Apple didn't have a grudge against the Finns when it started designing its popular phones and tablets. But it just so happened that Finland’s economy was one of many global players upended by the devices.
“It was the iPad that killed the Finnish paper industry and the iPhone that killed the Finnish ICT industry,“ Jan Vapaavuori, the Finnish minister of economic affairs, told an international group of journalists, repeating a comment that first came from the Finnish business magnate Björn Wahlroos. “That’s why we need to build something new.”
Nokia suffered more directly from the iPhone than the paper industry did from the iPad; the global pulp and paper industry was already shrinking due to years of increased electronic communications.
Despite a sluggish European Union and the decline and eventual sale of the country's largest company, Finland sees a path out of a stagnant economy: helping others do more with less.
Finland's star could be rising as the global clean technology industry capitalizes on what the country has been doing for years. Finland has little in the way of fossil fuel resources, but is rich in timber and heavy industries, such as pulp and paper, ship-building and mining. The combination means that Finnish industries have always had to focus on efficiency in order to compete globally, which many other heavy industries in countries with cheaper domestic energy are just beginning to do.
Finland’s share of global GDP is about 0.4 percent, but its portion of the global cleantech industry is more than double its GDP, about 1 percent. The figures are small, but so is the country’s population of just more than 5 million. If Finland can reach its goal to double that share of the world’s cleantech market by 2020, it could help to reverse recent years of flatlined economic growth.
“We think the cleantech economy is the most promising economy,” said Vapaavuori.
While the overall economy has not grown in recent years, cleantech in Finland increased 15 percent from 2011 to 2012.
For Finland, cleantech is more about business-to-business energy efficiency than it is about consumer-facing clean energy solutions. Many environmentalists would argue that burning wood-waste black liquor rather than relying on oil, coal or mining is hardly clean, but Finland paints its clean energy and efficiency portfolio with a broad brush.
The ministry of employment and the economy expects that it will focus on energy efficiency, biomass as a renewable energy and waste management. The ministry has a target to double its cleantech exports, decrease use of fossil oil by 20 percent, cut out coal use, and use 10 percent less natural gas by 2025.
During a media trip to Finland hosted by the government, journalists heard the country’s cleantech industry highlight home-grown companies specializing in everything from elevator and AC drive efficiency to robotics for waste recycling and second-generation biofuels.
It is not just large commercial companies like ABB, KONE, Neste Oil and Wärtsilä that are thriving. Finland is one of only a few European countries with a full-fledged startup culture, complete with its own cleantech incubator in downtown Helsinki.
Finland is already ahead of the curve when it comes to the European Union goals of 20 percent of energy from renewables by 2020, even though that will largely be biomass, its most significant natural resource. The country has a goal of 38 percent renewables by 2020, which it has already exceeded.
In 2012, the government reported 46 percent of its electricity and heat generation came from renewables, more than half hydro power (some from the Nordic power exchange) and about 20 percent from wood fuel. Fossil fuels provided about 25 percent and nuclear 18 percent, with peat and other energy sources making up the rest.
The outlook for cleaner renewables within Finland is not great. Finland has long worked with what it has, but it also can’t compete when it comes to wind and solar. The sun doesn’t shine most of the year in the Nordic country. When it does, it is lower in the sky than it is in most other areas of the world, so panels need to be positioned differently to best capture the rays.
Wind is being explored, and there is a new feed-in tariff for wind energy, but offshore wind is not a realistic choice for a country where all of the surrounding water can be encased in a meter of ice during the long winter. Cleantech experts do not expect wind to play a major role in Finland’s energy mix, although it can increasingly rely on hydro and wind power from neighboring countries as part of the Nordic power pool.
That leaves biomass as the primary option. The country sees its biomass industry as a potential export, since it has been using waste biomass as a fuel source for decades and is now working on second-generation biofuels. “Biomass is the priority, but we don’t grow...forests to burn [them] up for energy,” said Vapaavuori. “It’s all a byproduct of our forest industry. It gives us a possibility to be a world leader in biomass.”
Neste Oil, Finland’s only oil refiner, has already developed biofuels from sources including wood waste, animal fats and palm oil. (The company is attempting to move away from palm oil given its sourcing issues, but has not replaced it yet.) Neste is working with Lufthansa to test out aviation biofuels and is also in talks with Finnair.
“All the oil companies say they aren’t just oil companies anymore,” said Ville Niinistö, minister of the environment in Finland and leader of the Green League, the country’s green party. “I don’t believe it, but I do believe it with Neste Oil.”
The country, which is building joint liquefied natural gas terminals with Estonia, is also betting on the maritime industry’s move to change oil-powered ships to LNG. “We expect to provide solutions for the whole world,” Niinistö said of cutting-edge engineering for ships.
In addition, Finland has spent decades regulating its pulp and paper and mining industries to become more water-efficient and less toxic, and now wants to export that know-how to emerging markets. “In Finland, cleantech is very much connected to reindustrialization,” said Tuuli Makela, senior advisor for cleantech and sustainability at the Confederation of Finnish Industries EK.
Finland’s real crown jewel, however, may be its focus on energy efficiency. It is already a world leader in combined heat and power, which is used in many of the district heating systems that heat Finnish homes and businesses. In industries such as water processing, mining, manufacturing, maritime, and waste processing, Finnish companies focus on efficiency as a core part of their offering.
Vacon, which makes AC motor drives, works with many of the world’s largest industrial players such as Honeywell, Eaton, Schindler and Hyundai. It is part of President Obama’s new manufacturing institute for wide-bandgap semiconductors.
Tekes, the Finnish government’s funding organization for innovative research and development, said that nearly half of its €570 million ($790 million) budget goes to cleantech, with energy efficiency being one of the biggest focuses. The exports mostly focus on emerging economies, particularly China, Brazil and India, although neighboring European countries are often a testing ground.
Even if some of the emerging economies see slower growth in coming years, Finland is confident that even a small piece of the global cleantech pie will be enough to fill the economic hole left by Nokia.
“Finland is a country of engineers,” said Vapaavuori. “We think we have a solid basis to ground our future on.”