We should promote small hydropower instead of choking it off

Federal Court clears obstacle on the way to the EU electricity market

by Dr iur. Marianne Wüthrich

“Small power stations are running out of steam” we read in the daily press on 5 November.1 This cannot be happening! On the contrary, in view of the energy bottlenecks to be expected after the nuclear power plants are phased out, local self-sufficiency in hydropower would have to be particularly promoted and expanded.
  The Federal Supreme Court took the wind out of the sails of small-scale power plants in a very strange decision on 29 March 2019. In just a few sentences, the Swiss Supreme Court simply abolished the “immemorial water rights” that had arisen in the course of history, and that without instructing the cantons how exactly to implement this new ruling. The cantons are thus forced to abolish a traditional legal form, which was organised in different forms, and to spend taxpayers’ money on extensive expert opinions on possible implementation. According to a press release issued by “Swiss Small Hydro” on 16 May 2019,2 “this ruling has enormous implications and affects hundreds of small and medium-sized hydroelectric power plants throughout Switzerland.” The canton of Zug, which was affected by the court ruling, commissioned an expert opinion, and this was the reason for the above-mentioned newspaper article.
  In order to make it easier to understand what is at stake, the backgrounds and underlying factors will be illuminated here.

According to the Swiss Small Hydro Association, small hydropower in Switzerland is the second most important renewable energy source for electricity generation (after large hydropower). The 1,400 or so small hydroelectric power stations on Switzerland’s rivers and brooks produce 11 % of all hydroelectric power. Their operators thus make a significant contribution to local self-sufficiency. How is it that they “are running out of steam”?

WWF Switzerland versus small hydropower plant in Cham

The former Cham paper mill (now Cham Group) operates the Hammer power station on the Lower Lorze (river in Canton Zug). In 2015, the owner submitted two building applications to the cantonal building department for the repair of the plant and for residual water remediation. The state council rejected a complaint by WWF Switzerland and granted the building permits. The WWF appealed to the cantonal Administrative Court against this decision, arguing that the specified residual water level was too low and that the planned fish migration aids were insufficient, particularly with regard to lake trout. Following the dismissal by the administrative court, WWF appealed to the Federal Supreme Court on 20 November 2017. On 29 March 2019, the Federal Supreme Court upheld the WWF’s appeal, overturned the decision of the Zug Administrative Court and referred the matter back to the State Council for reassessment.3

“Immemorial rights” – traditional water rights versus “opening” the electricity market

The Hammer small power station uses the water of the Lorze River for local electricity production on the basis of “immemorial rights”. Immemorial rights are perpetual water rights, which were established in pre-industrial times to operate water-powered mills. It is estimated that several hundred small Swiss power stations are still operated today on the basis of immemorial rights. As early as 1657, for example, a paper mill was built in Cham which used the water power of the Lorze River, thus establishing rights of use which were passed on from generation to generation.
  As stated by the Federal Supreme Court, immemorial rights “originate in a legal system [...] which no longer exists. They can no longer be established under the new law, but can continue to exist under the new legal system”. (Federal Court Decision 1C_631/2017, recital 5) Today, immemorial rights would no longer fit into public law “without friction”. It is not revealed what “friction” the supreme court means. In any event, the owners of these power plant must also comply with the environmental requirements in force, as is clear in the present case: If WWF Switzerland is of the opinion that the residual water volume at Hammer power plant is too low, it can file an appeal against the application for a building permit and take the matter right up to the Federal Supreme Court.
  In reality, there is friction with the plans of the EU turbos in Federal Bern: in Switzerland, the use of hydroelectric power is part of the public service. Most power plants are in the hands of cantons and communes. For years the Federal Council has been trying in vain to persuade the 650 larger power stations into large-scale mergers and thus to initiate their privatisation – a mandatory condition for their inclusion in the EU electricity market. The reason for this is that the planned framework agreement and an electricity agreement based on this would be subject to the ban on state aid. If an electricity agreement with the EU is sought, there will be absolutely no use for traditional legal forms, such as immemorial rights of those commercial enterprises that produce electricity for local needs – and are in the way of no-one in the community.

