print close

Water supplies in the Valais in danger

The power supply is a joint effort – it is important to take care of it (Part 2)

by Dr rer publ Werner Wüthrich

The European electricity policy is in motion. Germany and other European countries rely massively on new renewable energy sources from the sun and the wind. They speak of a revolution – comparable to the moon landing of man. The energy revolution is promoted vigorously with high subsidies. The share of electricity from renewable energy sources in Germany was at 31 percent in 2014 (6.9% solar energy, wind 10%, biomass 9.5% and water 4%). In 2050, it will have amounted to 80 percent. Eight nuclear plants were shut down immediately after the nuclear disaster at Fukushima. In a few years the remaining plants are to be switched off. The television channel Arte described Germany’s policy in a program on the energy revolution as “lonely revolution” (5.9.2013). Other countries go their own ways. The differences are significant. The UK plans a new nuclear power plant at Hinkley Point and at the same time realizes the construction of huge wind farms at sea in Scotland. The Netherlands also hesitate to realize a complete exit from nuclear power. In Denmark – surrounded by the sea – 39 percent of its electricity came from wind farms in 2014. The French President Hollande wants to reduce the share of nuclear power in the longer term from 75 to 50 percent and will thus hold on to nuclear power. Poland is a “Coal Country”, which relies on fossil fuels for about 90 percent. The Czech Republic has reduced its funding of renewable energy and continues to focus on their own nuclear energy. Poland and the Czech Republic are protecting themselves against the cheap electricity from Germany, which endangers their own electricity production (see “Weltwoche” of 10.10.2013). Other countries wait and see.
A comparison with Austria: the share of electricity from renewable energy sources in Switzerland is at high 60 percent – consisting of 97 percent hydropower and of three percent energy from solar, wind and biomass sources. 40 percent of the electricity are generated in nuclear power plants. In Austria, 67 percent of the electricity are generated by hydropower and 27 percent by thermal power plants, which are powered by gas and coal. The proportion of energy from the sun and wind is also low. The completed Zwentendorf nuclear power plant has never been operating after the referendum in 1978. – It is obvious why Switzerland and Austria are referred to as Europe’s water reservoirs.

Electricity policy is an affair of nation states

There are good reasons for the fact – given the large differences between the 28 countries – that there are no uniform energy policies within the EU. The electricity market was liberalized in 1998 but may not be regulated by Brussels because it is the affair of every singular nation state how they produce their electricity. The prices at the European Energy Exchange are characterized by different national approaches both in electricity production and in subsidizing programmes. If it were up to the European Commission, there would not have been any purely national funding programs for the expansion of renewable energies for a long time. The question is open whether the development of wind and solar power will gain as much acceptance as in Germany or – which is to be assumed – whether there will be very different national approaches in the field of power supplies in the future.
Another effect is striking: Most modern gas power plants are currently shut down and mothballed, since they can no longer be operated profitably with the declining market prices in Europe. Old, depreciated coal power plants are, however, operated at low costs. They can still work efficiently at low prices and contribute to the oversupply – a fatal undesirable trend. The developments on the European gas market and their impact on energy prices are also uncertain.

Hydropower must have a future

The current oversupply of electricity clearly shows that irregularly occurring energies do require energy storage devices. The Swiss hydropower plants are able to fulfill this function, so that the power supply could remain independent to a certain degree as it did up to now. The current energy storage devices are part of an overall approach for a secure national energy supply.
The Grisons Energy Director Mario Cavigelli, President of the Conference of the Mountain Cantons, demands federal subsidies for conventional hydropower plants to enable them to be managed profitably: In the Grisons, Repower (formerly up to 2010 Raetia Energy) plans a pumped storage station for 1.5 billion Swiss francs in the Upper Poschiavo on the Bernina Pass. The two lakes Lago Bianco and Lago di Poschiavo will be linked by a pressure tunnel at an altitude of 2,000 meters. The project could be operated eco-friendly. But here again the question arises as to whether it will be possible to cover costs. Repower has deferred the project. However, the federal government relies on the existing and the proposed additional hydroelectric power plants in order to replace nuclear power capacity later on. The Swiss Federal Office of Energy has made a market study on the situation of large-scale hydroelectric power plants. It states that the production costs of electricity for new or upgraded units are 14 cents per kilowatt hour. They are more than twice as high as the current wholesale price of 5 cents (“Neue Zürcher Zeitung” of 13.12.2013). If the planned investments are not made, Switzerland will become increasingly dependent on electricity imports from Germany and France, which currently come from coal (Germany) or from nuclear power (France) to a large extent – an absurd situation. In the fall of 2014, the National Council responded in the context of the great debate on the Energy Strategy 2050 and granted 600 million investment aid for large-scale power plants. Of these, some projects in the Valais benefit. For the consumer, the surcharge on electricity of 1.5 cents/kWh is increased to 2.3 cents. The project will be dealt with in the Council of States in the spring session. This does, however, not solve the problem.

