Great potential in offshore wind power
Offshore wind power is an interesting potential form of renewable energy production, and we want to harness it to build societally influential business.
State area, property tax to the local municipality
The regional economic impacts of the construction and operation related purchases of the offshore wind farm are considerable. In addition the accrual of property tax on offshore wind production will have a very significant positive impact on municipal finances.
Municipalities have the right to levy taxes on properties located in their areas in Finland. Property taxes on the Korsnäs offshore wind farm are paid to the municipality of Korsnäs, even though the offshore area is state-owned. Metsähallitus’ tasks include managing the state’s land and sea areas.
The tax revenue obtained by an individual municipality from wind turbines depends on the construction costs of the turbines and the tax rate determined by the municipality. The annual property tax revenue from one offshore wind turbine to the municipality can amount to EUR 70,000 a year. In this case, the annual revenue from the wind farm is potentially several million euros.
Due to the more expensive foundations, an offshore wind farm has more structure subject to property tax than an onshore wind farm. In accordance with its program the Finnish government has, however, taken an initiative to reduce the property tax of the offshore wind so that it would not slow down development.
In addition, the increase in economic activity creates other cash flows both during construction and operation. The employment impacts will be generated by such activities as planning, construction of wind farm infrastructure, transport, wind turbine installation as well as accommodation and catering services.
Finland competes for offshore wind investments
Several areas possible for offshore wind production have been allocated to Finnish sea areas in the provincial plans, and Metsähallitus, as the holder of public water areas, has entered into a reservation agreement with energy companies for part of the areas.
Offshore wind power production is expected to grow rapidly in the future. As technology advances, offshore wind farms will be larger and efficiently produce more fossil-free electricity. Offshore wind power does not involve the same difficulties in finding a suitable location as onshore wind power.
Finland competes with the neighbouring countries for offshore wind energy investments. Success in the competition is influenced by e.g. wind conditions, the location of customers purchasing electricity on long-term contracts, and different investment incentives in different countries.
Metsähallitus’ operating model for offshore wind power
Metsähallitus operates at sea both as a project developer for wind power and as an issuer and lessor of reservation and access rights contracts. We do not build wind turbines or have them built, nor do we own the wind parks or participate in energy production. In all cases, ownership of the water area remains with the state.
Reconciling different objectives is in our core competence. We have an enormous stakeholder network and expertise to engage and listen to this network. The development of the offshore wind farm requires a participatory approach and good communication with both decision-makers and local people, which is our area of expertise.
In order to develop offshore wind power, we first carry out preliminary studies on water areas and based on them, we select the areas to be auctioned. Depending on the importance of the project, the State Council or the Economic Policy Ministerial Committee approves the areas to be rented and the conditions of the auction before starting the auction. The winner of the auction is responsible for, among other things, applying for the necessary permits and after signing the contracts can develop the area in a way that suits them.
The first auctions will take place in the estimated years 2023–2024 and will concern 3-4 areas suitable for offshore wind power.
Korsnäs is the first offshore wind power project in which we act as the project developer. We are looking for a parner to build and operate the offshore project in an international auction process. The, which may be from Finland or other countries, need to meet the terms of Metsähallitus’ responsible business operations.
After the development of the project, Metsähallitus will act as a lessor in wind farms, and the rental payments received from wind farms will form a part of Metsähallitus’ profits. At the moment, this share is around 10%, and it is growing as new power plants are built.