Amendment of the Electricity Market Act 2025 in a nutshell

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Electricity consumption in Finland is expected to increase significantly in the coming decades. The main reasons for this development are an expected increase in hydrogen production and a tripling of wind power capacity from 2023 levels – especially as the share of offshore wind power increases significantly. Industrial-scale solar power is also expected to grow significantly by 2040. The current electricity grid in Finland will not be sufficient to meet the needs of growing production and consumption. The electricity grid will need to be used much more flexibly than it is used today, and investments will be required to build new grid. Connecting this growing electricity consumption and production to the grid in a controlled way also requires a revision of the Electricity Market Act.

For this reason, the Finnish Government adopted a proposal to amend the Electricity Market Act of Finland in spring 2025. The proposal is currently in a committee stage in the Parliament, and the intention is that the changes will enter into force as soon as possible – possibly as early as in autumn 2025. We have summarised the key features of the essential changes below.

Amendment 1: Extending the possibility to build new grids with a voltage above 110 kV

One of the bottlenecks for new energy projects in Finland in recent years has been limited grid connectivity. A significant amount of generation is currently located in Western and Northern Finland, where wind power projects are concentrated, while electricity consumption hubs are primarily located in Southern Finland. Thus, in recent years, new capacity on the high-voltage grid has been limited for new projects in areas where they would be located under other circumstances. New grid construction has not been able to keep pace with demand. Projects in the north and west may have been forced to wait longer for connection to the grid, while projects in Southern and Eastern Finland have been easier to connect to the grid.

The development of high-voltage grid for industrial energy projects has been slowed down by the fact that, under the Electricity Market Act, only the transmission system operator (TSO) has the right to build grids above 110 kV, as such grids are automatically interpreted as part of the transmission grid. In the current government proposal, one of the amendments to the Electricity Market Act is that the right to build a grid over 110 kV would be extended to distribution system operators or third parties by means of a new electricity system permit, if the distribution system operator is unable to invest in a new grid in its area. Only the national-wide transmission grids above 110 kV or the cross-border interconnectors would remain under the responsibility of TSO.

Additionally, the inflexibility in connecting energy projects to the grid has been caused by the fact that under the current law, the system operator has not been able to include lines that connect several power plants, so-called “collecting lines”, in its regulated grid assets and thus has not received the regulatory return. For this reason, electricity producers themselves have built collecting lines in situations where it has been more cost-effective to connect several projects to the grid with a single line than with connecting lines serving each project separately. However, the intention has been that system operators should also be able to include such lines in their regulated grid assets. The current proposal would also allow system operators to own such lines that gather production in one place and would consider such connection lines grids that gather production in one place as part of their normal system operation activities. Furthermore, for the sake of clarity, the law would also introduce a new term, the so-called “generation connection grids”, which would refer to a grid where several power plants are connected to the grid by a common connection. The construction of these connection grids would be allowed for project companies and companies controlled by them without an electricity system permit, while the construction and operation of these grids by third parties and the system operator would be regulated. Instead, unlike before, only the lines serving one grid user would be considered as connection lines. The right of electricity producers to build these so-called connection grids themselves without an electricity system permit would not change, but the relationship between permitted electricity system operations, generation connection grids and connection lines would be clarified.

The proposed amendments will thus increase the opportunities to connect electricity generation to the grid by expanding the rights to build the required new grids.

Amendment 2: Extension of responsibility for the development and connection of regional and local high-voltage grids

As the grid over 110 kV could also be considered as something else than transmission grid due to the abovementioned changes, the definition of regional high voltage grid and the development obligations of distribution system operators will also change.

A high-voltage distribution grid would be defined as a local or regional electricity grid or line with a voltage of 110 kV or more. The new provision would stipulate that the distribution system operator should develop a new high-voltage distribution grid in its area of operation in accordance with the reasonable needs of grid users, unless this would be unreasonable in relation to the technical, economic and organisational resources of the system operator or for other customers of the system operator.

Distribution system operators would also be obliged to develop the grid if two or more power plant complexes express a need to connect to the grid. Thus, the construction and development of the abovementioned connection grids to serve generation would also become an obligation of the distribution system operator, as it would be part of the permitted electricity system operator activity carried out by the system operator.

Amendment 3: Clarifications on connecting offshore wind to the grid

Under the previous Electricity Market Act, it has been unclear whether the Finnish EEZ falls under the responsibility of the TSO, and thus whether the TSO has an obligation to connect offshore wind farms located in the EEZ to the grid.

In order to connect offshore wind power to the grid, the amended Act proposes that the responsibility of the TSO would include not only territorial waters but also the Finnish EEZ. As a result, the TSO would also have an obligation to connect projects located in the EEZ to the transmission grid. However, the construction of connection lines would not be considered as regulated activity of the system operator under the new law either, and therefore the obligations of the system operator would not apply to connection lines. Therefore, the connection of a single power plant from an EEZ to the grid, such as an offshore wind farm, would still not be part of the obligations of the TSO.

Amendment 4: Separate lines to facilitate hydrogen projects

The amendment to the Electricity Market Act includes a proposal on the regulation on separate lines, among other things to enable hydrogen projects. A separate line refers to electricity lines that connect production directly to consumption without the electricity produced passing through the electricity grid. Under the current legislation, a separate line can be built if the generation to be connected is less than 2 MVA. Thus, industrial production facilities such as wind farms could not, under the definition of a separate line, be directly connected to consumption sites such as hydrogen plants or energy storage facilities, unless they were located on the same property or group of properties, in which case they could be considered to have been connected to the grid within the property.

However, the current proposal would remove the 2 MVA limit, which would allow for future energy solutions such as connecting a hydrogen facility or other consumer site directly to renewable energy production by a separate line. This would, for example, prevent transfer fees for electricity directly used for consumption. This would also allow hydrogen to be counted as green hydrogen under the requirements of the RED II Directive, provided that the generation plant connected directly to the line produces renewable electricity.

Amendment 5: Flexible connection agreements

Under the current legislation, system operators and grid users have found providing additional connection capacity to grid users unnecessarily bureaucratic. System operators have wanted to provide additional capacity, for example, in situations where the existing capacity of the grid has not been sufficient to fully connect the site to the grid, and the grid has required reinforcement measures before full capacity has been available. Thus, in connection agreements, it may have been desirable to agree, for example, that part of the connection capacity will be connected to the grid immediately and the remainder only after the grid has been reinforced.

However, under the current legislation, system operators have practically only been able to offer one type of connection agreement to their customers due to their obligations of fairness and non-discrimination. The Energy Authority has argued that if additional connection capacity were offered to one customer without being offered to other customers who do not need additional connection capacity, this could constitute a breach of the principles of fairness and non-discrimination that bind the system operator. Thus, the system operators have been required to make a normal connection agreement with customers who have needed additional capacity, and a separate agreement for additional connection capacity. Grid users have also had to pay the system operator for such separate service.

The new proposed legislation will clarify the conclusion of flexible connection agreements. In order to allow more flexible use of available grid capacity, the new Electricity Market Act would allow so-called flexible connection agreements to be concluded directly in a single contract. A flexible connection agreement would mean a connection agreement whose terms include limits on the guaranteed capacity of the connection point, or the control of the electricity use or supply of the connection by the system operator. Flexible connection agreements would, for example, allow a project to be partially connected to the grid before the system operator has had time to reinforce the grid. The technical connection of the entire capacity of the project is possible at a later stage without the need for the parties to conclude separate agreements.

 

Our experts are actively following the progress of the legislative project and are ready to advise clients on all issues related to the Electricity Market Act and its obligations.

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