June 7, 2018 / 1:27 PM / 15 days ago

Finland slashes Russia power trading tariffs to ease imports

OSLO, June 7 (Reuters) - Finland will reduce the tariff it charges on electricity imports from Russia, making it cheaper for energy traders to sell more Russian power and boost the Nordic country’s security of supply, its grid chief told Reuters.

The move conflicts with European Union efforts to encourage EU members to reduce dependency on Russian energy supplies.

Imports from Russia, as well as Sweden, are indispensable for Finland to meet its growing domestic electricity needs and to cover its power production deficit, but tariffs, transmission fees and capacity payments kept Russian flows low last winter.

Fingrid, the country’s state-owned grid, will cut Russian tariff levels from July 1 onwards. The coefficient, a tariff adjustment rate, will be slashed to 0.2 for importing power in off-peak hours and scrapped altogether for peak hours.

“Reducing the trading tariffs will, in principle, make it less costly for traders to import Russian power, it is good for Finland’s security of supply,” Fingrid’s chief executive Jukka Ruusunen said.

In the Finnish-Russian power trade, Finland’s imports far exceed its exports, but high transmission fees and capacity payments for Russian-produced electricity at times make it unprofitable to send, even at seasonal peak prices.

High transmission fees that vary depending on Finland’s and Russia’s price differences, remain a discouraging factor for traders and were the main cause for last winter’s low imports, but cutting the coefficient to zero could push them up.

“The transmission fees are dynamic, in peak demand, even when prices are really high they also grow. That is why we had so low Russian imports last winter. But lower tariffs will make imports just a bit less costly,” Ruusunen said.

Reliability of power supply is particularly crucial to Finland as its industrial sector, including pulp and paper makers such as UPM and Stora Enso, but also for energy-intensive data centres that it wants built.

Finland, which imports up to a fifth of its electricity needs at times of peak winter demand, saw industrial energy needs grow by 1.7 percent last year, while net power imports hit a record high.

Net imports of electricity to Finland amounted to 20.4 terawatt hours TWh, which corresponded to 24 per cent of its total electricity consumption. About 5.8 TWh were imported from Russia. (Editing by Edmund Blair)

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