18.08.2023 | Drawing energy only in an emergency

Reserve power plants as part of the Swiss electricity system

In light of the fraught energy situation in 2022, the federal government contracted various fossil fuel-based reserve capacities – but this solution is time-limited to 2026. In summer 2023, the federal government presented its draft of a replacement solution and launched an invitation to tender for reserve power plants from 2026 onwards. While it makes perfect sense for Switzerland to rely on reserve power plants as a backup, these plants are no substitute for the expansion of renewable energy. Questions also remain regarding the management of combined heat and power plants.

In winter, Switzerland is highly dependent on electricity imports. This dependence poses a risk to security of supply in the event of temporary limitations on the export capabilities of surrounding countries, for example. Even before the outbreak of war in Ukraine, ElCom had warned of import risks and recommended the construction of reserve power plants. In light of the fraught energy situation in 2022, this topic has taken on greater significance and momentum. For example, the federal government already adopted an ordinance to establish a ‘winter reserve’ for winter 2022/2023 – consisting of hydropower reserves, three reserve power plants (Birr 250 MW, Cornaux 36 MW, Montey 50 MW) and emergency electricity groups aggregated via ‘poolers’. The ordinance and the contracts regarding reserve capacities are time-limited to 2026. With the draft presented in late June 2023, the federal government is seeking to create the legal basis for a longer-term reserve. In late July 2023, the federal government also launched an invitation to tender for the reserve power plants after 2026.

The role of reserve power plants

Reserve power plants are characterised by the fact that they do not, in principle, participate in the electricity market but are rather – as their name suggests – only available as a reserve in the event of emergencies. The most relevant scenario for Switzerland is a temporary inability to meet demand due to import restrictions and lower availability of domestic production facilities. In the event of a market failure of this kind, the reserve power plants could be activated to cover the energy gap.

When the Birr reserve power plant was still under construction in No-vember 2022: Since March of this year, the eight mobile gas turbines (250 MW) would be ready for operation. Source: General Electric

The costs of reserve power plants are financed by the general public, and in turn, the plants are on hand as a backup in order to ensure security of supply for the general public in an emergency. For this reason, the technologies chosen are typically taxable ones with low investment costs, whose participation in the market is not advantageous due to their CO2 emissions or other reasons such as high operating costs. These technologies include gas- and oil-fired peak load power plants.

The federal government’s draft

The revision of the Electricity Supply Act (ESA) currently being discussed in parliament creates the legal basis for an energy reserve. However, the envisaged form of energy reserve only includes storage hydropower plants, other storage and consumers with potential for load reduction. With the draft presented in late June 2023, the federal government is seeking to expand the legal definition of the energy reserve to include the reserve power plants (gas or other energy sources), emergency electricity groups and combined heat and power (CHP) plants already implemented by the ordinance.

As it takes several years to build new reserve power plants and the contracts with existing reserve capacities expire in mid-2026, the federal government launched an invitation to tender in July 2023 for reserve power plants for the period from 2026 onwards. The invitation to tender is for a total of 400 MW of capacity. Participation is open to new and existing reserve power plants. A separate invitation to tender for emergency electricity groups and CHP plants is to follow at a later stage.

The reserve is dimensioned based on a study by ElCom in collaboration with Swissgrid. This study concludes that the envisaged deployment of 400 MW of reserve capacity can produce enough power to ensure security of supply in the modelled worst-case scenario. In a second study, ElCom analyses Switzerland’s power balance for the period after 2030 and concludes that, in the long term, it may be necessary to top up the reserve to 700–1,400 MW in light of the decommissioning of nuclear power plants.

CHP plants unsuitable for reserve

In the federal government’s draft, it remains unclear what role will be played by (fossil fuel-fired) CHP plants – that is, plants that produce electricity and heat at the same time. On the one hand, the federal government envisages that these will play a part in the electricity reserve; on the other, it also wants to support them by means of investment contributions without their involvement in the reserve.

CHP plants can be a sensible option primarily where there is a need not only for electricity but also for heat. But they are therefore conceptually unsuitable for involvement in the reserve: if they are merely available as a reserve in standby mode, they cannot supply the consumers with heat; in the event of a market failure and therefore a need to draw on reserves, it would be necessary to make sensible, selective use of the heat.

In reference to a motion submitted to the National Council, CHP plants outside of the reserve are also to be supported with investment contributions of up to 60%. These investment contributions already exist for renewable CHP plants (including biogas plants and wood-fired power plants), such that the new funding would thus be for CHP plants using fossil fuels. Annually, the proposal would use up to CHF 20 million of the grid supplement fund, which is actually intended for renewable energy. This would therefore represent a paradigm shift in the sense that the federal government would also be supporting fossil fuel-fired plants on the market – with the resulting negative impact on Switzerland’s climate footprint. Although decentralised fossil fuel-fired CHP plants are certainly one way of generating winter electricity, they are economically and environmentally inefficient relative to larger power plants (e.g. other fossil fuel-fired plants with heat recovery) due to a lack of economies of scale. At the same time, there is a risk that such support will undermine the incentivising effect of emissions trading or the CO2 levy.

Reserve capacities are no substitute for the expansion of renewable energies

Reserve capacities may represent a sensible addition to the Swiss electricity system in order to safeguard against temporary import bottlenecks. However, they are not a solution when it comes to reducing the potentially rising import volume, which would require the plants to produce for the market over a prolonged period of time. Even against the backdrop of the recently approved climate act, it appears doubtful whether longer-term operation of fossil fuel-fired (reserve) power plants or CHP plants in Switzerland is expedient at present or whether corresponding incentives should be created by offering support. The better alternative is to push ahead with the expansion of renewable energies as quickly as possible and using all available means – although production of such energies is particularly decisive in winter. To this end, it is vital to significantly speed up the approval procedures and to bolster the security of investment. 

Timeline of reserve capacities

  •  February 2022 - ElCom publishes the concept for peak load gas-fired power plants
  • February 2022 – Federal Council awards the contract for reserve power plants to DETEC
  • September 2022 – Contract with GE for construction of the Birr 250 MW reserve power plant
  • December 2022 – Contract with Axpo for operation of the Birr reserve power plant
  • December 2022 – Contract with Cornaux 36 MW reserve power plant
  • December 2022 – Contracts with Axpo and BKW as poolers for emergency power generators (so far totalling 110 MW)
  • January 2023 – Winter Reserve Ordinance enters into force
  • February 2023 – Contract with Montey 50 MW reserve power plant
  • June 2023 – Federal Council launches the consultation procedure for revision of the Winter Reserve Ordinance
  • June 2023 – Federal Council launches the consultation procedure for the legal basis of reserve capacities
  • July 2023 – ElCom publishes studies on security of supply for 2025/2030/2035
  • July 2023 – Swiss Federal Office of Energy launches invitation to tender for 400 MW of reserve capacity from 2026 onwards
  • Likely 2024 – Announcement regarding the legal basis for reserve capacities and start of the parliamentary process

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