Swiss Hydropower Research Articles

High-resolution electricity generation model demonstrates suitability of high-altitude floating solar power

SummaryThis paper develops a meteorological site selection algorithm to quantify the electricity generation potential of floating solar design configurations on alpine water bodies in Switzerland. Using European power market demand patterns, we estimate the technical and economic potential of 82 prospective high-altitude floating solar sites co-located with existing Swiss hydropower. We demonstrate that the amount of solar energy radiating from high-altitude Swiss water bodies could meet total national electricity demand while significantly reducing carbon emissions and addressing seasonal supply/demand deficits. We construct a global map overlaying sites on each continent where high-altitude floating solar could provide low-carbon, land-sparing electricity. Our results present a compelling motivation to develop alpine floating solar installations. However, significant innovations are still needed to couple floating solar with existing hydropower operations or low-cost energy storage. As the industry matures, high-altitude floating solar technology could become a high-value, low-carbon electricity source.

The future of Swiss hydropower: how to distribute the risk and the profits?

Low electricity prices put economic pressure on hydropower companies. A more flexible water fee design can counteract this pressure and support hydropower companies during times when market revenues are low. However, this comes at the cost of lower revenues for resource owners. Using a sample of cost data for 62 companies and revenue data derived from an electricity market model, we have quantified this trade-off for the case of Switzerland. We found that electricity market price developments dominate changes in water fees and that for the profitability of hydropower, electricity prices are more important than water fee levels. However, with electricity prices of around CHF 40 per MWh, water fees can make the difference between profit and loss. Therefore, while flexible water fee regimes shift the market risk from producers to resource owners to some extent, the extent of this risk shift depends on the detailed design of the flexible regime.

Widening the common space to reduce the gap between climate science and decision-making in industry

Climate change impacts lead to risks for natural and human systems. Climate sensitive decision-making in companies is vital to addressing the urgent need for making societies resilient to climate change and entailed risks. Providing and using state-of-the-art scientific knowledge in decision-making, an integral aspect of climate services, poses great challenges for climate scientists and decision-makers. This article aims to contribute to more informed decision-making processes in climate adaptation by addressing the question “How can climate scientists practically implement a transdisciplinary (TD) collaboration with an industry partner to reduce the gap between climate science and decision-making in industry?”. We present an engagement framework that provides guidance to address this question. This framework conceptualizes the engagement using two spheres of interests offering the opportunity to explore and widen their overlap as a common space. We present a case study where we apply this framework to a TD collaboration for climate service provision with a Swiss hydropower industry stakeholder; leading to four practical recommendations for effectively using the proposed framework: (1) Secure an anchor person at management level of the decision-maker entity, (2) Be prepared to invest time into triggering and maintaining active engagement by all collaborators, (3) From the start, communicate the open nature of insights and solutions from the engagement process, (4) Be aware that you are working in a field of tension. The presented engagement framework and practical recommendations are particularly beneficial for climate scientists that are not yet familiar with TD collaborations and enables co-development of bespoke climate services.

Cross-border Effects of Capacity Remuneration Mechanisms: The Swiss Case

In this article, cross-border effects of different market design options are analyzed using Switzerland, which is strongly interconnected to larger neighboring markets, as a case study. An investigation is conducted with an agent-based model where in one scenario, all market designs are represented according to the current legislation, and in another, energy-only markets (EOM) are assumed in all considered countries. The results show that wholesale electricity prices are highly dependent on the chosen market design and in the annual average are up to 27% higher in the EOM scenario. Due to expected larger interconnector capacities, this increase is evident in all simulated markets. Furthermore, the results indicate that the planned market design changes in the neighboring countries decrease investments in Switzerland. However, generation adequacy is still guaranteed due to the high Swiss hydropower storage capacity. Our results suggest that, under the current circumstances, a domestic mechanism in Switzerland is not required.

