SUMMER SPECIAL Episode 3: CEO of Fingrid

This is the third episode of Plugged In’s five-part CEO summer series, where Richard interviews prominent leaders in Europe’s energy sector. 

In this episode, Richard speaks to Asta Sihvonen-Punkka, CEO of Finnish TSO, Fingrid. 

They discuss the ongoing issues with balancing Finland’s power market, the oversupply of renewable energy in the Nordics, and the future of Finland’s nuclear energy programme. 

Presenter: Richard Sverrisson - Editor-in-Chief, Montel News

Guest: Asta Sihvonen-Punkka - CEO, Fingrid

Editors: Bled Maliqi, Sarah Knowles

Producer: Sarah Knowles

Transcript

Richard Sverrisson - Editor-in-Chief, Montel News: 0:05

Hello listeners, and welcome to Plugged In - the Energy News podcast from Montel, where we bring you the latest news issues and changes happening in the energy sector. Welcome to the third episode of our five part CEO summer series, where we put the big questions to key energy leaders. Last week I spoke to Leonhard Birnbaum, CEO of Eon. About Europe's power market and the green energy transition. In this episode, we will hear from a TSO that's probably had one of the most challenging times this year versus its European counterparts, and that's Finnish TSO, Fingrid. I sit down with CEO, Asta Sihvonen-Punkka to talk about the ongoing issue of negative prices in the region, prices which are plummeted lower than all other countries in Europe. I hope you enjoy the conversation. A warm welcome to Asta.

Asta Sihvonen-Punkka - CEO, Fingrid: 1:01

Thank you, Richard. I'm really happy to be here and to discuss with you this current electricity and energy topics today.

Richard Sverrisson - Editor-in-Chief, Montel News: 1:11

Certainly, there's a, there's always a lot happening Asta but let's start by a little bit look back. Could you tell me a little bit about the changes that have occurred since you started? What are the biggest changes as you see them since you started in the industry? Asta?

Asta Sihvonen-Punkka - CEO, Fingrid: 1:26

So that is really a long time ago. So I started as the energy market regulator in 98. That was the time when competition had been introduced into electricity market. And since then, we have come really far. So I came to Ingrid at the beginning of 2016 and since then we have seen the really big change in the power system. So in the electricity system. So how the generation structure have changed. The renewables have really taken their role. At the same time also, the electricity has become much, much cleaner. I think that we are number three when looking at Europe when it comes to CO2 emissions. So we are really in a good, very good situation and that is thanks to wind, solar, and also the increase in nuclear generation. But at the same time, what has happened is that we have become nearly self-sufficient at the annual energy level. The Russian imports have stopped. They stopped real abstractly in 2022. We also got the Europe's biggest nuclear power unit, so all kilowatt of three in 23. So I would say that very, very big changes. And now we are just, looking at, so how this big variability in the system is developing.

Richard Sverrisson - Editor-in-Chief, Montel News: 3:06

You know, obviously there's very tumultuous changes we've seen as well with the context of COVID the energy crisis, you know, certain amount of oversupply in the system of electricity. We'll come back to those. But if I can just ask you as well, how do you view the market now? From a TSO perspective vis-a-vis how you have, viewed it before when you're a regulator.

Asta Sihvonen-Punkka - CEO, Fingrid: 3:30

Yes. Surely there is because as a regulator, so one is looking at the industry through the lenses of legislation and the regulatory framework. What is possible to do, what is allowed, how the sector should develop. Also the big issue was at that time, for example what is reasonable pricing of the transmission and distribution services and so on. But still it was, I would say, a rather stable environment despite the fact that competition had been introduced. So when I now look from the viewpoint of Ingrid this is. Business. This is transmission business. There are big I would say challenges. So how do we keep pace with developing the transmission network while the. Generation and hopefully also the consumption will be changing quite rapidly. Also, how to cope with the, increasing decree of variability in the system as TSO of course. So we are responsible for balancing the system so we have balanced responsibility and also the responsibility for the whole system so that the lights are on.