Federal court cracks immemorial rights by using a questionable trick

The Federal Supreme Court is now using this specific complaint to initiate the dissolution of the immemorial rights, although they were not even objected to in the present case: “The subject matter of the dispute is thus only the building permits and exceptions to be granted, but not the obligation (also asserted by the FOEN [Federal Office for the Environment] in its consultation) to convert the immemorial right into a concession.” Therefore, this conversion could not be ordered in the present proceedings. “On the other hand, it can be examined whether a concession is the condition for the grant of the contested authorisations. If that were the case, they could (and should) be revoked.” (Recital 1.2.)
  A very curious legal interpretation: although the Federal Supreme Court may not order the abolition of immemorial rights in this case, it does examine whether the Hammer power station would have needed a concession to enable the Zug cantonal government to issue the construction permits, which it has already granted on the basis of the immemorial rights. In doing so, it abolishes the – not disputed! – legal basis of the immemorial property rights, even with retroactive effect.
  As regards the actual subject of the dispute, the building permits already issued, the Federal Court relies on the ecological expertise of the Federal Office for the Environment FOEN. The latter agrees with the Zug Administrative Court that the measures planned by Hammer power station “to ensure the free migration of fish” are “sufficient” (recitals 7.6 and 8). So, although the requirements of WWF Switzerland have been met, the Federal Supreme Court upholds its appeal.
  The judgement is consistent with this course of action: “Building permits and exceptional permits may therefore only be issued once a concession has been granted. Since this condition is absent in the present case, on this ground alone the appeal must be upheld and the contested decision annulled. [...]” (Recital 6.5)

The Federal Supreme Court should not render political decisions; it should dispense justice

It is understandable that the highest court in Switzerland relies on the Federal Office for the Environment (FOEN) for the assessment of fish ladders. However, the fact that it also follows the requirement of an administrative office with regard to the purely legal question of the annulment of matrimonial rights is rather unusual. Thus the Federal Court quotes: “The FOEN emphasises that according to current legal opinion the state shall no longer grant special rights of use to public waters for an unlimited period of time, but only for a limited period, by means of a concession”, and it is “highly contrary to the public interest […] to misuse public waters for eternity”. (Recital 3.4., emphasis mw).
  Is the use of water bodies for electricity generation a “misuse”? The fact that people in the FOEN regard our rivers and streams primarily as habitats for animals and plants is nothing new, nor is it new that they are seeking internationalisation for this purpose. But the Federal Supreme Court has to make its decisions in accordance with Swiss law.
  In accordance with the FOEN’s demand, the I. Public Law Division of the Federal Supreme Court de facto suspends the immemorial water rights, using many nebulous formulations: They should be “subjected to the regulations currently in force, and in principle without compensation”. Immemorial rights should be replaced “at the first opportunity”, conceivably with a transitional period. “If the person entitled wants to continue using the water, he or she requires a concession under current law for this purpose”. (Recitals 6.4. and 6.5., emphasis mw)
  The court has imposed a whole series of unclear instructions on cantonal authorities and power plant operators. The general helplessness following this decision was great, and the expert opinion on the replacement of immemorial water rights, which was recently published on behalf of the canton of Zug, is correspondingly extensive.4 This is not the place to present the results of this expert opinion.  •

1 Stalder, Helmut. “Kleinkraftwerken geht der Schnauf aus” (Small power stations are running out of steam); in: Neue Zürcher Zeitung of 5 November 2020
2 Bölli, Martin. Press release on the decision of the Federal Supreme Court on the necessary relicensing of several hundred hydropower plants. Swiss Small Hydro of 16 May 2019
3 Federal Supreme Court decision 1C_631/2017. Judgment of 29 March 2019. I. Public-law division. Facts of the case
4 Abegg, Andreas; Seferovic, Goran. “Die Ablösung ehehafter Wasserrechte” (The replacement of immemorial water rights). Expert opinion on the implementation of Federal Supreme Court decision 145 II 140 (Hammer) of 26 October 2020 for the canton of Zug

