Austria and Switzerland have agreed a deal with Berlin to expand pumped storage capacity and international grid links to support Germany’s new renewables-based energy policy. However, low returns on pumped storage in Austria and soaring German solar output already threaten this green “battery of Europe” project.
A power co-operation deal signed by the three countries in May targets a 60GW expansion of solar and wind capacity in Germany. The marketing of these additional supplies via Alpine pumped storage would also help all three countries meet tougher emissions targets. German economy minister Philipp Roesler said the agreement would deliver “concrete steps for the cross-border usage of existing storage capacity and future co-operation on their expansion”.
Attractive on paper
On paper, the plan to store Germany’s vast intermittent supplies in the mountains of neighbouring Austria and Switzerland looks attractive. Germany needs an estimated 3.5GW of extra storage capacity for the 110GW of new wind and solar capacity coming on-stream. The Swiss government’s energy strategy published in April says an extra 4GW could be added to existing 1.7GW pumped storage capacity by 2020. The paper also calls for an extra 3GW of cross-border capacity in northern Switzerland to smooth integration of German wind supplies. Austria could add 5GW to its existing 7.5GW capacity by the same date.
But surging renewables generation is driving down peak power prices and undermining the economic case for an Alpine battery. Most of this extra capacity comes from Germany, but Austria is also expanding its wind and solar capacity. Solar supplies alone lowered peak power prices for midday hours by up to 40 per cent last year in the Austro-Swiss-German regional market. Pumped storage operators can no longer make their profits on the spread between day and night power prices. In Austria, current pumped hydro output of 2,880GWh/year is only 4 per cent of total supplies – adequate for Austria, but marginal for the nine-times bigger German power market. Swiss annual output is even lower at under 1,700GWh.
Pumped storage has other drawbacks. Plants are guaranteed to face stiff public opposition in both countries, take at least five years to build and typically lose 20 per cent of output to the plant’s own operation.
Nuclear power exit
Swiss expansion of pumped storage is tied to the country’s planned exit from nuclear power. Switzerland was the first European country to opt not to renew its ageing nuclear fleet in response to Fukushima. In March, the Federal Administrative Tribunal also brought forward closure of the country’s oldest nuclear plants to 2013. Swiss storage plants currently operate by pumping water at night using cheap nuclear electricity. The government is still to decide how to replace the 38 per cent of power sourced from five reactors.
In March, Norway scaled back ambitious plans for links between its pumped hydro and continental Europe. The Nordic green battery foundered on inadequate power routes, environmental objections and the power price disparity between Norway and central Europe. The parallel Alpine scheme has obvious advantages – 20 per cent of European electricity trade already goes through Switzerland. As the hub of Europe’s power network, Austria and Switzerland enjoy better grid links with major markets in France and Germany.
Wolfgang Anzengruber, chairman of leading Austrian supplier Verbund, claims “profiteers from closed markets” are lobbying Germany’s Roesler against closer Austro-German power links. He warned Roesler that failure to integrate Alpine hydro into Germany’s new energy policy “risked making power supplies less secure and more expensive”. Verbund’ has more than half of the total Austrian pumped storage capacity in 21 plants. “If developed fully, an Austro-German energy partnership could serve as a model for a future unitary European energy market,” said Anzengruber. “Both sides will profit – a classic win-win situation.”
‘Most efficient technology’
His claims won support from a recent study published by business consultancy Frontier Economics. The report says Alpine pumped storage “is the most efficient available technology” to integrate the 350GW of wind capacity planned across Europe by 2030. It also backs Austrian industry claims that this year’s doubling of network fees for pumped hydro plants would damage competitiveness against German, Swiss and Italian plants (none of which pay grid fees) and hit future investments.
The chairman of Verbund’s hydropower subsidiary, Karl-Heinz Gruber, said Austrian regulator E-Control’s move would slash profits by one-third. “The regulator should really support the building and operation of pumped storage and not punish it,” said Gruber.
Simon Jones is a freelance journalist
This article first appeared in Utility Week’s print edition of 29 June 2012.
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