Resistance against the neglect of hydropower

This assistance operation of hydropower was preceded by a parliamentarian decision in summer 2013 to increase the subsidies on new renewable energy technologies – i.e. solar and wind power – up to 900 million francs per year. For this purpose, the extra charge per kilowatt of electricity, which households already have to pay, rose. Various parties showed signs of opposition and set up their own demands:

  • The canton of Grisons filed a cantonal initiative in the fall of 2013 and requested to reduce the excessive subsidies again in order to preserve the value of hydropower.
  • The independent politician Christian Riesen took the referendum in 2013 against the feed-in compensation KEV, as an individual, and quite in the style of Thomas Minder. The massive subsidies made solar and wind power in Switzerland a good bargain. He protested that the Federal Council and Parliament did not plan a constitutional vote on the “multi-billion-project energy revolution” and the “Energy Strategy 2050”, which would indeed be mandatory in Switzerland for a policy decision of such great importance. Giant has not reached the required number of signatures.
  • Given the price situation, the Swiss Water Management Association called for a promotion of large hydropower dams by the federal government as early as 2013 – through concessionary loans (“Neue Zürcher Zeitung” of 25.9.2013).
  • Karl Frauenfelder, professor of energy management at the University of St. Gallen, called for “a guaranteed federal and cantonal minimum price for output and production of hydroelectric power – especially for that of the pumped storage stations”. This would enable the planned development and contribute to supply security. Similar to the National Bank’s specifying a minimum rate of 1.20 francs for the euro, the state should set a minimum price for electricity on the border, which would secure the survival of the hydropower plants and enable them to make the necessary investment in expansion. “Electricity is too big to fail,” said Frauenfelder (“Neue Zürcher Zeitung” of 6.10.2013). (Czech Republic and Poland go in a similar direction. They waive – at least temporarily – on the import of cheap electricity from Germany to enable their own power plants to produce electricity).
  • The industry organizations in the field of hydropower in Germany, Austria and Switzerland also launched the Energy Initiative of the Alpine Countries in 2013. The exaggerated subsidizing of renewable energy sources is challenging the survival of pumped storage plants. They demand: No new subsidies, but a reduction of the “one-sided solar and wind power” subsidies for green energy throughout Europe (“Neue Zürcher Zeitung” of 5.7.2013).

2013 – Reaction of the Federal Office of Energy

The Federal Council has responded and reduced subsidies for solar energy. The cost rates of cost-covering feed-in compensation KEV were reduced. Moreover, the money will only be paid out over a period of 15 years (Statement of the Federal Office of Energy of 22.8.2013). Furthermore, 2.4 million in funding for the planned large solar plant in the avalanche barriers above the Grisons mountain village of St. Antönien were stopped. This project will – at least for now – not be built: hence a little less money for solar power and slightly more for water.
Before I comment on the other events and especially the upcoming electricity agreement with the EU, it makes sense to take a look at the structures and legal basis of power supply in Switzerland.

Legal basis of Swiss power supply – a reflection of the Swiss model

At the beginning of the 20th century, in the year 1908, people and the cantons of Switzerland decided to vote in a constitutional referendum that the cantons would dispose of the water and use it within the limits of the federal legislation. In the 1916 implementing act About the utilization of water power, the federal government set the framework for the cantons and in particular for the concession agreements with the power plant companies. Here are three examples from the act that has been revised several times since then:

  1. The federal act supports communities to join forces in a region, to establish cooperatives and jointly address the issues of water use (Art. 43 ff.). This has also been done in the Valais and in many places in Switzerland.
  2. The act determines the framework for the water rates. Art. 49: “The water interest […] may not exceed 100 francs per year by the end of 2014 and it may not exceed an annually 110 francs per kilowatt gross output until the end of 2019.”
  3. Art. 67 of the act provides for the framework for the escheat. The renewal investments in the years before the escheat should be made as follows: “The concessionaire is obliged to maintain the equipment and keep those facilities in working order that come under the escheat law.” “Modernization and expansion investments are refunded to the concessionaire in case of escheat, provided that he has made the modernization or expansion in arrangement with the community entitled to escheat.”

At the same time countless referendums have taken place at the communal and cantonal level in which voters decentralized the legal basis for the power supply of Switzerland in their regions. Many communes established communal or public facilities. Others joined forces with other communes and founded cooperatives and corporations of various kinds in order to supply households with electricity, water and gas in the sense of the “Service Public”. Today, approximately 800 independent companies provide the population with electricity and often also with gas and water at production costs. The companies are connected to each other in a variety of regional networks. Hans Wyer reported about that in his impressive book “Die Nutzung der Wasserkraft im Wallis” (The use of water power in the Valais). The basic provision in the sense of public service is guaranteed today basing on this concept. Import and export balance possible variations.

