It needs a Hayek of Hydropower

It needs a Hayek of Hydropower

by Dr Ing Ernst Pauli

Nicolas Hayek has boosted the Swiss watch industry in a time marked by plant closures and high unemployment in the cantons affected. Isn’t it true, that the in itself healthy Swiss hydroelectric power production needs the ideas and confidence of somebody like Nicolas Hayek in order to out of the current situation?
Now, the Swiss hydroelectric power stations contributed after all 56.4% to the power generation in 2014 and they need new approaches to be able to survive in the current economic environment. Ideas and confidence are to come from those being responsible for the energy supply, namely cantons and communes, which ultimately own shares of 88% of the power producing enterprises. The typical Swiss values Hayek advocates in such a dedicated way, long-term strategic thinking before short-term profit, job security in Switzerland, a “stand-alone policy that is not of always eyeing foreign countries”1, are to be applied in this domain so critical to our country.
Politicians in the supervisory boards of the power producers do have a mission, namely to contribute the described values to the enterprise policy. As long as profits were gained, one has let companies such as Alpiq, Axpo and BKW have their way. They have invested in countless plants, especially abroad, with some kind of “hunter strategy” already followed by the former SwissAir, which now at times of the strong franc and the lowest wholesale prices for electricity impact the balance sheets of the utilities. The now pursued way out of the current crisis, namely to sell domestic hydropower plants to foreign private investors can only cause a head shaking. These investors, also the foreign ones, seem to see a very long-term perspective in the Swiss hydroelectric power. Professor Anton Gunzinger impressively describes in his book “Kraftwerk Schweiz” (Powerplant Switzerland), that within the framework of energy strategy 2050 with brave and clever use of all technical possibilities a self-sufficiency of Switzerland is last but not least possible using hydropower. His working hypothesis is: “Do we want to be energy-independent in case needed?” This also means that self-sufficiency requires at least partial phase-out from the free market drifting along hopelessly and which is entirely mislead running at prices that don’t even cover the production costs of the established energy production.
Reportedly, the prices are so low because new subsidised renewable energy, mainly from Germany is flooding the market. The on-going aberration, namely that old (German) coal plants, long since fully depreciated and to be closed for environmental reasons are just kept running, without having the politics acting against this, is denounced, but plants are not finally closed. This development is accepted unquestioningly, as if a natural event had taken place. Also absolutely meaningful innovative concepts such as the expansion of power plants around the Lago Bianco in the Poschiavo Valley to a large pumped storage plant and many other approaches to environmentally-friendly power generation, which would strengthen the Swiss energy supply, are taken back for “economic” reasons. The same applies to a long list of water plants, which are queuing on a list waiting for compensatory remuneration (KEV in Switzerland), but do not get the crucial political and financial support.
Out of this situation new ideas should be generated. If it is true, that the investment decisions are not taken because of missing short-term profitability considerations, then this must exactly be questioned. Isn’t it that money is in circulation in abundance, that even negative interest rates are to be paid because of all that superfluous money not invested? If you think and combine this with the fact that in particular the current cost of financing of new investments in power generation represents a high share of the cost, then an economic operation of hydropower plants would be possible without these costs and the cantons and communes could reopen by political decisions the way for strategic investments. A waiver of various taxes and levies to communes and cantons could make the hydroelectric power again competitive. Ideas and confidence are needed.    •

1     Current Concerns No 8, 19 April 2016, excerpt from an SRF-Interview with Nicolas Hayek

(Translation Current Concerns)

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