April 29, 2014 / 1:12 PM / 3 years ago

INTERVIEW-Swiss hydro power under threat from German energy shift

* Weak power prices undermine hydro plant plans

* Alpiq blames runaway German renewables

* German subsidy reforms needed fast, says Alpiq chairman

* Suggests new ‘bailout’ contracts on EEX power bourse

By Vera Eckert

BERLIN, April 29 (Reuters) - Oversupply of German renewable power threatens to undermine future hydroelectric operations in neighbouring Switzerland, the chairman of Swiss utility Alpiq said in an attack on Germany’s wind and solar subsidies.

As Germany seeks to get out of nuclear energy fast and wean itself off fossil fuels, it must also reconcile the national plan with nine surrounding countries in converging markets that are all affected by price movements and power flows originating in the European Union’s biggest economy.

The unchecked rise of subsidised German wind and solar capacity, now enough to supply a quarter of national demand, has therefore driven down wholesale power prices throughout northwest Europe and hit profits at utilities across the region.

“The future development of Swiss hydropower may fall victim to the price falls in the European power market, which is absurd given its ecological advantages,” Alpiq Chairman Hans Schweickardt, who has dual German and Swiss nationality, said in a Reuters interview at a sector conference in Berlin.

“Pumped storage power plants serve as a sustainable, renewable power battery for Europe,” he added, referring to the geography that allows Switzerland to serve as a swing energy supplier to Germany, France and Italy, thanks to Alpine lakes that provide 40 percent of its electricity.

Carbon-free pumped storage technology involves the collection of snowmelt in mountain reservoirs and pumping of water through turbines between low and high basins when power is needed, offsetting the intermittency of renewable output.

However, German benchmark power prices have halved over the past six years to 35 euros per megawatt hour because of weak demand as a result of the euro zone financial crisis and Germany’s burgeoning renewables capacity.

Schweickardt said that Swiss authorities had found recently that of 25 planned pumped storage projects, 24 were not viable because of weak earnings prospects.

PROJECTS ON HOLD

Swiss utilities had to put on hold several projects with 1,700 megawatts (MW) of combined capacity and industry figures show that market prices would need to double or treble to fully amortise new hydro ventures.

Alpiq is holding on to its 1.5 billion euro ($2.08 billion) Nant de Drance project, where it has completed excavation work for a 900 MW pumped storage plant in the Valais municipality of Finhaut. The plant is to begin operating in stages from 2017.

Schweickardt, who also holds senior positions on a number of European exchanges, said that Germany had introduced subsidy reforms but had based them on the expectation that wholesale prices would remain stable.

“The price bottom has not been reached ... the addition of new renewable capacity continues and influences prices,” he said, adding that Germany needs to bring green energy into a direct sales model well before the 2017 deadline envisaged in economy minister Sigmar Gabriel’s pending reform package.

“The new renewables have to share the same rights and obligations as thermal producers, such as providing replacement energy when there is no wind or sunshine - and they have to do so quickly,” Schweickardt said.

Schweickardt has also suggested that the European Energy Exchange, where he is deputy supervisory board chairman, develops what he calls solar and wind “bailout contracts” to protect producers from liabilities if they fail to meet their obligations because of unfavourable weather. ($1 = 0.7223 Euros) (Editing by David Goodman)

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