Government proposal to amend the Electricity Market Act – Clarification of the definition of a connection line for improved energy storage solutions

In short:

• The Finnish government has proposed amendments to the Electricity Market Act to enhance the integration of renewable energy and promote investments in energy storage solutions.
• A key proposed amendment is the clarification of the definition of a "connection line”. It is proposed to refer to a single unit consisting of an electricity line and other electrical equipment and installations necessary for connecting various entities, including energy storage facilities and power plants, to the electricity system. This amendment would facilitate the connection of energy storage facilities and power plants through a common connection line even if they are owned by different parties. 
• Other proposed amendments include the replacement of the term "place of use of electricity" with "electricity use target" to clarify terminology and amendments to the rules regarding the right of entities other than the distribution system operator to construct a distribution system in the area of responsibility. 
• The proposed amendments are currently under committee review, with potential changes during the parliamentary debate.

To enhance the integration of renewable energy and promote investments in energy storage solutions, the Finnish government has proposed further amendments to the Electricity Market Act (588/2013). These changes aim to address challenges faced by hybrid energy projects, particularly the ability of energy storage facilities, such as batteries co-located with wind or solar power plants, to utilize shared connection infrastructure.

We have compiled a few key points that market participants should take note of, as the main objective of these upcoming amendments is to encourage investments in energy storage facilities associated with wind and solar power plants. 

To this end, the government has proposed to, among other things, clarify existing regulation relating to the definition of a connection line to enable energy storage facilities located adjacent to power plants to utilize the connection line of a power plant or a joint connection line of several power plants, i.e., hybrid connections. 

Accordingly, the government proposes the definition of a connection line in the Act be amended to refer to “a single unit consisting of an electricity line and other electrical equipment and installations necessary for connection to the electricity system, connecting to the electricity system the following of the subscriber or subscribers: a) electricity use target; b) one or more interconnected energy storage facilities; c) one or more power plants; d) one or more power plants and one or more energy storage facilities adjacent to them”. 

The previous amendment to the definition of the connection line in 2023

The definition of a connection line was previously amended in 2023 (497/2023) to refer to “a place of use of electricity or energy storage facility or an electricity line built for one or more power plant, connecting the subscriber or subscribers to the electricity system”.

The prevailing interpretation of the amended definition has been that an energy storage facility can only be connected to the electricity system by a common connection line with power plants located on the same property or similar groups of properties as the energy storage facility itself. This has hindered the progress of hybrid projects, as a separate connection line for the energy storage facility would be required. 

Replacement of “place of use of electricity” with “electricity use target”

Through the proposed amendment, the terminology concerning a connection line is clarified by replacing the term “place of use of electricity”, which also has another more specific meaning in the legislation, with the term “electricity use target” when referring to the connection of a single electricity use target to the electricity system. “Electricity use target” refers to the target for which the subscriber acquires an electricity connection. “The place of use of electricity” on the other hand refers to a target in which the network operator’s electricity metering or other electricity metering is installed and where the network user can conclude an electricity supply agreement and an electricity system agreement. 

An electricity use target would be, for example, a property within the meaning of Section 4(2)(1) of the Act or a similar group of properties, where the electricity system is not subject to the authorization requirements concerning the electricity system activity. In addition to the consumption of electricity, the electricity use target could also include electricity generation and energy storage facilities. There could also be several places of use of electricity in a single connection. Examples include an industrial building housing several businesses.

Characteristics of the connection line

A typical characteristic of a connection line is that it serves a single subscriber. The connection line would always connect an individual electricity use target, an energy storage facility or an individual power plant to the electricity system of the network operator.

• A line connecting the networks of two network operators would not be regarded as a connection line but instead as part of the electricity system activity subject to authorization.
• The voltage level of the connection line would not affect the nature of the line. A connection line does not only refer to the connection line itself, but also the integrated set of other electrical equipment and installations on the subscriber's or subscribers' side of the connection point, which are necessary for connection to the electricity system.

