Switzerland, we have a problem. What the industry’s been discussing for several years is now also known to a large part of the population: we can no longer be sure of a reliable supply of electricity from the grid. Recently the Federal Council wrote to around 30,000 companies calling for them to prepare for electricity shortages. The issue of security of supply is now right at the top of the political agenda. About time too, you might be thinking. How could things get to such a pass in a country that used to be a pioneer in hydroelectric power and Europe’s central electricity hub? It’s a concatenation of mostly homemade problems.
Increasingly Limited Import Capacity
First of all, the Federal Council broke off talks on an institutional framework agreement without coming up with a valid alternative. Early on the EU had made it clear that without the institutional superstructure of the bilateral agreements there would be no agreement on electricity either. But that’s precisely what would be needed to solve two problems:
In the short term, action has to be taken to reduce unplanned flows of electricity through Switzerland. When Germany and France trade electricity, for example, part of it flows through Switzerland. This is because the physical path of the electricity doesn’t keep to the (direct) path agreed in the trade. These unexpected flows force the transmission grid operator Swissgrid to make immediate interventions. Without this, the grid in Switzerland would no longer be stable, and blackouts would result. With the requirements mounting all the time, it’s not certain whether efforts to maintain grid stability at all times will continue to function in the future.
In the medium term – by the end of 2025 – Switzerland will have definitely become a third country in the EU’s eyes. Until then, Switzerland’s neighbors will have to reserve a large part of their cross-border capacity for the exchange of electricity with other EU countries. This will limit our import capacity, increase the risk of power shortages, and erode security of supply.
Ideological Trench War over the “Right” Sources of Energy
Secondly, for some time Swiss energy policy has been mired in an ideological trench war which has so far prevented planning with an eye to solutions or the provision of the necessary generation capacities. In the midst of all this is leftist green ideology. Its roots in the anti-nuclear movement and nature conservation are sometimes contrary to the demands arising from the energy transition. There are two fronts in this war. The first runs between “conservation first” and “increased capacity first.” Here there should be efforts to streamline the approval process for new projects that boost security of supply. The scope for objections should be limited. The second front concerns the “right” technology for the energy transition: solar versus nuclear power.
The political squabble rages, and in recent weeks the solar lobby has gone on the PR offensive with a concerted campaign: they want solar power to become the dominant method of electricity generation in Switzerland, with mandatory installation of panels on all new buildings, and freeways roofed over with solar installations. There’s no end to their ideas. These ideas might be feasible from a technical point of view, but there’s still the matter of the price tag. It doesn’t end with the forced installation of new solar panels. This brings economic costs in its wake: nobody wants to sit in candlelight in an unheated apartment when there’s no sun shining on solar panels, so new large-scale industrial storage solutions have to be built. The distribution and transmission grid also has to be modified to be able to use peak generation over lunchtime efficiently. This will cost billions.
Violation of Technology Neutrality
For this reason there are calculations that put nuclear power at a cost advantage over solar energy. But they don’t come from members of the political mainstream, which is constantly swearing that nothing’s as cheap as solar energy. The sun doesn’t send a bill, after all, but the company supplying the uranium does. Mantra-like they point to new construction projects in Finland, the UK and France. What they fail to mention is that outside Europe, many reactors are being built more cheaply and on schedule. If solar power really is that much cheaper, why are representatives of the solar lobby calling for subsidies to be stepped up even further? This isn’t what people were promised when they voted for the Energy Act in 2017.
Not only are solar installations getting cheaper, but research in nuclear power is also moving forward. New types promise to be more cost-efficient and even safer. It may be true that there’s not enough time to seamlessly replace the existing reactors in Switzerland with new ones. It may also be true that there are currently no investors to be found who would finance a nuclear plant in this country. But it’s still wrong to ban the construction of new reactors. That violates the principle of technology-neutral regulation. So conservative politicians calling for a corresponding correction are basically right. Whether that gets them votes is another matter.
Lack of a More Attractive Framework for Investors
Thirdly, there’s the persistence of antiquated practices. Despite the expansion called for by politicians, investments in hydroelectric power are obviously not very attractive from an economic point of view. This is due in large part to the water usage levy that has been paid by hydropower producers for more than a hundred years. This levy is the biggest pool of costs, accounting for up to a third of the expense of production. But instead of a fundamental reform to make hydroelectricity more competitive, in response to pressure from the alpine cantons not only has the legal basis been extended, but the rate of the levy has also been constantly increased. Around CHF 550 million a year in water usage levies now go to the cantons and municipalities hosting hydropower assets – regardless of whether power is actually generated or the price it fetches on the market. Energy policy thus yields to regional policy. It goes without saying the “alpine OPEC” has also made sure that these revenues aren’t included when the national fiscal equalization arrangements are being thrashed out; in other words, they make themselves artificially poor to squeeze more out of the equalization scheme. What about the energy transition? When it comes to getting money for your own region, it’s secondary. But that’s not all: to place further obstacles in the path of hydropower, the political decision has been taken to tighten the rules on residual water volumes. This reduces the amount of water that can pass through the turbines, but the water usage levy is still just as high.
Switzerland Has the Solution in its Own Hands
Rather than the “electricity general” recently called for in the media, what Switzerland needs is an effective energy policy. This also means clarifying “energy policy” relations with the EU. The idea that Switzerland is an island in terms of electricity is a fiction. The benefits of cooperation are self-evident. When it comes to the battle between solar and nuclear power, what’s needed is less ideology and more political cooperation to come up with an attractive, technology-neutral framework for the generation of energy. This includes fundamental reforms in the energy market, such as the abolition of the water usage levy in its current form. If, in parallel to this, the electricity market were to be completely liberalized and state-dominated electricity companies were released into independence, this could also create the necessary dynamism and pressure for innovation on the market side to assure long-term security of supply in Switzerland.