Richard Sverrisson - Editor-in-Chief, Montel News: 4:57

I mean, that's quite a huge responsibility on your shoulders.'cause if anything does happen to the system. The fingers will pointed at you, will they? Not us. So they'll say, why? Why did you let this happen? We, that's certainly what we're seeing in other parts of Europe, maybe?

Asta Sihvonen-Punkka - CEO, Fingrid: 5:11

Yes. And I think that that is something that is quite understandable. So we have been given the responsibility and we need to live up to that. I would say that risk management is in our DNA. So of course we need to plan for the various contingencies or various situations. We need to mi mitigate the risks. And among the risks or big risks that we have. Identified, of course is the probability of blackout, that's for sure. It's it's something that belongs to this industry. You cannot get rid of that, but of course, you do everything so that, that wouldn't happen. Or if something like that would start so you would be able to limit that?

Richard Sverrisson - Editor-in-Chief, Montel News: 6:02

Often you hear from, for example, the trading community that maybe the grid operators too much on the side of caution, but of course your responsibility is to make sure there are no blackouts and the lights do stay on. So it's quite a fine balance, isn't it? Asta?

Asta Sihvonen-Punkka - CEO, Fingrid: 6:19

It's I would say that, of course we are developing our system and our processes so that we are able to manage the system, but at the same time, we need to be able also to develop the system, so the system is enlarging. Becomes I have used the word challenging quite many times, but I think that is the right one to say. And I think that this is something that you see all over Europe, I would say also globally. So in the old world. It was easy that you had quite a lot of. Controllable generation and generation was the one to be then adjusted to consumption. But now you have the generation when it's windy or when there's the sun. And then I think that not the whole consumption side has adapted the idea that they need to be the one who adjusts. To the generation. So when that is available. So this is a big paradigm change.

Richard Sverrisson - Editor-in-Chief, Montel News: 7:31

And more shifting to the demand, to the users of electricity rather than those generators. That is that is a huge change. Well, I want to turn to some of the challenges a bit later on in our discussion, Asta, but I would, if you take another look back and say, what has surprised you the most since you started in the energy sector since 1998?

Asta Sihvonen-Punkka - CEO, Fingrid: 7:52

I would say that what has really surprised me is, how fast then the system has changed. So the launch of competition and the liberalization, there was something that were planned and the rules were set for that, and the regulators were established for that. And then what came were the targets, at the European level for renewables and with the feeding tariffs. So how the wind industry, wind generation sector, so how that started to develop. So from Finland, so we were looking at what is happening in Germany, what is happening in Denmark, and Finland also introduced its feeding tariff in the early 2010. And then for example some specialists or experts who are saying that the Finn system can take 2000 megawatts or wind generation capacity at the maximum. Currently we are about 8,500 and the consumption hasn't. Increased. And there has been really a big change in, in, as I said, in the generation structure and in the whole system and how it started to move forward market-based. So the start with the feeding tariff but very soon in Finland and also in many other countries. Wind power became the, cheapest maybe solar in some countries where that is available. But here, up in the north, you just cannot rely totally on, on solar. So wind blows the year round. But it became the cheapest type of generation and since then so we have really seen this massive change. But at the same time, what has happened, so the very good sides of this development. So there has been this very big increase in self-sufficiency. There has been this very big change when it comes to how clean electricity is. And also so we have got a more decentralized system. Even though at the moment, so there are certain places in, in, in Finland, in the country, so where wind generation is currently concentrated, but still compared with the old system.

Richard Sverrisson - Editor-in-Chief, Montel News: 10:29

I mean, as you said it's a rapid change that's exponential growth in renewables that no one could afford seen 10, 15 years ago. You're absolutely right. I'd like to, move on to some of the particular issues that that Finland and the wider European market also face. And the first of that is that, paying people to use electricity, some negative prices that's been a big issue in Finland in the last couple of years. Could you explain some of the underlying reasons for why we see negative prices and how you think the situation could change after.

