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Swiss corporations invest billions abroad

Local electricity companies abroad produce much more solar and wind power than at home. No matter how much you would like to invest in Switzerland. But some of their projects have been stuck for decades or are not possible at all.

The Axpo subsidiary Urbasolar has built a large solar park on 25 hectares in Toulouse.

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Are the big Swiss electricity companies “homelandless fellows”? You could almost think that when you listen to Federal Councilor Simonetta Sommaruga: The industry has undoubtedly invested too much abroad in the last ten years instead of producing renewable energies in Switzerland, she said in “Le Temps”. That was not wise for the security of supply in Switzerland, especially in winter.

Even if she has since spelled back her criticism, two questions arise: How much are Swiss electricity producers, most of which are owned by cantons and municipalities, actually involved abroad? And why do you prefer to invest in renewable energies such as wind and solar systems abroad than in Switzerland?

Six billion abroad

Every two years, the consulting firm “Energie Zukunft Schweiz” compiles a list of how many solar and wind parks and small hydroelectric power stations the Swiss electricity companies own abroad. Here, not only the big three, ie Axpo, Alpiq and BKW, are scrutinized, but also around a dozen electricity producers and some joint ventures in which cantonal or municipal suppliers bundle their foreign commitments.

The installed capacity of all these power plants now amounted to 4500 megawatts in 2021. At today’s cost, a rough estimate would have to be 6 billion Swiss francs. Ten years ago it would have been 11 billion, since the investment costs for wind and especially solar systems have fallen sharply. In the last five years, capacity has increased by two-thirds. The systems installed abroad generate more than 10 terawatt hours of electricity.

Swiss electricity companies prefer to invest abroad

Annual production of new renewables in terawatt hours

Is that a lot or a little? This is best compared with the new renewables built domestically. If you add up the estimated production of all Swiss funding projects that have been carried out or have already been approved, you get 8.6 terawatt hours at the end of 2021. For comparison: Switzerland consumes around 60 terawatt hours per year.

The new renewable systems of the Swiss power plant operators abroad therefore supply more electricity than all the solar and wind projects implemented in Switzerland combined. The electricity companies only have a fraction of the Swiss projects on their books.

Rather, they are increasingly becoming developers who, for example, set up a solar system on a roof for a company or built it into a facade, which then supplies electricity to the grid. In the “new world of electricity”, the classic electricity companies still own large hydroelectric, nuclear and storage power plants, which are essential for a stable power supply.

Investors and pension funds are getting involved

This new business model can also be seen in foreign commitments. The electricity companies there often act as developers and then sell a wind farm or solar park again. According to the study, Axpo has doubled its capacity abroad within five years, but that’s an understatement. It has built many more parks, but then passed them on or only holds a minority stake.

That is also the second significant development in the electricity industry: There are increasingly specialized investors who are bustling about in this area and buying parks. Pension funds have also discovered this asset class. The largest investors based in Switzerland are called Energy Infrastructure Partners, re:cap or Susi Partners. The plants they own abroad have an estimated production of 8.8 terawatt hours.

How much the five largest electricity companies invest abroad

Installed capacity in wind, hydropower and sun (megawatts)

The electricity companies are therefore increasingly following a model in which they no longer own the systems themselves. So if Axpo announces that it intends to develop and build solar systems for 10 gigawatts (10,000 megawatts) and wind systems for 3 gigawatts by 2030, it will only hold the smallest part of it itself. This gigantic expansion – it corresponds to half the capacity of all power plants in Switzerland – will also largely not take place in Switzerland.

But why are Swiss electricity companies moving abroad? A key reason for this is that in small Switzerland there simply aren’t enough attractive project opportunities for the financially strong energy companies. “The lack of profitability is not the reason why we invest so little in this country,” says Antoine Millioud, Managing Director of Aventron AG.

The Basel-based company invests in wind and solar parks in six different European countries and smaller hydroelectric power plants on behalf of various energy suppliers, including Energie und Wasser Bern (ewb), Primeo Energie and Stadtwerke Winterthur. The company either buys power plants that are already ready for construction or develops, builds and operates plants in cooperation with a local partner.

