Elenia to cut capex further in 2023; improvement of security of supply as well as green transition poses significant capex requirements for the next 15 years

Finnish DSOs are required to submit network development plans to the Energy Authority every second year with the deadline for the latest update being end of June 2022. Following the amendment to the Electricity Market Act coming into force in August 2021, the guidelines for the network development plan have been updated mainly as following: i) the forecast period shall be extended from 2028 to 2036, ii) the cost effectiveness of the chosen security of supply improvement measures shall be evaluated, iii) the use of, for example, flexibility services or electricity storages shall be evaluated as an alternative to distribution capacity expansions, iv) the development plan shall be published and customers are to be consulted on the plan prior to its submission to the Energy Authority.

The development plan sets out Elenia’s strategic choices and measures to enable changes in the energy system brought along by the energy’s green transition, such as the integration of carbon-free energy production and consumption in the electricity system at different voltage levels. The plan details additionally actions that cost-efficiently improve the reliability and security of supply of the distribution network, that also ensure the fulfillment of the requirements of the Electricity Market Act. Elenia has been implementing its development plan in its operations already since 2012 and the basic principles and strategy of the plan have not essentially changed.

According to the network development plan Elenia’s capex requirements to replace aging overhead lines and improve the security of supply exceed 1500 million euro by 2036. Additionally, green transition related capex including e.g. deployment of smart meters and increasing network capacity to enable connection of wind power, are expected to amount to approximately 500 million euro by 2031.

Elenia also estimates that the sudden change in the regulatory methods, which came into effect at the beginning of the year, will probably increase the company's investment cuts for the years 2022–2023 to almost 100 million euros, slowing down the improvement of the quality of electricity distribution and the green transition of renewable electricity, and creating inequality between customers in terms of the quality of electricity distribution.

The regulatory methods planned for the regulatory periods of 2024–2027 and 2028–2031 should enable DSOs to continue the improvement of the networks and ensure the development of the smart grid for future needs. The methods must also encourage network companies and industry partners to reduce their carbon footprint and to develop solutions towards the carbon neutrality, electrification, and digitalisationdigitalization of society.

Customer consultation: the connection between the green transition and the smart grid is well understood; the 36-hour security of supply requirement is considered insufficient

In addition to publishing the network development plan, Elenia created a digital map service for the purpose of consulting its customers on the plan. The service allowed customers to examine and provide feedback on the future of the electricity network in their area of residence. Over 16,000 customers visited the service during the consultation period of May 2 to June 2, and nearly 800 of them provided feedback.

Residents especially in sparsely populated rural areas expect the security of supply to continue to improve. They consider the 36-hour security of supply requirement to be insufficient and the deadline of 2036 to be too distant. 96% of all respondents demand a 24-hour time limit for power outages, and almost 85% would only allow for a power outage of less than 12 hours at most.

Many respondents to the survey recognize the need for a green transition in society and understand how it relates to electricity network services. Electricity is being used more and more as fossil energy sources are being abandoned, and the production of renewable wind and solar power is increasing quickly. Electric cars are becoming more common, as are solar power plants in homes and other properties.

Accordingly, the consumption demand response services required by the electricity market will play an important role in the electricity network of the future. Due to the growth of weather-dependent wind power in particular, more demand response solutions are needed to continuously balance the production and consumption of electricity. Electrification, the green transition, and the climate goals of the society will not be achieved without a smart, reliable electricity network. As an international leader in the smart grid, Finland has a strong foundation to promote the development of a carbon-free society.