Promoting Swiss Hydroelectric Power

Promoting Swiss Hydroelectric Power

The only trump of domestic power production

by Pierre-Gabriel Bieri

The energy production by hydro-power in Switzerland is facing a strong foreign competition. Nevertheless, Switzerland has a strategic interest to preserve its large energy autonomy. The question arises whether it would be more effective to invest 700 million Swiss francsannually collected for the feed-in remuneration (KEV) into a similarly clean, but more effective source of energy, rather than into the development of new renewable energy sources?

Subsidies of coal and gas drive electricity prices down

Wouldn’t it make sense to support the Switzerland-based power producers, who are generating electricity from hydro-power and are complaining of not being able to cover their costs? This issue deserves serious discussion.
On the European market, prices have dropped considerably. This is on the one hand due to the slack economy and low demand associated to the latter. On the other hand, the low prices are caused by overproduction, caused by the massive subsidies to wind and solar energy, and ultimately by the low CO2 taxes on fossil energies (coal, gas). The wholesale market price fell from 8-10 cents per kWh in 2008 to currently 3 to 4 cents.
In Switzerland, the electricity providers benefit from these low prices. It is true that they are not necessarily depending on them, although they have to be competitive in the area of “large consumers” (more than 100,000 kWh a year), who have the right to choose their supplier from now on. In contrast, they are still free in their pricing policy concerning all other customers without free market access. This does, however, not change the fact that the large electricity providers took a liking to purchase energy on the highly competitive European electricity market. Since Swiss electricity providers don’t want to lose their business, they are forced as well to lower their prices, even if their production conditions are not as similarly beneficial, as those abroad.

Preserving a clean and especially more productive source of energy

The electricity production in Switzerland is based on hydro-power at about 60% . With the hasty decision to exit forms of nuclear energy, which still covers nearly 40% of the demand, as well as with the lacking capacity of “new renewable energies” to quickly fill the gap (solar and wind energy together account for hardly 1%), it becomes clear that one has to put more and more emphasis on dams and hydro-installations in the future, providing that we do not want to dispense with energy independence and to accept a situation in which Switzerland – with the associated risks, such as supply bottlenecks and supply shortfalls in Europe – would always be depending on electric power from abroad.
In case Switzerland wants to preserve its only source of energy, which produces a sufficient amount of domestic energy and is clean and renewable, it must ensure that the hydroelectric power plants receive the necessary funding to finance their operation and renovation as well as their expansion and enlargement. Otherwise it would be deprived of its high-quality infrastructure that is more expensive in contrast to other countries.
It is always painful to provide subsidies for production means. Nevertheless, one has to acknowledge that electricity production plays an effective infrastructural role for the economy, that is why the state must rightly deal with it. In particular, one has to remember that today there is an important subsidy: the KEV (“compensatory feed-in remuneration”) which was introduced to compensate for the difference between production costs and market price by the KEV Fund, which is fed by the electricity consumers and annually amounts to about 700 million Swiss francs.

Subsidising the KEV, where it is most useful

The problem is that the “great hydro-power” has no longer the right to be subsided today, which is now solely reserved for the small producers and the new renewable energies. Only, the large hydro-power plants secure a sufficient basic supply of electricity. Against this background the question arises, whether it is expedient that every year several hundred million francs are invested into the sluggish and uncertain development of production capacities, while hydro-power plants begin to totter in economic terms in view of the foreign competition? Wouldn’t it be more efficient to subsidy our best and most important sources of energy production wholly or partly by KEV, to help them temporarily overcoming this difficult period?
In the bosom of the parliament, one is recently becoming aware of the difficulties the Switzerland-based hydro-power plants are facing and also of the need to support them. The newly developed proposals remain but still reticent until now, which is doubtlessly based on the fact that no one dares to conjure up a “useful” reorientation of KEV. But bold measures are needed to protect this valuable capital in service of our prosperity.    •

(Translation from French into German: Evelyn Gfeller; Translation into English Current Concerns)

Source: from 19.8.2015

On this background, is it expedient that every year several hundred million francs are invested into the sluggish and uncertain development of production capacities, while hydropower plants become shaky versus foreign competition in economic terms?

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