The amount of energy aid has multiplied since 2018. The diversity of objectives and the lack of systematic monitoring undermine the effectiveness of the aid. The broad guidelines have made it possible to apply the aid criteria inconsistently.
The audit focused on the energy aid granted to companies and other entities in the form of investment aid. Energy aid has aimed at promoting the achievement of the energy and climate objectives of Finland and the EU. The aid is intended for projects that promote renewable energy, energy saving and energy efficiency or other decarbonisation of the energy system.
The amount of energy aid multiplied in 2018–2023 when, in addition to national aid, funding under the EU Recovery and Resilience Facility (RRF) was targeted at promoting the green transition and climate objectives. The audit examined whether the Ministry of Economic Affairs and Employment and the funding centre Business Finland have created sufficient conditions for effective allocation and use of the energy investment aid.
The lack of concrete targets has undermined the steering impact of the energy aid and the accountability of the aid administration. The energy aid has many objectives. They are so general that the aid can always be said to have promoted the achievement of one of them, at least to some extent. Ensuring the effectiveness of energy aid would require more specific performance targets, such as defining the minimum increase in renewable energy, energy efficiency, energy saving or other measurable impact expected to be achieved with the aid and the time frame within which this should be achieved. Performance targets would also ensure equal treatment of the applicants and promote the accountability of the aid administration and the transparency of the use of state funds.
According to decrees, new technology projects should be prioritised in the discretion process for energy aid. Aid may have been granted for other projects as well if this has been possible within the scope of the state budget authorisation. Between 2018 and 2023, about 51% of the national energy aid granted was targeted at new technology projects. The aim has been to discontinue the support for conventional energy solutions as their risks decrease and they become commercially viable. However, the criteria for assessing the novelty and risks of technology have been rather ambiguous, and the authorities do not seem to have had a systematic procedure for monitoring the matter.
The authorisations to grant energy aid increased in the state budget from around EUR 55 million in 2018 to around EUR 730 million in 2022. A growing amount of the authorisations remained unused, and the resulting budgetary distortion had to be corrected in supplementary budgets. Strong fluctuations in the use of authorisations are problematic. They weaken the predictability of the operating environment of particularly companies planning large investments and also pose challenges to the functioning of the aid administration.
The energy aid guidelines have been comprehensive. However, based on the analysis of the application material, the guidelines have made it possible to apply the aid criteria differently. The discretion in granting the aid has been largely based on information provided by the applicant, and this information has not been presented consistently. This makes it difficult to compare projects and may jeopardise the equal treatment of applicants.
According to the aid processing guidelines, the project must have a clear emissions reduction impact at the level of the entire energy system. Applications have been required to include at least an estimate of the reduction in carbon dioxide emissions. However, the calculation and assessment of the emissions impact have been very inconsistent. Therefore, the energy and climate impacts of projects have been poorly comparable. It has not been possible to compile uniform and reliable monitoring information from the project data or to assess the overall impacts of the aid. The external impact assessments of the aid commissioned by the aid authorities have therefore mainly focused on the views of the aid recipients on the necessity and effectiveness of the aid. The cost-effectiveness of energy aid projects has not been assessed or documented systematically.
The National Audit Office recommends that the Ministry of Economic Affairs and Employment should set concrete performance targets and corresponding follow-up indicators for energy aid. The aid authorities should also introduce better methods for assessing the catalytic effect of energy aid and ensure that the ex-ante assessment of the profitability, emissions reduction impact and other impacts of projects is based on uniform criteria and calculation rules. In addition, it should be ensured that the aid is genuinely targeted at new technology, and the benefits achieved with the aid should be monitored in relation to the objectives set for the aid.
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