The Future of Swiss Hydropower: Realities, Options and Open Questions

Abstract

The NRP70 project 'The Future of Swiss Hydropower: An Integrated Economic Assessment of Chances, Threats and Solutions' (HP Future) addresses the challenges Swiss Hydropower faces in the changing electricity market environment. In particular it aims to answer four main research questions:1. What are short-term operational options for Swiss HP to cope with the volatile market situation? 2. What are long-term investment options for Swiss HP and how can uncertainty be accounted?3. What are the regional impacts from a comprehensive sustainability perspective? 4. What are the effects of different water fee reform options?The project started in fall 2014 and lasted until December 2018. This final report provides a summary on the main findings and recommendations for decision makers. 2 Executive SummaryThe NRP70 project 'The Future of Swiss Hydropower: An Integrated Economic Assessment of Chances, Threats and Solutions' (HP Future) has been initiated in 2014 with the objective to identify options for Swiss hydropower (HP) to adopt to the ongoing and expected electricity system changes.The project has been finalized in 2018 and this final report provides an overview of the obtained results and insights. Following a short summary of the main findings is provided. Troublesome yearsThe decline of wholesale electricity prices in the last years has initiated a cascade of effects within the Swiss energy landscape: companies' books were in the red and concepts for selling HP assets were issued, calls for subsidies emerged with the Confederation granting support for vulnerable HP installations for the next five years, water fee reduction and adjustments were put on the agenda, and overall the envisioned role of Swiss HP for the Energy Strategy 2050 was questioned. Even though the discussion has slowed down a bit, the 'crisis' highlighted the main challenges Swiss HP needs to address: market and political, legal and social aspects. The importance of those drivers has also been identified by Swiss HP stakeholders in a project workshop conducted in 2015 and the relation between market challenges and the Swiss regulatory and policy framework forms the basis of our assessment. It's the markets, stupid!The Central European market development is the single most important driver for Swiss HP profitability. Albeit HP flexibility is seen as a valuable asset and allows diverse trading strategies, our assessment shows a limited payoff in today's markets. Additional revenue potential from optimized trading across multiple markets is likely in a range of 10% to 25%. This in turn can be expected to be insufficient if prices remain below 40CHF/MWh for prolonged periods but could be crucial for cost recovery in the 40 to 60CHF/MWh range. Given that the future market development is uncertain and low price trajectories cannot be ruled out, the development of global fuel prices and of the European Emission Trading System are of central importance for Swiss HP. As influencing those market dynamics is out of reach for Swiss decision makers, companies...

A Conceptual Framework to Classify and Manage Risk, Uncertainty and Ambiguity: An Application to Energy Policy

“…They are the nuclear and coal power plants' decommissioning and the electricity agreement between Bern and Brussels. One must also point out that the forecasts for hourly day-ahead and daily balancing market, based on quantitative models, are not promising [72]. Furthermore, it is not clear if the different variants of market design will offer new opportunities to hydropower [72].…”

“…We focus on a middle/medium term (2021-2035) and on a long-term horizon (2036-2050). The main sources used are documents published by the European Commission [67], the Swiss Confederation [68], international organizations [69][70][71], and research programs [13,[72][73][74][75][76]. We have also considered some academic articles.…”

Research for Switzerland’s energy future

“…Figure 8Water fee as a percentage of the financial resources of municipalities in the Canton of Graubünden in 2018 (Barry et al 2019). …”

Forschung für die Schweizer Energiezukunft. Resümee des Nationalen Forschungsprogramms «Energie».

“…Water fee as a percentage of the financial resources of municipalities in the Canton of Graubünden in 2018 (Barry et al 2019). are developing their existing green power products into participation models that allow customers to acquire stakes in larger-scale solar energy systems.…”