4.1 Grid assets
Fingrids grid investment programme promotes the national climate and energy strategy, improves system security, increases transmission capacity and promotes the electricity markets. The annual capital expenditure in the grid has remained extensive.
The company’s total capital expenditure in 2016 amounted to EUR 146.7 (147.5) million. This included a total of EUR 135.8 (138.4) million invested in the transmission grid and EUR 3.3 (0.7) million for reserve power. ICT investments amounted to EUR 7.5 (8.4) million. A total of EUR 2.4 (1.8) million was used for R&D projects during the year under review. At the end of 2016, Fingrid had thirteen 400 kilovolt substation sites and 67 kilometres of 400 kilovolt power line contracts as well as a significant number of 110 kilovolt substation and power line projects under construction.
Grid assets are recognised at fair value for the purposes of the company’s regulatory balance sheet, as described above. The fair value of the transmission network assets (adjusted replacement cost) is calculated by adding up the adjusted replacement costs for each grid component; these are calculated by multiplying the unit price specified by the Energy Authority with the number of grid components. The adjusted present value in use for a grid component is calculated based on the adjusted replacement cost, using the useful life of the grid component and its mean lifetime data.
Congestion income is generated because of an insufficient transmission capacity between the bidding zones of an electricity exchange. In such cases, the bidding zones become separate price areas, and the transmission link joining them generates congestion income in the electricity exchange as follows: congestion income [€/h] = transmission volume in the day-ahead markets [MW] * area price difference [€/MWh]. The basis for this is that a seller operating in a lower priced area receives less for their power than what a buyer pays for it in a higher priced area. The additional income caused by this price difference, i.e. congestion income, remains in the electricity exchange, which then pays the income to the TSOs as per the contractual terms. The congestion income received by a grid owner must be used for the purposes stated in EC Regulation 714/2009, Article 16, Paragraph 6: guaranteeing the actual availability of the allocated capacity, and maintaining or increasing interconnection capacities through network investments. As a consequence of the change in the regulation governing Fingrid’s grid pricing, the company will include the congestion income received after 1 January 2016 as accruals in the item other liabilities in the balance sheet.
The congestion income from 2016 was used for improving and maintaining the cross-border transmission connections, and in part also for the Hirvisuo–Pyhänselkä transmission network investment, which supports the cross-border transmission from northern Sweden.
As a consequence of the change in the regulation governing Fingrid’s grid pricing, the company will include the congestion income received after 1 January 2016 as accruals in the item other liabilities in the balance sheet. Of the accruals, congestion income will be recognised in the income statement as other operating income when their corresponding costs, as defined in the regulation, accrue as annual expenses in the income statement. Alternatively, they are entered in the balance sheet against investments, as defined by regulation, to lower the acquisition cost of property, plant and equipment, which lowers the depreciation of the property, plant and equipment in question. The congestion income received before 1 January 2016 was recognised in turnover.
Public contributions received from the EU or other parties related to property, plant and equipment are deducted from the acquisition cost of the item, and the contributions consequently reduce the depreciation made on the item. Other contributions are distributed as income over those periods when costs linked with the contributions arise. Other contributions received are presented in other operating income.