Gasum press release 19.1.2012
Clear reduction seen in Finnish natural gas consumption in 2011
A clear reduction on the year before was seen in Finnish natural gas consumption in 2011, with the consumption level also falling under the longer-term average. A total of 39.08 TWh of natural gas was consumed in Finland in 2011, down 12% on the 2010 figure. This is the lowest consumption seen in ten years.
Q1 of the year saw consumption rates slightly above average due to very cold winter weather, but towards the end of Q3 the low price levels seen in the electricity market and emissions allowances weakened the competitiveness of natural gas against other fuels. In Q4 the low electricity and emissions allowance price levels – coupled with a record-warm autumn and early winter – cut the consumption of natural gas by more than one third year-on-year.
”The year was quite exceptional in terms of the weather, the energy market situation and the world market prices of raw materials,” says Gasum CEO Antero Jännes. ”The price of natural gas is index-linked to the price of competing fuels, such as heavy fuel oil and coal. Regardless of the global economic downturn, we have not seen a drop in oil prices. This is also reflected in the price of natural gas. Producers were not able to benefit from the high power-to-heat ratio offered by natural gas in combined heat and power (CHP) production in a market situation where there was plenty of inexpensive hydropower available and the demand for electricity was affected by the economic situation and the weather conditions.”
The competitiveness of natural gas also suffered from the increase in the excise duty on fuels that entered into force in early 2011. Jännes points out that the decision to introduce the tax change was justified by environmental considerations. ”If, for instance, the price level of emissions allowances turns out considerably different from that anticipated in the tax proposal, the mutual competitiveness of fuels will not become a reality in the way assumed when the bill was passed. The second tax increase being considered at the moment will further reduce the competitiveness of natural gas against coal. Signs of this could already be seen last year. If natural gas is replaced by coal and peat, carbon dioxide emissions from energy production will increase. I presume this is not what the legislators had in mind."
When passing the bill the Finnish Parliament also required that its impacts on emissions development must be monitored. ”In the current economic situation the state is unlikely to be ready to give up the income generated by energy taxes. At the same time, however, it should be ensured that the promises made regarding a green tax reform are kept. One way of doing this is to review the relationship between the basic components of the energy tax reform – carbon dioxide emissions and energy content,” Jännes points out.