5.1 Grid assets
Fingrid’s 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 2019 amounted to EUR 135.6 (92.7) million. This included a total of EUR 103.4 (85.1) million invested in the transmission grid and EUR 5.5 (2.9) million for reserve power. ICT investments amounted to EUR 25.6 (4.0) million. A total of EUR 3.4 (3.6) million was used for R&D projects during the year under review. In 2019, power lines and substations were built extensively throughout Finland. A total of approximately 150 kilometres of new transmission lines were built, and 12 new or expanded substations were completed. The most significant on-going construction projects are related to the Forest Line, the third AC connection between Finland and Sweden and the construction work around the Oulujoki river.
Grid assets are recognised at fair value for the purposes of the company’s regulatory balance sheet, as described earlier. 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 and mean lifetime data of the grid component.
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 EU Regulation 2019/943, Article 19: 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 in the balance sheet.
Fingrid’s congestion income from cross-border transmission lines totalled EUR 73.0,0 (29.6) million. Congestion income accrued in 2019 was allocated to the Alapitkä capacitor investment, which maintains cross-border transmission capacity. EUR 72.4 million in congestion income was left unused and will be used for future investments to improve the functioning of the electricity market.
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.