Balancing-market design and opportunity cost: The Swiss case

The energy transition entails many changes to the existing system. This study focuses on the Swiss electricity balancing market and its adaptation in the context of the energy transition. An operational model for a set of Swiss hydropower plants is used to quantify the opportunity costs of balancing provision under the past, current, and future market designs. The results show that compared to the former balancing-market design, significant cost savings can be achieved by the planned modifications. In addition, the analysis shows how the cost dynamics may change in the future with an increasing share of renewable energies.

The Design of Variable Water Fees and its Impact on Swiss Hydropower Companies and Resource Owners

Water fees are a remuneration to be paid by the operators of hydropower plants to the owners of the water resource right. In Switzerland the fee is based on the gross capacity of the plant and independent from market conditions. This regulation implies that cantons and municipalities have a constant income from water fees, because the whole market risk lies with the producers. As revenues of hydropower companies have dropped after 2012 due to low electricity prices Swiss hydropower producers have been calling for a change in the water fee regime. The currently most probable policy change is a flexibilization of water fees. Within this paper we analyse the impacts of different water fee reform options – and how they depend on market conditions – from the hydropower producers (companies) and resource owners (cantons and municipalities) perspective. We find that electricity market price developments dominate the water fees in most cases, but for a range of electricity prices between 40 and 60 CHF/MWh water fees can make a difference. However, there is a larger variability between plants than between market scenarios, i.e., in every scenario, we find plants that make profits and others that make losses. We also show that a uniform water fee favors storage/pump-storage plants, whereas a differentiation of the water fee level by plant type favors run-of-river units.

The Future of Swiss Hydropower: Realities, Options and Open Questions

The NRP70 project ‘The Future of Swiss Hydropower: An Integrated Economic Assessment of Chances, Threats and Solutions’ (HP Future) has been initiated in 2014 with the objective to identify options for Swiss hydropower (HP) to adopt to the ongoing and expected electricity system changes. The project has been finalized in 2018 and this final report provides an overview of the obtained results and insights.

Bidding Into Balancing Markets in a Hydrodominated Electricity System

In an electricity system, demand and supply have to be balanced in real time. Since most energy is traded before real time already in forward, day-ahead and intraday markets imbalances can occur. To ensure the balance between demand and supply even if power plants deviate from their schedules, the system operator procures balancing capacity and energy in balancing markets. The market outcomes may significantly differ from one country to the other depending on the underlying generation technologies and market design. In this paper, we have a look at the balancing market prices of a hydro-dominated electricity system using Switzerland as a case study. By using a short-term hydropower operation model and a set of Swiss hydropower plants, we are able to identify a competitive benchmark for Swiss balancing market prices defined by the opportunity costs of hydropower for providing balancing capacity. Our results show that Swiss balancing market prices are influenced by several drivers but do not hint at any market imperfections.

The role of glacier retreat for Swiss hydropower production

Abstract High elevation or high latitude hydropower production (HP) strongly relies on water resources that are influenced by glacier melt and are thus highly sensitive to climate warming. Despite of the wide-spread glacier retreat since the development of HP infrastructure in the 20th century, little quantitative information is available about the role of glacier mass loss for HP. In this paper, we provide the first regional quantification for the share of Alpine hydropower production that directly relies on the waters released by glacier mass loss, i.e. on the depletion of long-term ice storage that cannot be replenished by precipitation in the coming decades. Based on the case of Switzerland (which produces over 50% of its electricity from hydropower), we show that since 1980, 3.0%–4.0% (1.0–1.4 TWh yr−1) of the country-scale hydropower production was directly provided by the net glacier mass loss and that this share is likely to reduce substantially by 2040–2060. For the period 2070–2090, a production reduction of about 1.0 TWh yr−1 is anticipated. The highlighted strong regional differences, both in terms of HP share from glacier mass loss and in terms of timing of production decline, emphasize the need for similar analyses in other Alpine or high latitude regions.

