23.11.2022 | Scenarios for climate neutrality and security of supply for Switzerland

The unaffordability of autarky

Recently, the Nuclear Energy Agency, which is affiliated to the OECD, calculated scenarios for climate neutrality and security of supply for Switzerland in 2050. The agency came to the conclusion that both can be achieved most favourably if Switzerland continues to rely on nuclear energy in 2050 and ensures mutually agreeable solutions for electricity trading with the EU. How does the situation look from the point of view of Axpo, which has experience with all production technologies (renewables, nuclear energy, gas)? The following thoughts on this.

From Axpo's point of view, it is right, both in terms of CO2 emissions and from a cost perspective, to keep existing nuclear power plants running for as long as they are technically safe and economically viable. The former is ultimately decided by the technical authorities, the latter not least by politicians: depending on the conditions imposed for continued operation, existing nuclear power plants may also no longer be operated economically. But safety must always have priority.

Axpo also assumes that after the decommissioning of the existing nuclear power plants, wind and photovoltaics will not be the only options. It needs controllable power plants that can also reliably supply electricity during dark periods. This could be CO2-neutral gas-fired power plants, whereby the assumption is that the market for CO2-free gas will be large enough after the technical end of life of the existing nuclear power plants (for possible scenarios, see https://powerswitcher.axpo.com ).

Without Axpo having an updated cost estimate, the price of 12.8 billion subsumed by the Nuclear Energy Agency for the construction of two new nuclear power plants in Switzerland seems optimistic, even if the costs of modern nuclear power plants will fall in the coming decades. Axpo shares the view of the Nuclear Energy Agency that without state-guaranteed framework conditions, hardly any investors will jump on board. A nuclear power plant has to be amortized over 60 to 80 years, and in this context, from an investor's point of view, it needs revenue certainty to tie up capital for that long. As current new-build projects prove, the construction of nuclear plants involves great risks: cost and time overruns are the order of the day and characterize projects in France, the UK and Finland. Social acceptance is also lacking at the moment. In 2017, the Swiss population approved the federal government's energy strategy, which included a ban on new construction in the law.

In view of the follow-up costs, self-sufficiency cannot be a viable scenario either. Axpo shares the view of the Nuclear Energy Agency in this regard. This is because self-sufficiency would double the system costs compared to an open electricity market. Autarky is unaffordable. The European electricity market regulators recently put the benefit of the open market for end customers at 34 billion euros per year.

In summary, what does Axpo think needs to be done to achieve climate neutrality and security of supply? Firstly, the framework conditions for the rapid expansion of renewables must be improved permanently and in the long term in order to minimize the probability of critical situations in the future. This requires consistently fast licensing procedures and appropriate support instruments, such as sliding market premiums based on international models. Finally, the existing nuclear power plants should be kept on the grid as long as they can be operated safely and economically. This gives us time to expand renewables, which are becoming increasingly cheaper.

Link to the study.

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