Review of the CEO
Major steps towards a new energy system
The journey towards a new, more electricity-dominated energy system continues to gain momentum. During 2016, two important records were broken in the Finnish electricity system. In early January, the consumption of electricity throughout Finland reached the level of 15,100 megawatts.
Another national record was broken in August, when the production of wind power in Finland exceeded 1,200 megawatts. Later in the year, it even reached 1,300 megawatts. This is concrete proof of how wind power is gaining importance in our power system. Wind forecasts are an increasingly important daily tool for Fingrids control room.
All in all, 2016 was a very busy and successful year for us. System security of the transmission grid stayed at an excellent level. We also succeeded in serving the electricity market by securing the efficient use of transmission capacity. Power flowed freely from one country to another, driven by price signals. We have made major efforts to improve the reliability of cross-border transmission connections, and now this work is bearing fruit. The number of disruptions was decreased significantly and they are also shorter.
We have put forth ideas about how to control the future power system. We are strong proponents of a market-based system, and we believe the best solutions will be found when the operators, driven by market prices, can make decisions based on their own priorities. Demand side management is one area where answers are being sought to respond to rapid changes in the production or consumption of electricity, even within seconds.
Fingrid plays an active part in this development. Pilot schemes are rapidly advancing to practical, commercial solutions. Roughly half of our new frequency controlled reserves for disturbances come from demand side management and the other half from electricity production. This doubles the amount of demand side management compared with the previous year. We seek to promote consumers possibilities to actively participate in the electricity market by developing a real-time market, by building the datahub to support the markets and by actively participating in the work of the national smart grid working group.
Fingrid has carried out capital investments at a brisk pace. In 2016 we had 27 substation and 13 transmission line projects underway. It is an indication of the organisations excellent capabilities that all the projects have progressed according to the set schedules and budget. Furthermore, we have maintained excellent cost effectiveness, as proven by the great results in international benchmarking studies. The flagship of our capital investments is the 400 kilovolt Coastal Power Line from Pori to Oulu, Fingrids all-time biggest investment, costing EUR 260 million and completed at the end of the year. This transmission connection will play a key role when building up a more environmentally sustainable power system not just in Finland, but in all of the Baltic Sea area. The next mega project is already ahead of us: in late 2016 we agreed with our Swedish colleagues on building an AC transmission connection between our countries. This is a project of great national importance.
Transitioning to the new energy system of the future requires international cooperation, where the overall rules are being laid down in Brussels. Concrete co-operation with the other Nordic countries and the Baltics is reflected daily in our operations. Even if there are bumps in the road at times, the collaboration constantly produces new solutions that help to maintain high levels of system security and promote well-functioning markets. In the Baltic Sea region, this has for some time been based on close inter-TSO co-operation. In future, political decision makers should bear their responsibility for this work better.
In a changing and increasingly global operating environment, the sustainability of TSO operations is crucial. Our commitment to the UNs Global Compact initiative in 2016 is a testimony to how important sustainability and transparency are to Fingrid. We implement our strategy in strict compliance with the principles of corporate sustainability.
Our finances are in good shape, despite significant capital expenditure and operational development in recent years. Fingrids profitability was stronger than projected. The consolidated turnover amounted to EUR 586.1 (600.2) million and profit for the financial period to EUR 138.7 (103.6) million. The financial result was positively impacted by raises in grid pricing, increased consumption of electricity and cross-border transmission as well as decreased loss power and reserve costs.
Nevertheless, we have never forgotten that Fingrid exists for our customers and for Finnish society as a whole. Fingrid celebrated its 20th anniversary with our customers in September. To mark the anniversary, our visual image received a facelift to communicate openness, activeness and a modern feel. Judging by the feedback we have received, it can be said that our clients are as happy as ever with our operations and we enjoy their continued trust. At the same time, the expectations placed on us and our services are becoming increasingly demanding. We are happy to accept this challenge as part of our own development work. In future, you will be served by Fingrid personnel with even more insight into customers needs and a strong drive to find new solutions.
Fingrid delivers – now and into the future. Responsibly.
President & CEO