the forest industry.
Once recovered, they are used in the hydrogen industry, when the water is first broken down into oxygen and hydrogen in electrolysis. Fuel is made from the elements by adding carbon dioxide.
Koponen also emphasizes the importance of the high quality of the electricity networks maintained by Fingrid as a competitive advantage.
The electricity price difference to Central Europe is huge in Finland’s favor. In the operating costs of the steel mill, it can mean an annual saving of 100–200 million euros, says Koponen.
Today In Finland, there are already very early-stage investors in domestic research-oriented technological innovations, such as the construction of factories for the first stage of textile recycling.
According to Koponen, the bottleneck nowadays is gathering large international investors for projects worth hundreds of millions, where the technology may still be partly in the development stage.
“Finland has no experience of how to finance such large projects.”
In order to increase the local acceptability and credibility of the project, Koponen calls for the cooperation of Finnish institutions and investment companies of wealthy families in such mega-projects, “a kind of Finland club”.
The reason is that it is often important for international investors that local investors have invested in the project as well.
In addition to the technology under development, investors often also have a political risk in clean transition projects.
For example, the production cost of synthetic jet fuel is currently about five times that of fossil kerosene.
Then the group of investors investing in a zero-emissions fuel factory worth one billion euros must trust that the EU will not slip away from its fuel requirements for aviation as trade wars between different continents intensify.
Koponen according to 10-15 investor-led projects aimed at green hydrogen or jet kerosene are planned in Finland.
On average, they are projects worth a billion euros each.
“But it easily takes 2-3 years for project development before a decision is made and construction begins to be financed.”
in the Hankekehythsinluana (bankable feasibility study) making it, on the other hand, typically costs 10–50 million euros in a billion project.
Tesi has received a promise from the state for additional capital of 300 million euros for its own direct investments.
In the initial phase of the project, Tesi’s investments are small. In two or three years, it can participate in further funding rounds with investments of tens of millions of euros.
“Hundreds of millions must come from private money. Our share is limited to individual percentages of the project’s funding.”
Koponen according to Finland, in the early stages of projects, there has sometimes even been too much public money. Then the question of whether the activity is business may have become blurred. “Therefore, funding must support the private sector and not the other way around. Both are needed.”
Prime minister Petteri Orpon The (kok) government is currently preparing a separate tax credit and investment subsidy for clean transition industrial investments.
Are many giant investments waiting for these subsidies before they want to make the investments public?
According to Koponen, subsidies are important for promoting investments, even though it is difficult to succeed in the international competition for subsidies.
“Subsidies are important, but too much support always raises the question of whether the activity is still a business.”