Deceptive “security of supply” through an electricity agreement with the EU

mw. On 21 May 2017, the Swiss people adopted the revised Energy Act, thereby agreeing above all that nuclear power plants in Switzerland should be replaced by renewable energies in the longer term. However, a resolute promotion of domestic energies, and in particular of hydropower, which nature makes available to Switzerland on a large scale, is essential to secure energy supplies. Switzerland has done well in keeping hydroelectric power, one of the most important areas of public service, in the hands of the cantons and communes or, indeed, locally based commercial enterprises.
  Anyone who thinks that an electricity agreement with the EU would increase Switzerland’s security of supply because we would then be able to import electricity more easily in times of electricity shortages is seriously mistaken. Have you forgotten that our neighbouring countries illegally refused to allow supplies of protective masks and other urgently needed material ordered and paid for by Switzerland in spring? The same thing will happen to electricity: When a state itself is in short supply, it first looks for itself. To be able to import the necessary energy, Switzerland would in any case be better off concluding agreements with individual states. That would bring more security than an agreement with Brussels. But the most reliable option is a substantial increase in domestic production.
  The Swiss authorities, including the Swiss Federal Court and the administration, are obliged to promote domestic energy production instead of putting obstacles in its way because it does not fit in with the “opening” of the electricity market.
  Nevertheless, the Federal Council announced on 11 November that the revision of the Energy Act of 2017, which is already pending again, will significantly improve the framework conditions for the expansion of electricity production, especially hydropower. In particular, the Federal Council wants to promote storage power plants to secure the electricity supply in winter with massively higher contributions (an additional 0.2 centime/kWh). (“Der Bundesrat will eine sichere Stromversorgung mit erneuerbaren Energien” (The Federal Council wants a secure electricity supply with renewable energies), Press release of 11 November 2020)


“Sustainable use of small-scale hydropower is widely supported”

Interview with Martin Bölli, Managing Director of Swiss Small Hydro*

Current Concerns: Mr Bölli, what do you think of the decision of the Federal Supreme Court of Switzerland that “immemorial rights” should be abolished and replaced by concessions?
Martin Bölli:
It came as a surprise to everyone involved. So far we have been proceeding on the assumption that they are to a certain extent protected. However, this new decision requires new concessions to be granted “as soon as possible”: what does that mean?
  The whole concession procedure is very complex. It can take up to ten or even fifteen years. During this time, the project is often revised several times, sometimes due to objections. Sometimes it can be very streamlined and will not attract much attention, but that is rather the exception; basically there is a certain wariness regarding new concessions.

Can the concession also be refused?
Yes, the environmental associations can lodge an objection with the State Council on the basis of the association’s right of appeal. They can, for example, demand that more residual water is needed than the legally stipulated minimum, for example to better protect a species of fish. The volume of water that flows down the residual watercourse is then not available for turbine generation. This means correspondingly less electricity yield, and if the volume of residual water becomes too large, at some point it is no longer worthwhile.

Did I understand you correctly: a concession is better for the WWF and other environmental organisations, because then they can make their objections and drag out the proceedings?
Yes, exactly.

And for small power stations, the situation is worse without their immemorial rights, because in the end it is no longer worthwhile for them to produce?
Yes. The immemorial water right was like a trump card. People knew that we had been producing energy at this site for 150 years, mechanically or electrically, and because this right is still valid, there is a good starting situation for investment in renewal or even expansion.
  In the past, water wheels had to provide a certain amount of energy for 20-24 hours a day throughout the year to drive the mills.
  Today, things are different with the transmission network. If there is not enough water, you turn off the system and channel the water into the residual water, and the more water flows in, the more electricity you can produce. You don’t have to consume this electricity on site; you can channel it into the grid so that it can be used elsewhere. In this way, you can generally leave more residual water in the watercourse, but still produce more electricity all year round. This is a win-win situation. But in order to make this conversion, you need a new diversion, new pipes, a new turbine, a generator, and you have to take various measures at the weir. The whole thing will therefore be a rather complicated project with corresponding investment requirements.
  At the moment we have the problem that the price of energy is very low, 4 to 6 centimes per kilowatt hour. But if you need 80 years to redeem this investment, then nobody will invest any more. If a person takes money in hand today, they want it to be paid back within 15 or 25 years at an interest rate of at least 1 to 3 per cent. In doing so, they have to take into account various risks, from the risk of not being granted a permit to a drought (like two years ago) or downtime due to maintenance and repair work. The risk must be in proportion to the yield.

