Finland is in the vanguard of climate action, boasting over €220 billion worth of investment plans in the green transition. Not all plans will materialize, but the current project pipeline and Finland’s strong fundamentals in advancing the green transition justifies genuine optimism, writes Janne Peljo.
The United Nations climate summit COP28 in Dubai in December 2023 ended with a historical agreement, with countries agreeing to “transition away from fossil fuels in energy systems” to keep the pursuit of global net zero emissions by mid-century within reach. This gives a further push to investments in clean technologies across the world.
Transitioning away from fossil fuels requires significant investments, especially in clean electricity. A core component of future competitiveness is the availability of emission-free and affordable electricity. Finland is exceptionally well-positioned in this regard, attracting green investments into the country.
The Confederation of Finnish Industries (EK) has compiled a list of publicly announced investment plans in the green transition. In the end of 2023 the investment plans announced totaled over €220 billion – more than 70% of Finland’s GDP.
Wind power dominates the investment pipeline in Finland, with onshore and offshore wind projects covering almost 75% of the planned investments – and for a good reason. Finland’s favourable wind conditions, vast land areas and shallow waters provide Finland with excellent potential to further increase wind power production on- and offshore. Finland’s power transmission grids are also in a good condition to accommodate further variable power generation.
In 2023, Finland produced 94% of its electricity from emission-free sources while enjoying the second cheapest power prices in Europe, second only to neighboring Sweden. The availability of clean and affordable electricity gives rise to a boom in industrial investments planned in Finland.
Core component of future competitiveness is the availability of emission-free and affordable electricity. In this regard, Finland is exceptionally well-positioned.
Finland’s government has set the target of producing at least 10% of the green hydrogen in the EU by 2030. Hydrogen investments in the project pipeline currently exceed 7 gigawatts, translating to over €14 billion worth of investments.
As a forest rich country, Finland also has a tradition of expertise in biomass feedstocks, and positions as a world-leader in sustainable biofuels for land, maritime and air transport. Put together, Finland is well-suited to become a European leader in producing green hydrogen and its derivatives where bio-based CO2 is a key component. Further, heat generated in hydrogen production can be utilized in Finland in district heating, improving the overall efficiency of these processes.
Finland also has significant mineral resources and is the only country in Europe with access to all minerals needed for batteries. This makes Finland attractive for investments throughout the battery value chain. Large investments are also underway in the production of fossil-free steel as well as numerous data center projects. For all these projects, affordable clean electricity is a major competitive advantage: the demand for electricity they create helps to attract further investments in power generation, creating a self-reinforcing spiral for new green investments.
However, there is a long way to go from making investment plans to having industrial facilities up and running. The currently high inflation and interest rates, prevailing in the European economy are presenting challenges to many of these projects – most of which face high upfront investments and risks related to scaling up novel technologies on an industrial scale. Permitting processes take their time, and while the Government has initiated a reform to speed up the investment permitting processes, the impacts will not be achieved immediately. Estimates are that the green transition could mean over 100,000 to 200,000 new jobs in Finland over the next two decades. This potentially presents a bottleneck in Finland with its aging population, if attracting foreign labour across industries is not successful.
All in all, energy transition is already well underway in Finland. Building on clean electricity and a tradition of excellence in industrial engineering and digital know-how makes Finland extremely well positioned to be in the vanguard of climate action. Not all the investment plans will materialize, but the current project pipeline and Finland’s strong fundamentals in advancing the green transition justifies optimism that Finland will not only meet the national target of reaching net zero emissions by 2035, but also turns green industries to an engine of growth for Finland.
