Finland should consider a new model for support for electricity production

From the reader. Due to the security of supply, the stability of the electrical system and the growing demand, Finland needs emission -free power generation that does not depend on weather conditions. In order to build such critical infrastructure, can we rely solely on the market mechanism or do new support mechanisms need?

There has been a debate on supporting new nuclear power. The initiative has been criticized by invoking that the electricity market has been systematically exported in the market -based direction. However, it is not possible to talk about markets where solutions are purely based on demand and take into account the overall benefit of society.

At the EU level, the aim is to have an emission-free, overall cost and delivery electrical system. In a market economy, these parameters should be priced for investments, but the current market rules only emission -free, ie the price of carbon dioxide emissions, is taken into account in the calculations.

Supports are needed from time to time

Individual investors do not take into account the overall cost of the system, and there is no direct price for security of supply. Effective operation of the market requires that the threshold for entering the market is low enough.

The debate on price breakdowns and long -term electricity purchase agreements shows that due to the high capital and project duration required by nuclear power projects, this threshold is too high for investors. Market risks are perceived as too high and the market is to be isolated. In Finland, one has to think about how the threshold could be reduced.

We cannot expect that investments in electricity generation, which meets sufficient capacity and meets the goals, will be launched on a market basis. The previously used feed -in tariff system showed that from time to time support is needed to bring new technology to the market and get to scale. Discussion of capacity mechanism indicates growing concern that current market mechanisms do not guarantee adequacy in all situations.

A decade ago, a two-way price breakdown agreement was introduced in the UK a decade ago, which is now being discussed in Finland. In the model, electricity users will pay the agreed guarantee price to producers if the market price is below the warranty price. If the market price exceeds the warranty price, the producers will refund the excess to the users. This reduces the risk of investment by guaranteeing a predictable income stream for producers and lowering financial costs.

Market distortions must be prevented

Production subsidies such as the price separation agreement distort the market and weaken the profitability of production and investment that is excluded from support. Investment subsidies reduce the threshold for entering the market and support long -term technologies, but do not eliminate market risk. The best solution is often a combination of several instruments suitable for the situation.

From the point of view of maintaining electricity, security of supply and competitiveness, it is worthwhile for Finland to investigate the need for supporting new nuclear power production and possible models. This is particularly relevant to small modular reactors.

Jani Halinen

Director of Nuclear Power Research, VTT