According to Millioud, Aventron realizes as much as possible in Switzerland. But there is a problem with the approval process. The projects would each be delayed by 10 to 15 years until a building permit was finally granted. This stands in stark contrast to the need to cover the power gap in winter by increasing wind and solar energy capacities.

For once it worked: The largest Swiss wind farm with turbines that are 150 meters high is on Mont Crosin.  It is operated by BKW.

For once it worked: The largest Swiss wind farm with turbines that are 150 meters high is on Mont Crosin. It is operated by BKW.

Valentin Flauraud / Keystone

Appeals make projects massively more expensive

The Zurich Electricity Works (EWZ), which is one of the five largest investors abroad in the Swiss electricity sector, is struggling with the same difficulties. “We can hardly build anything domestically because our projects are stuck in the approval process,” says EWZ spokesman Harry Graf.

The Zurich plant, which has to use every third franc of the city’s framework credit for domestic projects, began planning two wind farms in the Jura twelve years ago. Since then, it has already spent eight million francs on it – but has not yet produced a kilowatt hour of electricity. “With every new project, new opportunities for appeals open up,” Graf complains, “and that delays and makes the projects massively more expensive.”

The situation with hydropower is analogous. The Oberhasli power plants, in which the EWZ is involved, would like to build a new reservoir on the Trift and raise the Grimsel dam. But even these projects are blocked by objections and years of legal disputes. “The financial commitment at the beginning and the uncertainty are too great for us to simply plan ahead,” says Graf.

The lengthy procedures and the flood of appeals are also the number one stumbling block for domestic investments for Axpo, the largest energy supplier in the country. France is a role model. According to a company presentation, it only took 2.5 years between the initial contact with the authorities and the building permit for a solar power plant in Sanvignes-les-Mines.

According to Christoph Sutter, head of the Renewables division in the group, his company’s focus on other countries also has something to do with the fact that Switzerland lacks a good system of subsidies for large solar systems.

In France and Germany, the state guarantees the project operator who makes the lowest bid a minimum price per megawatt hour produced for 15 to 20 years. If the market price falls below the offered price, the operator receives the difference from him. With this “sliding market premium”, the state protects the investor against fluctuations in the electricity price. According to Sutter, the model ensures the necessary pace for the expansion of renewables. He says: “Investments for several decades are only made if the risks are manageable.”

The Axpo subsidiary Volkswind owns a wind farm in Antezant-la-Chapelle, France.

The Axpo subsidiary Volkswind owns a wind farm in Antezant-la-Chapelle, France.

PD

Subsidy regime splits the industry

In Switzerland, energy systems are to be subsidized in the future with one-off investment contributions. For large photovoltaic systems, the state government proposes auctions: the award for support is given to those who ask for the lowest contribution. According to Sutter, the Federal Council is using the lever in the wrong place. Because the great uncertainty in the expansion of renewables is not in the initial investment, but in the future electricity price. And the sliding market premium reduces this risk.

However, the electricity industry is divided on the question of the appropriate funding model. The Zurich Electricity Works (EWZ), for example, like BKW, give preference to investment contributions. Because this could cushion the investment costs, which are mainly incurred at the beginning of a project, says spokesman Graf. Occasional fluctuations in the market price, on the other hand, are part of the risk of an energy company.

One thing is certain: the importance of state-organized funding is tending to decrease. The EWZ, for example, does not claim any subsidies for its wind farms in Sweden, Norway and France. The investment decision was therefore made solely on the basis of economic criteria. This shows that investments are also possible without subsidies, says Graf.

From this it can be deduced that more subsidies are not primarily needed in this country so that more money flows into domestic energy production. Much more important is the simplification and acceleration of the procedures for the construction of electricity production facilities. And a discussion about the conditions under which energy systems may henceforth also be installed in protected areas and, in the case of solar energy, also in open spaces in the mountains and in the lowlands.

If everything stays the same, Swiss electricity suppliers are likely to keep an eye out for new energy projects, especially abroad. “We would very much like to invest in Switzerland,” says Graf, “but it seems to me that we have to accelerate with the handbrake on.” After all, you have to follow the procedures and rules in Switzerland. However, this also means that the electricity companies cannot be given the buck.

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