Banning coal in 2030 to affect energy companies slightly

Phasing out coal in energy production by 2030 would have only minor effects on energy companies, according to a survey commissioned by the Ministry of Economic Affairs and Employment.

However, this would require that the Greater Helsinki area have access to reasonably priced biomass for replacing coal in energy production, said an official press release.

Enforcing a ban on coal in 2025, on the other hand, would have serious economic impacts especially in Helsinki, Vaasa, Espoo and Vantaa, and coal would be replaced by biomass and to a significant degree by natural gas.

Pöyry Management Consulting submitted its report on the effects of phasing out coal in energy production to Minister of the Environment, Energy and Housing Kimmo Tiilikainen on Tuesday.

The Minister discusses the report results and the future of the coal phase-out project in press conference.

The Pöyry report focuses on the effects of phasing out coal in district heating networks and industry where coal has been a significant source of energy in recent years. Eight cities have large coal-fired units, accounting for 90 per cent of the coal used in energy production in Finland. Helsinki, Naantali, Espoo, Vantaa, Vaasa and Lahti topped the list in 2016.

Phasing out coal by 2030 would have cost implications chiefly in Vaasa and Helsinki, where measures to replace coal would have to start earlier than currently planned. The estimate is that the other coal-fired power plants could be replaced before 2030.

Banning coal in 2025 would have significant effects on district heat generation especially in Vaasa and Helsinki. It would have cost implications even in Espoo, Vantaa and Turku, but to a considerably lesser degree. The overall impact of phasing out coal by 2025 could grow to EUR 200 million in 2024–2033, based on the assumptions used in the study.

The report estimates that the price competitiveness of coal will decrease in the future. However, banning coal would cause power plants additional costs due to earlier replacement investments, potentially higher production costs, premature decommissioning of existing equipment and additional investments in existing power plants.

There will be a considerable market-driven drop in the capacity of coal-fired heat generation by 2030, while most replacement investments will take place in the mid-2020s. This will reduce the economic effects of the coal phase-out. It is estimated that the use of coal for energy will drop from 22 TWh in 2016 to around 5–7 TWh by 2025 and to 3.5 TWh by 2030, while the coal-fired district heat capacity will decrease from 2,055 MW to 1,100 MW by 2025 and to 480 MW by 2030.

Finland aims to phase out coal in energy production in the 2020s, according to the current Government Programme. The National Energy and Climate Strategy puts forth that a Government proposal on a transitional period for phasing out coal power by 2030 will be prepared during this government term. Minister Tiilikainen requested Pöyry Management Consulting to even consider a scenario where coal power is phased out by 2025.