The Finnish government encourages investments in CO2-free energy production

Fortum Corporation
Press Release
6 November 2008

The Finnish government encourages investments in CO2-free energy production

The basis of the government's climate and energy strategy published today is to
secure the future of energy-intensive industry in Finland. The strategy
encourages investments in CO2-free energy production: renewable and nuclear
energy. In addition, the strategy highlights energy saving and efficiency as
more concrete goals. The goals are right - it is good that despite the current
challenging financial situation the work against climate change continues.

"We find these to be the right goals and it is easy to support them. On the
other hand, not all the means suggested by the government suit the open
international energy market. The strategy states that Finland is part of the
Nordic electricity market and that both the European wholesale and retail
electricity markets will integrate within a few years. Nevertheless, many means
are completely domestic, resulting in efficiency losses, additional costs and
distortion of competition," says Timo Karttinen, Fortum's Senior Vice President,
Corporate Development.

In today's regional markets, electricity flows freely from one country to
another, but the strategy focuses on domestic electricity consumption. When
assessing the sufficiency of electricity production capacity, attention should
be paid on the development of electricity consumption and production in a larger

As for nuclear power, the strategy leaves open the number of new nuclear power

National renewable energy support system the most expensive solution for

The strategy is based on Finland reaching its goal of increasing the share of
renewable energy to 38% of energy end-usage by 2020. The set goals can be
reached, but the questions of costs and the adequacy of workforce, for example,
for organising the collection and use of wood chips, are still left open.

Domestic means are employed to reach the goal of renewable energy: in
electricity production, a national feed-in tariff will be introduced. However,
when defining a national support system, the support systems in other countries
must be used as a reference, not only domestic production costs. As
technologies, fuel and electricity flow freely between countries, investments
will not remain in Finland without an internationally competitive support
system. Thus, Finland too should prepare a common support system for renewable
electricity, starting in the first phase with a Nordic support system. The
strategy considers a common support system for many countries as problematic as
it attracts investments to where they can be implemented with the lowest costs.
On the other hand, it is admitted that the support will be paid by Finnish

Building offshore wind power is relatively expensive in Finnish conditions. In
addition to support system, streamlining licensing proceedings should also be
used as a means to promote wind power investments; proceedings principles should
be the same for all companies and in all locations in Finland. It is good that
attention is paid to the pricing of land areas needed for offshore wind power,
and that the starting point is large-scale wind power.

Energy efficiency through electric cars and heat pumps

For the 10% goal of renewable energy in traffic, the strategy does not clearly
state whether Finland will try to meet it by using bio-based traffic fuels
alone. Compared with bio-fuels, part of which must be imported, the goal can be
met with lower financial and environmental costs with electric cars running on
renewable electricity.

In addition to heat pumps, electric cars are an example of how a sensible
increase in the use of electricity can decrease the total use of energy. The
5-TWh goal set for the use of heat pumps corresponds roughly to switching nearly
all 250,000 oil-heated single-family houses in Finland to heating with heat
pumps. This would increase electricity consumption by approximately 2 TWh, which
corresponds to approximately 2% of the expected electricity consumption in 2020.

The climate and energy strategy is based on the fact that the world is changing
and there is a constant flow of new information. Consequently, the set goals
could be refined as more information becomes available. Therefore, it would be
beneficial if the government could already now define how the strategy will be
followed and, furthermore, how the goals may be re-evaluated.

Fortum Corporation
Corporate Communications

Further information: Timo Karttinen, SVP Corporate Development, Fortum
Corporation, +358 50 453 6555