The situation for Swiss hydropower within the liberalised market is far worse than portrayed by the ElCom. The report does not differentiate between distribution grid companies that have a monopoly market and those electricity producers that have to sell their hydropower at a loss on the liberalised market.
Approximately half a billion of missing money in the liberalised electricity market
As has been publicly and transparently communicated in the past, the current calculated total deficit of Swiss hydropower is approximately CHF 1 billion per year. One half, plus a regulated profit margin for the distribution companies, is paid for by the Swiss end customers in a monopoly market. The remaining 500 million Swiss francs deficit is borne by the pure electricity producers within the liberalised market. In its response to the ESPEC-N, Alpiq illustrates what is known as the “missing money” problem. On the one hand for the total hydropower within the liberalised market minus the market premium (2018: 383.9 MCHF; 2019: 511.9 MCHF; 2020: 446.6 MCHF; 2021: 428.6 MCHF), and on the other for Alpiq (2018: 101.6 MCHF; 2019: 157.2 MCHF; 2020: 156.2 MCHF; 2021: 149.5 MCHF).
No prospect of improvement over the short and medium term
The short and medium-term outlook on the coming calendar years shows that the forward prices are at insufficient levels. On average the prices for the calendar years 2018 to 2021 are approximately 29 EUR/MWh in Germany and 35 EUR/MWh in Switzerland. Both reference prices lie considerably below the costs for the generation of hydropower and make economically viable operation within the liberalised market impossible.
Immediate measures as an interim solution necessary
As a result of the partial market liberalisation in Switzerland, approximately 700 distribution grid operators with a regulated grid monopoly that can sell hydropower at a profit are opposed by just a few pure electricity producers within the liberalised market. The latter are responsible for more than 40% of the generated hydropower and for more than half of Switzerland’s entire electricity generation. As an interim solution until the market is fully liberalised and a new market model has been introduced, immediate political measures are urgently required.
Alpiq has been diligently doing its homework
While the Generation Switzerland business division is unprofitable, the three growth areas Digital & Commerce, Industrial Engineering and Building Technology & Design are well positioned throughout all of Europe. During the first half-year of 2017 they generated the Alpiq Group’s entire operating result.
Over the past four years, Alpiq reduced its net debt from more than CHF 4 billion to CHF 726 million. Moreover, thanks to its cost saving and efficiency enhancement programme, the company has reduced the cost base by more than CHF 400 million per year. These cost management efforts will continue to be strictly implemented. What is more, Alpiq has a stable liquidity of approximately CHF 1.5 billion and a robust equity ratio of more than 40%. The safeguarding of the ability to operate on the capital market, ensuring the sustained solid liquidity and the further reduction of the net debt have the highest priority.
Alpiq accompanies the political debate in a fact-oriented and transparent manner
At the beginning of July, the ESPEC-N asked Alpiq for a statement regarding the report by the Federal Electricity Commission ElCom. Alpiq responded to the enquiry in a transparent and fact-oriented manner and explicitly indicated that the statement includes confidential information and forecasts. Nevertheless, Alpiq will continue to accompany the industry debates about energy policy in a constructive and transparent manner, in order to enable policy-makers to gain an enhanced overview of the economic situation of hydropower.
Find more information about Alpiq on www.alpiq.com