The FINANCIAL — The European Commission has concluded that Finnish plans to grant around €10 million of public investment to Vaskiluodon Voima Oy, the operator of a gasification plant in Vaasa, are in line with EU State aid rules.
The plant will convert forest biomass (mainly wood chips and a small amount of peat) into gas for electricity generation and district heating instead of using coal. The Commission found that the aid will further EU energy and environmental goals, notably reducing carbon dioxide emissions and dependence on imported coal, whilst maintaining competition in the Single Market, according to the European Commission.
EU Commissioner in charge of competition policy Margrethe Vestager said: “The investment in the Vaasa gasification plant will reduce our carbon dioxide footprint and dependence on imported coal. It shows how State aid rules can encourage sensible public spending targeted at reaching the EU’s environmental and energy policy goals.”
In 2012, Finland notified plans to support the construction of a gasification plant in Vaasa and integrate it with an existing coal burning boiler. The plant will produce gas from forest chips (90%) and peat (10%) that will replace between 25 and 40 % of the coal currently used to fuel the boiler. Finland will support the project with around €10 million of investment aid, as well as a variable premium above the market price for electricity. This premium would be paid to Vaskiluodon Voima Oy, the plant operator, for the use of forest chips with the aim of ensuring sufficient profitability. It would be set at a value of up to €5.47 per megawatt-hour (MWh), depending on the price of EU emission trading allowances, and would be paid for up to 12 years.
The Commission assessed the measure under the applicable EU rules on state aid for environmental protection and energy. It found that the investment in gasification allows imported coal to be replaced with renewable energy sources in a cost-efficient way. The gasification of forest biomass has not been demonstrated on this scale before and this plant could be a blueprint for future projects, both in the EU and worldwide.
Furthermore, the previously mostly fossil energy based heating will be much more environmental friendly: As a result of the investment, CO2-emissions are expected to decrease by 228,000 tons per year. The plant also contributes to increasing security of energy supply and reduces Finland’s dependency on imported fuels.
The Commission therefore concluded that the positive effects of the aid clearly offset any potential distortions of competition brought about by the public financing.