By c-c-netzwerk.ch (Carnot – Cournot – Network)
by Markus Häring and Markus Saurer
How did the debacle of the Energy Strategy 2050 come about? Countless studies in universities and well-known engineering offices were recorded. At the levers of the energy supply sat qualified experts and on the boards of directors of energy companies business leaders from industry and only a few politicians. Checks and balances in the companies and in the responsible committees were implemented. We exclude corruption and criminal energy in advance. What could possibly go wrong?
And yet everyone is now standing there with long faces and realizing that energy prices are shooting to dizzying heights and the energy supply is no longer secure in the near future. The electricity shortage, the worst-case scenario of Switzerland’s risk analysis, has suddenly moved into the realm of probability.
How did it come to this? The answer is to be sought on several levels, and we do not claim to have found all the answers. Because the problem lies in the complexity of the energy supply itself, especially in the power supply.
The old energy world
Electricity is a very special commodity. It must be consumed in the same millisecond in which it is produced. Electricity cannot be filled into a tank like oil, then sold and transported and finally left until it is needed. Electricity can only be stored in a different form after an energy conversion process and converted back into electricity through another energy conversion process. Both conversions incur losses. Interim storage consumes additional energy and other resources, for example in the form of water storage or chemical batteries.
Planning and investments in Switzerland’s power supply system were originally shaped by economic thinking. During the construction of the hydropower plants, the focus was on building a stable grid. Run-of-river power plants were intended for the belt load, storage plants to compensate for seasonal fluctuations, regulations to compensate for daily fluctuations. A coherent, stable system. From the late sixties, the nuclear power plants were added. They increased the supply of strip electricity and enabled lucrative cross-border trade with controllable hydropower. Exporting and importing electricity were also further, very flexible controls for stabilizing the grid. Everything went pretty smoothly as long as domestic production exceeded consumption over the year. Not only a stable supply was guaranteed, but also a fairly stable price structure.
This production structure also resulted in relatively simple business models. Investment costs, operating costs and revenues could be determined or planned fairly precisely, the risks were manageable. These business models could be easily financed. Investments were worthwhile. Every bank joins in. It is obvious that the state wanted to participate in these safe and profitable infrastructure projects. It is also understandable, since hydropower uses resources that lie within the sovereignty of the state (canton). The cantons have “their contribution” remunerated with water interest – and not too scarcely. Notabene, this money is then missing for new investments. The whole thing worked with a fairly simple set of rules. It is more complicated with the nuclear power plants. These are very reliable energy production machines. For their construction and operation, however, complex resources must be procured as well as implemented and implemented. The technology is more sophisticated, and requires rigorous management for safety. With ENSI, the latter is additionally monitored by an independent authority.
The new energy world
With the new renewable energies (NEE), everything has changed radically. In contrast to hydropower and nuclear power, wind and sun produce neither coil nor control energy. Electricity production is stochastic, i.e. hardly or not at all plannable. In any case, it can by no means be controlled according to needs. This requires completely different operating and business models. Since the value of electricity varies greatly depending on supply and demand and cannot be predetermined, only business models with a guaranteed purchase obligation work. This means that when electricity is produced, it must be able to be fed into the grid at a guaranteed price – but without a delivery obligation! Only with such an offtake agreement, which would certainly not exist in a free market, can the investment in a wind turbine or a solar park be reasonably plannable and thus financed. The guaranteed prices are simply passed on to electricity consumers via grid charges. The business risk of NEE producers is minimal. The large energy companies such as Axpo, Alpiq, BKW and the like understandably take advantage of this and invest diligently abroad in such projects, where state protection is also provided.
But there is a big catch in this matter. It is interesting for investors in wind and solar, but downright devastating for competing energy producers with reliably producing power plants. The latter have to stand at the back with their electricity when feeding into the grid. And from the point of view of the entire grid, the plannable grid load is over.
The pure production costs of solar power have become increasingly cheaper. Today, solar panels sometimes produce cheaper than hydropower plants or the most efficient gas-fired power plants. With the feed-in privilege of renewables, however, the merit order principle is taken ad absurdum. Even if the production costs of PV or wind should be cheaper than strip energy from conventional power plants, NEE electricity primarily included in the grid cannot be demand-oriented. Production fluctuates erratically, and the grid would lose its stability at both high and low production of NEE. Power plants with reliable and controllable production therefore have to step in again and again. But such stop-and-go operation makes these “gap fillers” unprofitable, and thus the investment in power plants with reliable and controllable production unattractive. For power plants that only produce part-time, there is no longer a profitable business model, unless the state helps with subsidies. Without subsidies, no one invests in baseload power plants.
This is exactly where we are today. The Chairman of the Board of Directors of Alpiq, Johannes Teyssen, rightly noted this in his interview in the NZZ on Sunday, 24 April 2022: We live from what our mothers and fathers have created. He sees investments in nuclear power plants as uninteresting.