The Impact of Climate Change on Swiss Hydropower

Hydropower represents an important pillar of electricity systems in many countries. It not only plays an important role in mitigating climate change, but is also subject to climate-change impacts. In this paper, we use the Swiss electricity market model Swissmod to study the effects of changes in water availability due to climate change on Swiss hydropower. Swissmod is an electricity dispatch model with a plant-level representation of 96% of Swiss hydropower plants and their interrelations within cascade structures. Using this detailed model in combination with spatially disaggregated climate-change runoff projections for Switzerland, we show that climate change has ambiguous impacts on hydropower and on the overall electricity system. Electricity prices and overall system costs increase under dry conditions and decrease under average or wet conditions. While the change of seasonal patterns, with a shift to higher winter runoff, has positive impacts, the overall yearly inflow varies under hydrological conditions. While average and wet years yield an increase in inflows and revenues, dry years become drier, resulting in the opposite effect. Even though different in magnitude, the direction of impacts persists when applying the same changes in inflows to the 2050 electricity system.

Dream team or strange bedfellows? Complementarities and differences between incumbent energy companies and institutional investors in Swiss hydropower

Institutional investors can potentially be a significant source of capital for financing the energy transition. This is even more important as incumbent energy companies in many European countries struggle to adjust their business model to changing market conditions. This article reports on a choice experiment with pension fund and energy managers conducting 1,129 experimental investment choices in Swiss hydropower. We find that complementarities exist with regard to financing different stages of project development – pension funds are averse to construction and development risk but comfortable in deploying capital to existing projects, while incumbents are willing to invest in all project stages. The two groups show surprising similarities in their aversion to fluctuating electricity prices. When fully exposed to revenue risk, energy firms and pension funds demand a risk premium of 5.98% and 7.94% respectively. For policy makers, this suggests that shielding investors from revenue risk, as has been done with feed-in tariffs for other renewables, might be an effective way of lowering the financing cost of hydropower. When it comes to their preferred co-investors, the two groups express mutual distaste for each other: energy firms would rather invest in consortia with other incumbents, and the same goes for institutional investors.

Hydropower Operation in a Changing Market Environment A Swiss Case Study

Hydropower (HP) is expected to play an important role in the European energy transition by providing back-up and storage capacity as well as flexibility for intermittent renewable energies. However, due to low electricity market prices the profitability of HP decreased in recent years. In this paper, we analyze historic revenue potentials and future market prospects for HP taking into account different development paths. Using a short-term HP operation model to capture market opportunities as well as technical and natural constraints of HP plants, we model three representative Swiss HP plants. The results indicate that in the last years, balancing markets could have provided significant additional revenues for HP plants. However, accounting for uncertainties and market characteristics, the potential of balancing markets is reduced but cross-market optimization is still beneficial. Looking into the future, market price prospects for the coming decade are low to modest. Global fuel markets and the European Union Emissions Trading System (ETS) will be the main drivers for decisions for Swiss HP. The revenue potential from balancing markets will be reduced significantly in the future if all Swiss HP operators aim for balancing. While optimized operation across markets helps Swiss HP to increase its revenues, it is limited in scale.

Evaluation and recommendation of a subsidy instrument for new large hydropower plants, use case of Switzerland

Hydropower is the central pillar of the current Swiss electricity mix. The Swiss energy transition will profoundly change the electricity mix by transitioning a third of electricity generation from nuclear towards renewable energy sources mainly. This backbone role of hydropower is hindered by the current Europe-wide sluggish economic situation, characterized by subsidized new renewables energies which distort electricity prices, a partially liberalized market and power production overcapacity. In this difficult context, a strong and comprehensive political support through long-term policy will be of utmost importance to accompany hydropower across this transformation. This article explores various subsidy instruments, before using the general framework of “System Engineering” to base a precise recommendation for Swiss hydropower. The recommended mixture of investment contribution with discount reclamation appears the most appropriate instrument. Also, the short time horizon means that the subsidization can be quickly terminated if necessary. In parallel, it is a mature instrument since it is already used for other new renewable energies. The discount model allows reclaiming subsidies in case of an excess profitability. The strength of this study is its robust, comprehensive and all-encompassing methodology which can be replicated to other cases (for instance, other technologies or energy sources) and other countries.