The terms connection and connection line would therefore also include, among others, substations, transformers and converters converting direct current into alternating current (DC-to-AC converters) owned or controlled by the subscriber, but not inverters. This means that the power plants and energy storage facilities and the electrical equipment and installations serving them located on the side of the subscriber or subscribers at the connection point would not have to be in the same area as the property or similar group of properties. 

In essence, the amendment of the definition of a connection line would allow the connection of one or more interconnected energy storage facilities or one or more power plant or a group of one or more energy storage facilities connected to a power plant to the electricity system by means of a common connection line. In these cases, there could be more than one subscriber, which would allow power plants and energy storage facilities owned by several parties to be in the connection. An entity thus formed would not be regarded as an electricity system within the meaning of Section 3(1) of the Act, nor would the operation of the connection line be regarded as an electricity system activity within the meaning of Section 3(6) of the Act, which are subject to authorization under Section 4 of the Act. 

The granting of project permits

As before, a connection line of 110 kilovolts or more would be subject to the project permit procedure for the construction of high-voltage lines under Chapter 3 of the Act. However, Section 16(2) of the Act is proposed to be amended in that in cases where the application for the project permit does not concern an electricity line crossing a national border, the project permit is to be granted for a connection line by which the electricity use target, one or more interconnected energy storage facilities, or one or more power plant or one or more power plant and one or more energy storage facilities connected to them are connected to the nearest electricity system with a nominal voltage of at least 110 kilovolts.

It is to be noted that a connection line can also cross-national borders. However, the construction of a power line with a nominal voltage of 110 kilovolts or more crossing the national border would require a project permit from the Ministry, in accordance with Section 14 of the Act. 

Responsibilities over the connection line

The clarification of the terminology of a connection line is not intended to change the existing responsibilities of the subscriber and the grid operator. The construction of a connection line would therefore continue to be the responsibility of the subscriber, whereas the connection line would be part of the electricity system of the grid operator. However, the metering equipment for the electricity system would be the responsibility of the grid operator as provided for in Section 22 of the Act. 

Amendments to the rules regarding the right of other entities than the distribution system operator to construct a distribution system in the area of responsibility 

Due to amendments to the definition of a connection line, Section 13(2) of the Act, which provides exceptions to the exclusive right of the distribution system operator to construct a distribution system in its area of responsibility, is proposed to be amended to clarify these changes. 

Accordingly, entities other than the distribution system operator may construct a distribution system in the area of responsibility in the following cases:

1. a connection line or a back-up connection connecting an electricity use target or one or more interconnected energy storage facilities to the electricity system of the distribution system operator of the area of responsibility. A key feature of a connection line is that it serves only one subscriber. If there are several electricity use targets located in different properties or groups of properties, this is regarded as the construction of an electricity system within the meaning of the Act, not subject to connection line regulation. Similarly, other subscribers cannot build their own connection line to the connection line, since the operation of the connection line would then become an electricity system activity subject to authorization;
2. a connection line or a back-up connection connecting one or more power plants, or one or more power plants and one or more energy storage facilities adjacent to them to the electricity system of the distribution system operator or other network operator in the area of responsibility. The right to construct connection lines for power plants and connected energy storage facilities is more flexible than for electricity use targets. A common connection line can be built for several power plants and connected energy storage facilities without the activity becoming an electricity system activity subject to authorization. A connection line can also be built in the area of responsibility or to the network of another network operator located outside of the area of responsibility; and
3. a separate line connecting small-scale electricity production to the electricity use target or to the network of a property or a similar group of properties. This amendment is merely technical, changing “place of use of electricity” to “electricity use target”.
4. As an example, the electricity user can build their own connection line via an electricity contractor to connect the electricity use target to the distribution system. The developer retains possession and is responsible for the operation and maintenance of the connection line unless otherwise agreed with the distribution system operator of the area of responsibility.

What to expect next? 

As of the date of this article, the government’s proposal is under committee review. Changes may still occur during the parliamentary debate, and therefore the proposed provisions may still change before they enter into force.

This article was written by our legal trainee Lilia Lamri and our associate Panu Punkari. For further questions, please contact our Energy team: Antti Niemi, Panu Punkari, Johanna Smalén, Sakari Lähteenmäki and Josetta Saari.