This is bad for grid stability, security of supply and the national economy. In addition, trade with foreign countries will soon no longer function according to needs. Not only Switzerland, but some other countries, will want to import more and more in the future and have little to nothing left for export, especially in the winter half-year. It is to be seriously feared that there will not always be enough electricity in the European grid network in the near future. Thus, an important way to stabilize the grid is strongly questioned. Security of supply is becoming increasingly fragile, as less and less is being invested in stabilizing power plants abroad. And no one seems to be responsible. What is the error of thought that led to this dilemma?
Where is the error?
It lies in the dishonest comparison of production costs.
Despite all the sympathy for photovoltaics – the direct conversion of light quanta into electricity without mechanical parts is fascinating – solar cells are unfortunately only half the history of electricity production.
Solar panels are like water turbines. They reliably convert running water into electricity. But no one would ever invest in a water turbine without building a dam.
Only then can electricity be produced as required and fed into the grid. Exactly when it is consumed at the other end of the network in the same millisecond.
Therefore, randomly produced wind and solar power is of inferior quality.
It cannot be that a product of inferior quality has feed-in priority over a product of higher quality just because it is “just there”. Specifically, this happens when, due to too much wind and/or solar power produced, the water has to be drained via the weir in run-of-river power plants instead of running through the turbines. This is a criminal destruction of energy and value.
Production has to adapt to demand, but this does not work the other way around, or this leads to exorbitant damage to the economy and society through shutdowns, rationing and other measures.
A harmless adjustment of consumption to production is only possible in an insignificantly narrow range. Often you also hear the argument: Somewhere the wind is always blowing. Dark doldrums are dismissed as a bogeyman. However, an analysis by Florian Blümm shows that these occur more frequently than expected. A similar argument is that the power grid is like a lake that is always filled from some source that can always be tapped. Unfortunately, this picture is also wrong. It suggests that the network has a storage function. But this lake could still be as large as the whole of Europe, as former National Councillor Ruedi Rechsteiner says – its water depth would not be a millimeter to stay with the comparison. Because only as much as comes in can be taken out every millisecond, otherwise it dries out immediately or it overflows. Without adequate control and storage before or after the ominous electricity lake, nothing works, it comes to a blackout.
Presumably, the systemic benefits of producing strip load are underestimated. This could be due, among other things, to the incomprehensible claim of the German Agency for Renewable Energies that in the future there will be no need for baseload producing plants at all (“Base load was yesterday“). Not only is the total demand for electricity increasing, but the demand for base load is also even increasing disproportionately. Automated operations, the entire information technology, from the data center to the network operator, from the streaming service to e-banking, including the production and trading of cryptocurrencies, all require uninterrupted electricity. E-mobility also creates new consumption peaks. Everyone wants to charge the empty batteries in the evening and overnight. This is impressively demonstrated by the famous “duck curve” of electricity consumption in California with a slump in demand during the day and a peak in the early evening. For the car battery as a nightly power supplier for the household, it has yet to be proven how something like this should be interesting for the electric vehicle driver
How can the investment backlog be corrected?
There are no simple recipes against the current investment backlog, but the following three measures would probably already achieve a great deal:
- Creation of equally long spikes
Solar and wind power producers would have to be obliged to sell the electricity only as coil energy or as balancing energy. In addition, however, they would then also receive market-driven prices. The spontaneously fluctuating feed-in into the grid should no longer be possible, not even for the – self-destructive – free of charge. Every solar and wind power producer should be obliged to maintain storage capacity for its self-produced electricity. Then all producers would have the same length of time again, investors would have comparable business models again, and the network would become much more stable. Market-distorting subsidies would be eliminated. The flood of regulations would be stopped.
- Restriction of the right of association to lodge a complaint
Another element that inhibits investment is the right of association to lodge a complaint. It is true that infrastructure projects are subject to a careful approval procedure, but a right of objection to a project should only be granted to those directly affected. The problem lies in the fact that opponents bear no responsibility for omitted projects. If every project is delayed by objections to such an extent that in the end a building permit is only possible through a legal balancing of interests and no longer through legal foundations, no one wants or can take large infrastructure projects by the hand. An example of ideologically motivated delaying tactics is opposition to deep repositories for radioactive waste. Only with the establishment of a regulated sectoral plan procedure could countermeasures be taken against abusive objections. This measure could serve as a model for future major infrastructure projects.
- No technology bans
The toughest club against politically less popular technologies is bans. The ban on the granting of general licenses for new nuclear power plants was a mistake of the century. It makes the delaying tactics against nuclear energy law. This slows down the only technology that could permanently avoid a power shortage and at the same time enable the achievement of climate targets. The lifting of this ban would be an important step in order not to lose touch with the rapid developments of this sustainable technology. A technology which, thanks to its high energy density, consumes orders of magnitude fewer resources and land than wind and solar plants. Of course, nuclear energy must also face up to the market. If, however, as outlined above, the same length of skewers is ensured and legal certainty is created, such projects can also be financed, contrary to the statements of the Alpiq Chairman of the Board of Directors.