Persistent and transient cost efficiency\u2014an application to the Swiss hydropower sector

Electricity prices on the European market have decreased significantly over the past few years, resulting in a deterioration of Swiss hydropower firms’ competitiveness and profitability. One option to improve the sector’s competitiveness is to increase cost efficiency. The goal of this study is to quantify the level of persistent and transient cost efficiency of individual firms by applying the generalized true random effects (GTRE) model introduced by Colombi et al. (Journal of Productivity Analysis 42(2): 123–136, 2014) and Filippini and Greene (Journal of Productivity Analysis 45(2): 187–196, 2016). Applying this newly developed GTRE model to a total cost function, the level of cost efficiency of 65 Swiss hydropower firms is analyzed for the period between 2000 and 2013. A true random effects specification is estimated as a benchmark for the transient level of cost efficiency. The results show the presence of both transient as well as persistent cost inefficiencies. The GTREM predicts the aggregate level of cost inefficiency to amount to 21.8% (8.0% transient, 13.8% persistent) on average between 2000 and 2013. These two components differ in interpretation and implication. From an individual firm’s perspective, the two types of cost inefficiencies might require a firm’s management to respond with different improvement strategies. The existing level of persistent inefficiency could prevent the hydropower firms from adjusting their production processes to new market environments. From a regulatory point of view, the results of this study could be used in the scope and determination of the amount of financial support given to struggling firms.

Persistent and Transient Cost Efficiency An Application to the Swiss Hydropower Sector

Over the past few years, the price of electricity on the European market has decreased significantly and thereby the competitiveness and profitability of the Swiss hydropower firms has deteriorated. With one possibility to improve the sector’s competitiveness being an increase in the firms’ level of cost efficiency, the goal of this study is to quantify the firms’ level of persistent and transient cost efficiency using the generalized true random effects (GTRE) model introduced by Colombi et al. (2014) and Filippini and Greene (2015). Applying this newly developed GTRE model to a total cost function, the level of cost efficiency of 65 Swiss hydropower firms is analyzed for the period between 2000 and 2013. For comparison, a true random effects (TRE) specification is estimated alongside, serving as a benchmark for the transient level of cost efficiency. The results of the GTRE model show the presence of persistent as well as transient cost inefficiency. The existing level of persistent inefficiency could hinder the hydropower firms from reacting flexibly to new market environments.

The Future of Swiss Hydropower - A Review on Drivers and Uncertainties

Swiss Hydropower (HP) is currently facing a wide range of challenges that have initiated a debate about future prospects and its role within the envisioned energy transition. Building on this debate, this paper provides an overview of the status and prospects of Swiss HP by identifying and evaluating the different drivers and uncertainties that Swiss HP faces. Based on a review and the perceptions held by some of the main Swiss HP stakeholders the two main topics that need to be addressed are the market driven impacts and the political, legal and social aspects. While the market dynamics cannot directly be influenced by Swiss companies or authorities, the regulatory framework can and needs to be adjusted. However, this requires a comprehensive stakeholder process and is at least a medium-term process.

The Future of Swiss Hydropower A Review on Drivers and Uncertainties

Swiss Hydropower (HP) is currently facing a wide range of challenges that have initiated a debate about future prospects and its role within the envisioned energy transition. Building on this debate, this paper provides an overview of the status and prospects of Swiss HP by identifying and evaluating the different drivers and uncertainties that Swiss HP faces. Based on a review and the perceptions held by some of the main Swiss HP stakeholders the two main topics that need to be addressed are the market driven impacts and the political, legal and social aspects. While the market dynamics cannot directly be influenced by Swiss companies or authorities, the regulatory framework can and needs to be adjusted. However, this requires a comprehensive stakeholder process and is at least a medium-term process.

