20 May 2010

Current figures from the new edition of the Axpo study "Stromperspektiven 2020" show that the problem of the electricity gap has become significantly more acute. The supply agreements with France will begin to expire earlier than was projected in 2005. The gas-fired combined cycle power plants planned at that stage are no longer a realistic option today. In addition, development projects for new renewable energies are increasingly encountering opposition.

The average availability of electricity in Switzerland is 99.99 percent; this high level is maintained irrespective of demand. Five years ago, the original Axpo study on the outlook for electricity in 2020 showed that electricity demand was converging with the available production supply. The result is that electricity production in Switzerland from hydroelectric power, nuclear energy and new renewable energies is already insufficient to meet Swiss demand at all times in the winter months. This threatens our security of supply.

The new study shows that the problem is becoming more acute. The reasons:

- Gas-fired combined cycle power plants are not an option: In 2005, gas-fired combined cycle power plants were seen as a possible interim solution, whereas today they are simply uneconomical because the bulk of the CO2 released would have to be offset in Switzerland. Reliance on gas and the currently insoluble issue of domestic CO2 compensation have prompted Axpo not to pursue the construction of gas-fired combined cycle power plants in Switzerland. Axpo CEO Heinz Karrer observes: "We hoped to use gas-fired combined cycle power plants as a bridging solution until the existing nuclear power plants were replaced. The fact is, the legally prescribed domestic compensation level of 70% of CO2 emissions makes gas-fired combined cycle power plants uneconomical and they cannot be considered as a solution for bridging the anticipated electricity supply gap."

- Privileged energy import is in jeopardy: As is widely known, the privileged nuclear energy import agreements with France will begin to expire in stages from 2016. EU pressure on Switzerland due to the applicable EU legislation is growing. There is a danger that privileged imports will no longer be guaranteed in future. In 2005, this situation was not foreseen, which means that the security of electricity supply in Switzerland is now even more under threat than Axpo projected in 2005.

- The expansion of new energies is encountering resistance: The construction of facilities for new renewable energy production is increasingly running into opposition from environmental lobby groups and local residents. This applies to projects for biomass conversion, small-scale hydroelectric power and wind energy. Concerns about noise, smell and air pollution and resistance to landscape encroachment have resulted in the far slower expansion of new renewable energies than was anticipated in 2005. Heinz Karrer: "Opposition to production facilities for new renewable energies is unexpected and impedes our planned expansion of the proportion of renewable energies. Electricity generated in Switzerland from wind and solar energy is still currently less than 0.1 percent of total national electricity consumption, despite major efforts and considerable subsidy payments in support of these technologies."

Options for Switzerland

Switzerland will be faced with demand overhangs during the winter months in the years ahead, and, after 2020 – when the operational lifecycle of the nuclear power plants Beznau I and II and Mühleberg is expected to end - we can increasingly expect a supply deficit throughout the year when the first nuclear power plants are phased out. "Axpo intends to make a significant contribution to bridging the anticipated electricity supply gap, thereby ensuring that Switzerland will always have an adequate supply of competitively priced, virtually CO2-free electricity in future," says Axpo CEO Heinz Karrer. "We can only guarantee security of supply if we have sufficient production capacity in Switzerland. In order to guarantee a high level of supply security, any future electricity production mix will have to be diversified. Only this will reduce the risks."

Despite the fact that Axpo will invest around CHF 3 billion in new renewable energies by 2030, it will require much more than the expansion of new renewable energies, energy efficiency and savings measures to bridge the looming electricity supply gap. Large-scale power plants will always be necessary for cost-effective electricity supply in the future. However, the potential for hydroelectric power plants in Switzerland has been virtually fully exploited. Electricity from gas-fired combined cycle and coal-fired power plants is not an option due to the high level of CO2 emissions. In contrast, electricity from nuclear power plants is virtually CO2-free and offers the lowest production cost.

To bridge the looming electricity supply gap, it will be necessary to optimize the run-of-river power plants, expand the new renewable energies and replace the existing Beznau I and II and Mühleberg nuclear power plants. In addition, Axpo is planning to invest CHF 1 billion in the expansion of the grid and to optimize the energy efficiency of all its facilities and activities as part of its strategy to ensure the security of supply.