Action Plan to Promote Offshore Wind Power

The Finnish Ministry of Economic Affairs and Employment published last week an action plan for promoting offshore wind power, outlining measures to create a competitive advantage for Finland in offshore wind power compared to other Baltic Sea countries and to advance other offshore wind power goals included in the government programme. The working group appointed by the Ministry listed a total of 17 proposed actions. Below, we have compiled our observations on some of the interesting proposals.

The EEZ is not part of Finland's real estate system, which means that any lease and usage rights (or permits relating to these rights) pertaining to the EEZ cannot be registered with the title and mortgage register maintained by the National Land Survey of Finland. Consequently, the right to use the project area in the EEZ and any wind turbines and substations constructed therein cannot be used as real estate collateral but could instead be pledged as part of a business mortgage. This could reduce the value of the wind farm as collateral compared to a situation where real estate collateral can be used. This could also increase the cost of financing and thus the cost of project implementation for the wind power company. For further information on the topic, please refer to our earlier article titled “Financing Wind Power Projects Within the Finnish EEZ".

According to the report, the Ministry of Economic Affairs and Employment has initiated a study on promoting the bankability of projects in the EEZ.

Currently, the property taxation of wind farms in territorial waters is determined in the same way as for onshore wind farms. Since real estate taxation for buildings is based on replacement value, the taxation of offshore wind power becomes higher in monetary terms than onshore wind power due to higher construction costs. The Ministry of Finance is working on a reform to make the property taxation of offshore wind farms neutral compared to onshore wind power.

In the EEZ, only the provisions specifically mentioned in the Act on the Finnish EEZ apply, and currently, there is no mention of taxation legislation in the said act. The Ministry of Finance is also working on a legislative project concerning property and income taxation in the EEZ.

The report identifies challenges in the timing of applying for a water permit. According to the report, the technology and locations of wind turbines must be finalised when applying for a water permit. This complicates later changes in project development when technology evolves during the project or the project encounters other changes. Therefore, it is being investigated whether the water permit process could be made more flexible for offshore wind power and under what conditions. Unfortunately, there is no specific timeline for the investigation, but it is only stated that the legislative project depends on the resource situation of the responsible ministry.

Territorial waters are mostly owned by the Finnish state and managed by Metsähallitus. According to the report, Metsähallitus has required in its wind power lease agreements for territorial waters that the tenant provide restoration and decommissioning securities. In the EEZ, securities cannot be implemented in the same way because there are no lease agreements similar to those used for territorial waters. The offshore wind power legislative project for the EEZ has not yet addressed how the decommissioning obligation will be resolved, but pursuant to the legislative proposal, the matter will be prepared later. The report aims to define the requirements for the decommissioning of wind turbines and the restoration of the area, which could potentially apply to both the EEZ and territorial waters.

For onshore wind power, the rules that currently apply are the same as for any other construction. Decommissioning and restoration are typically resolved in an agreement between the landowner and the wind power company. However, the Ministry of the Environment is also working on a legislative project concerning the decommissioning and restoration obligations for onshore wind power and related securities.

The report identifies that projects carry the risk of the availability of grid connection capacity and the location of the connection point until a connection agreement is signed, as the signing of the connection agreement typically requires the building permits for the wind turbines to be legally valid. According to the report, Fingrid has recognised the need to update connection agreement practices for large projects that take a long time to develop.

Fingrid is also conducting a study on the potential grid connection opportunities for offshore wind power projects in the 2030s. Preliminary results of the study were published in May, and Fingrid will refine the preliminary connection points in the autumn of 2024.

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