Scheduled departure from the tried and tested Swiss model – politicians urge to liberalize the electricity market as defined by EU

Contrary to the presented and well functioning current Swiss model, EU turbos have begun in Berne since 2002 to harmonize the EU electricity market. The Swiss Federation of Trade Unions took the referendum against the Electricity Market Act of 2002, and the people rejected the liberalization significantly. After only five years – in 2007 – the Parliament agreed on the Electricity Supply Act, intending to liberalize the electricity market – very similarly to the bill of 2002 – this time in two steps. There was neither a referendum nor a popular vote on it. Since 2009, the electricity market has been liberalized for big consumers. However, the free market has not been attractive for them until recently, since the fixed prices for households were lower. Only about 10 percent of big consumers (over 100,000 kilowatt hours per year) used it. However, this changed recently, since a lot of cheap electricity from Germany has been flowing into Switzerland, undermining the prices of domestic power plants. The share of bulk buyers who are stocking up on the open market or in Germany or France, has increased significantly over the past year. The city of Winterthur, for example, obtains its electricity from Germany as of recently.
The market for private households is to be liberalized in a second step by 2016, so that households can choose their electricity supplier freely – similarly to what is already the case today with telephone and internet providers. This second step would be one of the conditions to join the internal EU electricity market. It is subject to an optional referendum. The people will have the opportunity to stop this unsound development.

Electrical power supply must not be centralized

Currently the “Bundesrat” (Swiss government) is negotiating a new electricity agreement with the EU. However, since the EU has demanded that Switzerland also agrees to adopt all future decisions made in Brussels in this area, without knowing what these decisions might be, all negotiations have been put on ice for months. These carte blanche treaties, which also entail that Switzerland surrender her jurisdictional sovereignty to EU law in the respective area, are euphemistically referred to as “institutional framework agreements”, something the EU want to enforce with respect to all future bilateral treaties and even to the already existing ones. In the electrical power market the EU intends to accomplish their mega-goal of a single market. Even today we may fairly predict that this mega-goal – should it be implemented as planned – would have far-reaching consequences, also in regard to hydropower.
Brussels intends to regulate the electrical power market in a streamlined fashion for all 28 countries. Obligatory provisions and shared regulations regarding power plants, networks operators, providers and consumers are supposed to be the solution and accomplish the single market in the electrical power sector. New transnational power lines are planned to connect the countries and unify regional and national markets. So-called “electrical power highways” are being designed, capable of carrying huge amounts of electrical power across Europe. This EU single market is bound to fundamentally change electrical power supply in every single country and create a situation reminiscent of the USA where electrical power of the entire country is dominated by a few big corporations.
There are still open technical questions. One huge EU market of electrical power is not as easy to handle as telephone or internet markets. Big costly investments for new power lines would be necessary in all countries – including Switzerland should she join the scheme – in order to connect power providers and consumers with each other. Switzerland is supposed to play a role as an exchange and storage platform of electrical power. The costs would have to be paid by the consumers. New expensive technologies have to be implemented on a large scale in order to control the expected oscillations in production and consumption.
Legally this plan is covered by the Lisbon treaty. According to its Articles 193 and 194 Brussels has been granted far-reaching competencies to influence national politics of EU member states, although it cannot rule on energy issues directly. And Brussels intends to apply these competencies even to the non-member state Switzerland.

How would the EU single market of electrical power affect Switzerland?

There is not much talk about that. For instance Brussels demands that foreign power providers have to have equal rights in competition with domestic companies. This would actually mean that foreign power providers would be granted concessions to use the water in the alpine cantons. Many small and medium domestic electrical power providers owned today by the municipalities and cantons do not pay any taxes because they serve in the public sector as state institutions, this could be interpreted as an illegal competition bias under the EU single market law. The EU could press Switzerland to sell and privatize these domestic power providers.

