In the long term, Switzerland will be massively short of electricity

Mr Brand, is Axpo too big to fail?

I don’t see any parallels to the financial sector, where the term came from.

But shortly before Christmas, your competitor Alpiq asked the federal government for liquidity support. Is there a need for new regulation so that in the event of insolvency, the electricity companies can continue to supply electricity?

The short, simplified answer is no.

And the longer one?

The financial issues that apparently prompted Alpiq to take this step are not the real problem. Rather, they are a symptom of a disease. And this is that in Europe capacities are constantly being turned off and too few new ones are being built up. The enormous increase in electricity prices in December and the subsequent liquidity problems are one of the consequences of this. Therefore, one should not try to fight the symptoms, but tackle the causes.

Back to the original question: In the event of insolvency, is there a need for preventive regulation so that the lights don’t go out?

In the case of large power plants in particular, you are practically never the only owner. These plants continue to run even if a partner goes bankrupt, because they produce electricity that can be sold.

You say that too little new capacity is being built – especially in Switzerland. Now there could be power gaps in 2025. How great is this danger?

By 2025, the problem will not be acute. From then on, however, new EU rules could massively reduce Switzerland’s import ability. If, in addition, the sun and wind fail to supply electricity or a nuclear power plant fails, a difficult situation could arise. The concern is therefore justified – especially if you look even further into the future.

The federal government now wants to let the nuclear power plants run for ten years longer. Does that help?

That will help us a lot in the medium term, but in the long term Switzerland will be massively short of electricity if we shut down the nuclear power plants and at the same time demand increases as much as our climate targets suggest.

The deficit between supply and demand is particularly large in winter. How do we get more electricity from summer to winter – at a reasonable cost?

This is a major challenge because there is a lack of large-scale industrial storage solutions. It takes four actions. First, we need to make sure that hydropower doesn’t deliver less and less. Estimates assume a loss of up to 7 terawatt hours, which corresponds to a tenth of today’s Swiss electricity production. This is due to environmental protection regulations and higher residual water volumes.

And secondly?

Secondly, there needs to be a massive expansion of photovoltaics, on roofs, but also in open spaces. Alpine solar systems can make a valuable contribution, they produce the same amount of electricity in winter as in summer. Thirdly, we will also have to import a part in the future; this is also possible with the new EU rules. And fourthly, it probably won’t work without gas-fired power plants. However, these are reserve power plants that would only run sporadically in winter.

Now there was recently the round table for hydropower, at which environmental groups, electricity companies and the authorities agreed on 15 expansion projects. Does that bring liberation?

Not all environmental organizations were represented at the round table that we support. So there can still be objections. As things stand today, it must also be said that not one of these 15 hydropower projects will probably pay off. Funding will be needed if they are to be realized. One cannot speak of a liberation anyway. We estimate that if we do nothing, we will be short of over 50 terawatt hours by 2050. The 2 terawatt hours of additional water flow are important, but ultimately only a small contribution.

Solar energy plays a key role in the energy transition. According to Axpo calculations, their share is to be increased from 4 percent today to almost 50 percent by 2050. Do homeowners need a solar obligation for this to succeed?

I’m generally skeptical about do’s and don’ts. Financial incentives are more effective. The right price signals are needed so that every homeowner, every SME and every parking lot owner decides to install a photovoltaic system. This expansion can be financed by long-term, but ultimately temporary debt from the network surcharge fund, which is currently being paid at 2.3 centimes per kilowatt hour.

If you put all of this together, it’s a system that only works with subsidies: for the expansion of hydropower, for wind and sun, and for gas-fired power plants. What does that have to do with a market?

Admittedly, as an economist, the hairs on the back of my neck stand up. The original sin, however, lies in the fact that fossil energies are massively subsidized worldwide to this day because they do not have to bear their environmental costs. Therefore the correct solution would be a global CO₂-Tax, then you can stop all subsidies and market interventions. But since even simple incentive taxes are hardly politically enforceable, we have to look for the second-best solution.

And which would be?

That would be emissions trading that encompasses all sectors, which it doesn’t do today. And the third-best solution that is realistic in the short term is a funding system that operates as close to the market as possible. By that I mean technology-neutral tenders for CO₂– free electricity.

You say that gas-fired power plants are needed to ensure security of supply. Won’t this even increase dependency on other countries?

