By: Truman Data CEO, Björn Hammar
Release Date: September 15th
Sitra published a report in 2021 (link to the report follows) on the cost-effective development of the Finnish energy system, which contains two main findings that remain highly relevant today.
First, in broad terms, the recipe for significant emissions reductions is to make electricity production emission-free and then electrify societal and economic functions in an order that is most efficient from the perspectives of cost, energy use, and resource efficiency. Finland is already well on this path, as reflected in the relatively rapid decline in emissions from its electricity system, now at a level that is admirable by European standards. As of 2024, over 95% of Finnish electricity production is emission-free. At the same time, the average electricity price in Finland was the third lowest in Europe, after Norway and Sweden.
We are now in the midst of an accelerating electrification trend. The heating sector, in particular, is rapidly electrifying with the help of electric boilers and heat pumps. This trend is also clearly visible in transport and industrial processes.
Reference, the Sitra report: https://www.sitra.fi/julkaisut/sahkoistamisen-rooli-suomen-ilmastotalvagiden-saavuttamissessa/
Another key observation from the Sitra study is that as the energy system becomes more electrified and the share of variable electricity production increases, electricity price volatility also grows. In such scenarios, flexible electricity production and consumption become critical.
In 2024, Finland recorded the most negative hourly electricity prices in Europe but also experienced significant price peaks. The study concluded that low demand-side flexibility increases the need for production-side flexibility, meaning more storage and additional production capacity, which leads to higher system costs.
Putting it simply: the more flexibility we have on the demand side, the less we need to invest in generation, storage, and transmission infrastructure, making the electricity system more cost-effective overall.
The rest of the whitepaper will be published in Finnish and English on September 15th.