Asta Sihvonen-Punkka - CEO, Fingrid: 11:06

When looking at the past few years, so we have been having increasing number of negative prices. And for example, last year, so we had the highest number of negative hours when looking at Europe. And of course this has been the result of the fact that, there ha has been constructed more generation capacity, but at the same time consumption has not developed as anticipated. And I think that this is a. Common problem at the moment in Europe. So there were scenarios about the growth in consumption and how electrification would advance, but that has been slower than anticipated. But what we have seen is that as, so it's not just negative prices. So in Finland we have very volatile prices. So last year we also had the highest price in Europe. So it was the first week of January when we experienced that. So also back during the energy crisis when the prices also reached a relatively high level. The normal consumers, so households have become very aware of the price of electricity and what we saw then a couple of years back was that people started to save on electricity, shift their consumption on the basis of prices. And they are frequently using the apps. So looking at, so what is the price for next day? And what is the right moment to to charge your electric car or when it's the right time to wash your dishes or clothes or even is it the right moment to go to sauna? So to, to speak it in this way. And I think that also the demand for the kind of systems or applications that help you do this. So they have developed, I remember I would say some. Seven years back. So it was the time when I came to Ingrid. So then and I was working with the market issues, market development, and we were seeing that there was this development coming, so how wholesale and retail markets would come very close together and gradually emerge. So we were discussing and talking and advocating demand response and this kind of features to the market. Nobody was interested because the volatility of prices wasn't there at that time and not that high prices either. But now the volatility it's also what it does is that it creates earning possibilities. We see very lively investment environment for battery storage capacity, for example, in Finland at the moment. And the investors are able to earn from the volatility and also from the fact that as the share of renewable and intermittent generation has increased. The demand for various types of reserves that we use for balancing has increased and there are earning potentials.

Richard Sverrisson - Editor-in-Chief, Montel News: 14:40

Do you, I mean in the second part of my question, do you, I was asking more about how do you see this situation evolving? Do you think as consumers become a less price, or, sorry, more price sensitive, of course, that these kind of volatility will flapping out a little bit, or do you think it's in the nature of the market where you have that amount of intermittent generation plus maybe less flexible consumption, that the, this kind of volatility would continue?

Asta Sihvonen-Punkka - CEO, Fingrid: 15:07

That is a good question and I do not have a kind of full and total answer to that. But I would assume that if or when this volatility and this kind of, affluent supply of electricity is being utilized, for example, in the form or whether you have the possibility to somehow shift your consumption and take advantage of the low prices and for example the increase in the capacity of battery storage. So I, I would bet that would a bit. Even out the prices. And of course and I do hope that there will be investments in, into various types of industry that, that consumes electricity and wants to come to Finland for the cheap and clean electricity. So that will also then have an effect on the prices. Of course it's a kind of circle. When, then the prices would go up a bit. So there are already now, investments into generation capacity, so investment decisions made, but the investors are just waiting with their investments so that the price would become a bit better for them.

Richard Sverrisson - Editor-in-Chief, Montel News: 16:33

I mean that, that leads me very nicely to my next question, Asta and about a hot topic at the moment, if you like data centers. What, how do you view them and what role do you see them having in increasing demand in Finland in the coming years? Demand for electricity.

Asta Sihvonen-Punkka - CEO, Fingrid: 16:49

Finland and also the other Nordic countries have been very attractive sites or attractive countries recently for data centers. Because of clean. Cheap and secure electricity. And also the societies are stable. It's cool here. So that also helps. And then if you are able to use the extra heat that is being generated for district heating, for example. So there are many advantages for having the location here up in the north. So from Ingrid point of view we see them among the consumers, new consumers and we just need to see that, the locations for them are good. From the viewpoint of transmission network we are developing currently the transmission network, but because of this big chains in the system, so we have temporary connection restrictions in the south and up in the north or in the. West so when there is abundant electricity being generated. So they would be the good locations for these types of investments. And of course some has have raised. The concern about the adequacy of electricity for other types of investment or the effect on prices. But we see that new consumption then creates new generation. And these data centers are like any other consumption customers from our viewpoints.

Richard Sverrisson - Editor-in-Chief, Montel News: 18:34

So it kind of creates a virtuous circle. Would you like, you know?