The uranium for our nuclear power plants does not come from the Emmental either. Of course, we are dependent on Russian natural gas in Europe today. In the longer term, however, there are alternative sources of supply, think of liquid gas from Qatar or the USA. However, that costs more. However, if the gas-fired power plants are only run sporadically in the winter months, the risk of dependency is justifiable.

Are fewer gas-fired power plants more sensible, or should there be 2000 small, decentralized gas-fired power plants, so-called combined heat and power plants?

Definitely few big ones. They only run when you need them in winter. We are very critical of CHP systems, on the other hand, because they are more inefficient and expensive compared to large modern gas-fired combined cycle power plants and produce a lot more CO₂ expel Since they run constantly when heat or electricity is needed, they are not backup power plants.

Is it possible gas power plants CO₂– to operate neutrally?

That must be the goal. It can’t be, CO₂-free electricity from nuclear power plants due to CO₂– to replace emitting gas power plants. In the longer term, this should also be possible. We assume that in the 2040s, when nuclear power plants are shut down, the market for CO₂– neutral gas will be sufficiently liquid.

The FDP would like to allow the construction of new nuclear power plants again. What would it take for the investment in a new nuclear power plant to pay off?

At least a whole new generation of nuclear power reactors. But you can’t buy them in the market today.

So why is Électricité de France pushing for the construction of new nuclear power plants?

You would have to ask the company itself or its main owner France. Because the construction of the new nuclear power plant in Flamanville devours such enormous sums, it can only be done with the support of the state. So there should be a good dose of industrial policy involved.

Has Axpo never calculated how much it would cost to build a new nuclear power plant in Switzerland?

Not since the old plans from back then, no. A look at Hinkley Point, Olkiluoto and Flamanville is enough for us. All of these new construction projects have staggering cost overruns and huge delays. Investment bank Lazard estimates the cost of new nuclear power plants using today’s technology to be between $131 and $204 per megawatt hour. Large-scale solar systems come to 30 to 41, wind turbines to 26 to 83 dollars – so produce much cheaper.

Can one hope for small, modular nuclear power plants that pose hardly any danger?

I recently asked the CEO of a large reactor builder: If I order a small modular reactor today, when will I get it? His answer was: In ten years at the earliest. But that would be the first series. And I don’t know whether we would then want to use this first generation of reactors in Switzerland, even if they were so outstanding in terms of safety and cost-effectiveness.

Nevertheless, bourgeois politicians are discussing whether the building ban on nuclear power plants should be lifted.

I suspect there is political campaigning involved. I am also in favor of openness to technology, but politicians should better move forward with the technologies that are available. If we can reach agreement on this, it would be of great help to us. In ten or twenty years you can still discuss the introduction of new technologies.

According to Energy Minister Simonetta Sommaruga, you are partly responsible for the electricity supply crisis. She criticizes that the electricity companies have invested too much abroad instead of producing renewable energies in Switzerland.

Axpo is making great efforts in Switzerland to solve the problem of the emerging power shortage. For example, we didn’t build the solar system at Muttsee because it was economical, but to show what an alpine solution could look like. And as far as foreign countries are concerned: Our activities there saved us in the years when electricity prices were rock bottom. Without foreign countries, Axpo would no longer exist.

But Axpo’s money is not used to ensure security of supply in Switzerland.

Yes, we still invest a lot of money in Switzerland, three times as much as abroad since 2013.

However, these are not new production capacities, but primarily relate to the maintenance of the existing power plant park and the electricity grid.

That’s not exactly correct. Existing works do not continue forever. If we hadn’t invested so much in the large-scale project at the Leibstadt nuclear power plant, we would have had to shut it down sooner. In addition, it must not be forgotten that we have not earned the capital costs with our Swiss hydroelectric power plants in recent years. The profits from the trading business are needed so that we can even afford major projects such as the Linth-Limmern pumped storage plant. That’s why I’m very happy that we have our international business.

If Switzerland had an electricity agreement with the EU, none of us would have to worry about this, would we?

It is not that easy. We are not the only ones who have the problem that existing capacities are going offline and the shortfall cannot be closed quickly enough by other power plants. In Germany, the expansion of wind power has almost come to a standstill due to objections. In addition, the routes from north to south cannot be built. If everyone has the same problems, an electricity agreement will do us no good. However, if our neighboring countries have enough electricity, an electricity agreement for Switzerland is the best insurance that we will not have any supply problems.