Crucial decision

Is the concept which had been developed by citizens of several generations a phase-out model? I don’t think so. – When the electorate of the Canton of Zurich voted in favor of a publicly owned electrical power company instead of a private one in 1908, they did that for a good reason. A number of other polls could be cited here. I think the Swiss people would prefer to keep control of their own electrical power supply in one way or the other – at both regional and cantonal levels. But precisely because it is running so smoothly nobody actually thinks about the system. (It has to be said, though that big segments of Swiss electricity providers have extended their original business scope and started to be involved in the foreign business).
As a matter of fact, those structures that were built over generations would be turned upside down in case Switzerland joined the EU electricity market. Smaller companies – and there are still quite a few of them – would find it hard to meet the Brussels conditions. The ongoing trend towards fewer and bigger mega-companies would be enhanced even further and the public sector of basic needs such as electricity, gas and water would be weakened. – Is that what we really want?
Switzerland is facing a crucial decision with the electricity treaty: maintaining well-functioning structures which have developed over decades, or entering towards a hazardous modification process in a EU single market? There is more at stake than just a liberalization of the electrical power market and a promise of lower electricity prizes for private households. Just like in the case of the Euro, this project of a single EU electricity market is another step towards political union. This explains why the EU wants Switzerland to also sign an “institutional framework agreement” as a pre-condition together with the electricity treaty.

Connecting Europe

The single EU electricity market is part of an EU programme called Connecting Europe, which is supposed to use the electricity treaty to integrate Switzerland into the EU. Brussels intends to spend 50 billion euros on transnational infrastructure projects by 2020. As a side effect, this is meant to boost the EU economy. 9.2 billion are designated to the energy sector. Former EU Commission President José Manuel Barroso commented on the plan as follows: “At the end of the day Connecting Europe will lay foundations for a really unified European Union in which all European nations are interconnected with each other.”
We have seen other examples where Brussels made bad economic decisions for the sake of some distant ideological vision. The EU single currency project, which functions poorly because grave economic and cultural differences between the participating countries were ignored, is similar to the single electricity market in its dimension and political implications. The same questions arise with the power supply as with the single currency: Does it really make sense for so many countries with such huge differences in all aspects of life to be lumped together? Or can people organize their own power supply easier in smaller, de-centralized units? In Germany, for-instance, a trend towards re-communalisation has been detectable for some years. Municipalities and communes take on responsibility for the electrical power supply themselves, again.
Therefore, with this electricity agreement with the EU there is much more at stake for Switzerland than just some questions of import and export of electrical power or the liberalization of the energy market. It is worth starting early to deal with it.

In Switzerland decisions are made by the people

Switzerland will solve the ensuing questions in the cantons and on the federal level. The regionalisation of mega-power plants has to be discussed and organized in an atmosphere of co-operation, according to the tradition of the Swiss “Eidgenossenschaft”. The “new” sustainable energies have to be promoted in such a way that water power is not devalued. Further use of nuclear power has to be decided upon and a regulation framework be established for the future. As already mentioned, in part one of this article (see Current Concerns No 5 of 22.2.2015), quite often Axpo, Alpiq, BKW and Repower act similarly to some globally active mega-corporations today, although they are up to 80% owned by cantons and municipalities and should be controlled much more tightly by the electorate. In the Canton of Graubünden the popular initiative “Yes to clean electrical power without coal” was accepted on 22.9.2013 and therefore vetoed the plans of the electrical power provider Repower to invest in the huge Italian black coal power plant in Saline Joniche.
The sovereign hast to become active at the federal level, too. Parliament has discussed the energy strategy 2050 in autumn 2014. The expose will be presented to the “Ständerat” (Council of States) in its spring session. Several popular initiatives have already been submitted. On 8 March 2015 people will vote on the initiative “Energy tax instead of sales tax”. More referenda concerning the ensuing parliamentary decisions will follow in the months to come. Many questions remain. How to proceed with water power? How fast should nuclear energy be abandoned? Should Switzerland opt out of nuclear energy completely? Should the exit be combined with a new ecological taxation system? How much EU-style free trade would make sense without jeopardizing sovereignty? Many questions, the sovereign needs to answer.      •

Prospects: unity and solidarity among the mountain cantons and the Swiss Plateau

The power supply which was constructed with much foresight in the last century is a gem and we have to take care of it. Hans Wyer, the grand old man of the Swiss Valais and the CVP, closes his comprehensive work “The use of water power in the Valais” with the following words:
“Today we speak a lot about synergies, i.e. interaction. The utilisation of water power today takes place in water power stations from Gletsch up to the Lake Geneva, made in the Valais and Bernese Alps, on both sides of the Rotten. To put this specifically into service for the country and the people is the challenging task of coming generations. We start today to prepare them. The significance of this result can surpass by far the expansion of water power in the last century.
The reversion of the large power stations in the years 2035 – 2055 will become the touchstone of the water power utilisation. The Valais will master this task for the future if unity and solidarity prevail between mountain and valley. In the Swiss federal energy policy and electricity supply, the hydropower use will meet a political task that is beyond its energy and environmental meaning if unity and solidarity prevail between the Mountain cantons and the industrialized Swiss Central Plateau. I am confident that an open Valais in an open Switzerland will recognize this opportunity for the future and seize it.”