Eddy covariance flux measurements confirm extreme CH<sub>4</sub> emissions from a Swiss hydropower reservoir and resolve their short-term variability

Abstract. Greenhouse gas budgets quantified via land-surface eddy covariance (EC) flux sites differ significantly from those obtained via inverse modeling. A possible reason for the discrepancy between methods may be our gap in quantitative knowledge of methane (CH4) fluxes. In this study we carried out EC flux measurements during two intensive campaigns in summer 2008 to quantify methane flux from a hydropower reservoir and link its temporal variability to environmental driving forces: water temperature and pressure changes (atmospheric and due to changes in lake level). Methane fluxes were extremely high and highly variable, but consistently showed gas efflux from the lake when the wind was approaching the EC sensors across the open water, as confirmed by floating chamber flux measurements. The average flux was 3.8 ± 0.4 μg C m−2 s−1 (mean ± SE) with a median of 1.4 μg C m−2 s−1, which is quite high even compared to tropical reservoirs. Floating chamber fluxes from four selected days confirmed such high fluxes with 7.4 ± 1.3 μg C m−2 s−1. Fluxes increased exponentially with increasing temperatures, but were decreasing exponentially with increasing atmospheric and/or lake level pressure. A multiple regression using lake surface temperatures (0.1 m depth), temperature at depth (10 m deep in front of the dam), atmospheric pressure, and lake level was able to explain 35.4% of the overall variance. This best fit included each variable averaged over a 9-h moving window, plus the respective short-term residuals thereof. We estimate that an annual average of 3% of the particulate organic matter (POM) input via the river is sufficient to sustain these large CH4 fluxes. To compensate the global warming potential associated with the CH4 effluxes from this hydropower reservoir a 1.3 to 3.7 times larger terrestrial area with net carbon dioxide uptake is needed if a European-scale compilation of grasslands, croplands and forests is taken as reference. This indicates the potential relevance of temperate reservoirs and lakes in local and regional greenhouse gas budgets.

Extreme Methane Emissions from a Swiss Hydropower Reservoir: Contribution from Bubbling Sediments

Methane emission pathways and their importance were quantified during a yearlong survey of a temperate hydropower reservoir. Measurements using gas traps indicated very high ebullition rates, but due to the stochastic nature of ebullition a mass balance approach was crucial to deduce system-wide methane sources and losses. Methane diffusion from the sediment was generally low and seasonally stable and did not account for the high concentration of dissolved methane measured in the reservoir discharge. A strong positive correlation between water temperature and the observed dissolved methane concentration enabled us to quantify the dissolved methane addition from bubble dissolution using a system-wide mass balance. Finally, knowing the contribution due to bubble dissolution, we used a bubble model to estimate bubble emission directly to the atmosphere. Our results indicated that the total methane emission from Lake Wohlen was on average >150 mg CH(4) m(-2) d(-1), which is the highest ever documented for a midlatitude reservoir. The substantial temperature-dependent methane emissions discovered in this 90-year-old reservoir indicate that temperate water bodies can be an important but overlooked methane source.

Resource rent taxation and benchmarking—A new perspective for the Swiss hydropower sector

The electricity generation in Switzerland is mainly based on hydropower (55% of total production). The exploitation of water in the hydropower sector can generate significant so-called resource rents. These are defined by the surplus return above the value of capital, labor, materials, and energy used to exploit hydropower. In Switzerland, hydropower producers pay to the State a fixed fee per kW gross capacity. With this system the substantial differences in costs, revenues and in the production characteristics of the hydropower plants are not taken into account. In this context, the following paper has two main goals: (1) to discuss the introduction in the Swiss hydropower sector of a new payment system based on a resource rent tax; (2) To propose a combination of a RRT system with a benchmarking analysis of the production cost obtained through the estimation of a stochastic frontier variable cost function. We estimate a true random effects stochastic frontier variable cost function using panel data in order to overcome the asymmetric information problem. In addition, using the information on cost efficiency of the single companies, we show how to introduce in the RRT scheme a benchmark system which gives incentives to minimize the production costs.