Why is the conversion more expensive today?
Today, comprehensive planning is required, as a teamwork of civil engineers, hydrologists, aquatic ecologists or also of mechanical and electrical engineers. It is a technically complex structure, an interdisciplinary project, which requires a certain amount of effort and alignment with each other. The structures have to meet stringent requirements, and on rivers at risk of flooding it is also necessary to ensure safety even in the event of extraordinary flood events.
  This is the problem that the facilities with immemorial water rights also have: they could actually be expanded, in line with the new energy strategy, resulting in a significantly higher yield. But because the administrative procedures have become so complicated and time-consuming, it is not worthwhile for most of the plants to spend so much money, partly also because they are not eligible for subsidies.

There are no federal subsidies for smaller power plants?
No, not with the new Energy Act. Unfortunately, this was one of the decisions of parliament not made in favour of renewable electricity production. Although even a water wheel with an output of 3 kW can supply about 5 to 6 households with electricity all year round. Perhaps too few politicians were aware of this proportionality; otherwise there would probably have been another outcome.
  Moreover, in the federal administration we have two authorities with different objectives: The Federal Office for the Environment (FOEN), which wants to protect water bodies, and the Swiss Federal Office of Energy (SFOE), which emphasises the contribution of small hydropower accounting for four terawatt hours per year, i.e. 11-12 % of total hydropower.

11–12 %? Surely this should be encouraged! With the new energy strategy of 2017, we voted in favour of promoting renewable energies, not making life difficult for them.
Agreed. But it is also true that the new Energy Act states that the maintenance of existing small power stations with a capacity of less than 300 kW should no longer be promoted. For new small hydropower plants, Parliament has even raised the limit to 1 MW. That threshold is really high.

Back to the Federal Supreme Court ruling. In the case of the Hammer power plant, the Federal Office for the Environment says that the environmental requirements have been met. So actually, there was no reason to uphold the complaint of WWF Switzerland. Did I understand that correctly?
Personally, I suspect that in the Hammer power plant case an agreement between WWF and the operator would have been possible. But the complaint effectively targeted the immemorial water rights. The WWF had a legal opinion prepared by Bütler/Riva for a trial [quoted in Recital 5.3. of the Federal Court], and then waited until it had the opportunity to take a case with immemorial water rights to the Federal Court via the association’s right of appeal. Hammer was unlucky in that it was the power station summoned before the Federal Court and confronted with this new expert opinion. There, the whole matter of immemorial water rights was reopened, and the Federal Court concluded for the first time that these were no longer up to date and needed to be brought into line with the law in force. Using Hammer as an example, the WWF was able to turn the Federal Court’s practice around in one fell swoop, and now there are hundreds of power stations where they can demand that this right be replaced by a concession. The associations will then be able to make their demands in the concession procedure. They did not have this option in the case of immemorial water rights.

In addition to the WWF’s Bütler/Riva expert opinion, the Federal Supreme Court also relied on the “legal opinion” of the Federal Office for the Environment. However, the Federal Supreme Court would have had to introduce its own legal opinion, not that of the FOEN. It could have said that immemorial rights were not at issue here.
Yes, definitely. Because the FOEN has one billion (!) Swiss francs to mitigate the negative ecological consequences of hydropower through its programmes, this Federal Court ruling is naturally also in the interests of the FOEN. On the other hand, I have been informed that the Swiss Federal Office of Energy SFOE was not heard at all throughout the proceedings. Actually, it was not the FOEN that should have been consulted, but rather the SFOE, under whose jurisdiction the Federal Hydropower Act falls.

Thank you very much, Mr Bölli, for this very informative and gripping discussion. •

Swiss Small Hydro supports the concerns of small hydropower plants. In Switzerland there are around 1400 micro- and small hydroelectric power plants with a maximum output of 300 kW and 1 to 10 MW respectively. These produce 11-12 % of Swiss hydropower and a good 5 % of the total Swiss electricity production. “The sustainable use of small-scale hydropower is widely supported, as careful integration into the environment is ensured and local added value is promoted”. (Source: https://swissmallhydro.ch)

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