Asta Sihvonen-Punkka - CEO, Fingrid: 18:37

Yes. That's that's correct.

Richard Sverrisson - Editor-in-Chief, Montel News: 18:39

And you see there's still a lot of interest in building data centers in Finland from outside the country. Big tech other types of, obviously we see the big boom in AI, but which needs to drive some of these centers is. What you're seeing at the moment, Asta?

Asta Sihvonen-Punkka - CEO, Fingrid: 18:53

There is, and what we see is then important is that of course there, there isn't just, one type of data centers. So they, they are providing different types of services and then they have different capabilities when looking from the viewpoint of the electricity system and transmission network. For example, the capability to produce or generate flexibility is something that is very important. If they are able to, provide that maybe they have certain capacity to generate electricity for certain situations. Or they have UPS systems or similar or then they are able to, or. Their business model is such that they are taking into account the price of electricity, so when the price becomes high, so then maybe they are not consuming that much. I think that taking into account those features are very relevant and the ability to be flexible and that would be very important when looking at their role and possibility to have and place them in our system.

Richard Sverrisson - Editor-in-Chief, Montel News: 20:11

Absolutely. That's, a final question. I think, you've highlighted the. The massive growth in renewable generation in Finland. And Finland also has a very rich and is very proud of its nuclear heritage. How, how can these two forms of generation coexist?'cause with the, it is problematic in other parts of Europe, but Finland seems to manage it quite well. Is that that's the outstanding from understanding from outside the country. Would that be a, a fair assumption?

Asta Sihvonen-Punkka - CEO, Fingrid: 20:39

So I think that one of the strengths of Finland has been this versatile production or generation array. So we have not just relied on one source of generation capacity but we have had quite a few, so nuclear. Hydro now than renewables, especially onshore wind. Solar is growing then biomass and of course when looking at nuclear, so the current fleet of generators. So they are very important from the viewpoint of our country. And I think that when thinking about adequacy. We need to have a long perspective and then think about that in a country like ours. Where there is winter, it can be very cold. It can be, or it'll be dark. And during those times. It might be so that there is no wind usually when you have very low temperature. So it's, there is no wind. So we need to have something, some kind of capacity that is able to produce energy. From this viewpoint nuclear is very beneficial, very good.

Richard Sverrisson - Editor-in-Chief, Montel News: 22:03

But is it flexible enough to manage the intermittent wind as well? Asta.

Asta Sihvonen-Punkka - CEO, Fingrid: 22:08

For flexibility, I think that we need to look at other, solutions. They have been discussed quite recently, for example, in, in in the context of non fossil flexibility. So what that could be. So some non fulfilled. Fuels and used by certain, whether it's motor engines or how power engines or something like that. The ca capacity that is already, or technology that is already currently available. So that could be something. And we see the increase in, in battery capacity. We need to have more demand response and that kind of things. And I have to say that we currently have quite few of these current nuclear plants in our reserve power markets. So they are able to provide flexibility through the markets as well.

Richard Sverrisson - Editor-in-Chief, Montel News: 23:03

Asta, thank you for a wonderful overview of the challenges we faced and the current situation in Finland, but also a very interesting look back at when you started in this very vibrant and interesting sector. And thank you very much for being a guest on the Plugged in Podcast Asta.

Asta Sihvonen-Punkka - CEO, Fingrid: 23:18

Thanks a lot.

Richard Sverrisson - Editor-in-Chief, Montel News: 23:20

I hope you enjoyed this episode with Asta. Join us next week for the fourth episode of our CEO Summer Series where I speak to Jarand Rystad, CEO, and founder of Energy Research and Intelligence Company, Rystad Energy.

Jarand Rystad - CEO and Founder, Rystad Energy: 23:33

The concept of a small modular reactors sounds fantastic. The point is we haven't seen any one of them. Even in a, in an investment decision, they need to be airplane crash, secure. They need that kind of protection that is not really scalable. Then it would be even more expensive.

Richard Sverrisson - Editor-in-Chief, Montel News: 23:53

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