European ‘Battery’ at Risk With Swiss Nuclear Vote

(Corrects tender details in 17th paragraph of story published March 1.)

Switzerland, the transmission hub for 25 percent of Europe’s electricity, has four nuclear reactors approaching the end of their life. A nationwide referendum now threatens the industry’s future.

Utility bills for households and companies will rise and Switzerland’s role as a “battery” for the region may be at risk if voters decide in 2013 to ban reactors that provide 39 percent of the country’s power supply, according to analysts, including Ralph Schlaepfer of PricewaterhouseCoopers. A non- binding vote in the canton of Bern last month backed a replacement of a nuclear plant by 51 percent.

“It will certainly be very tight,” said Thomas Bernauer, a professor of political science at the Swiss Federal Institute of Technology in Zurich. “The population is almost evenly split and opinion is bound to swing in both directions in the run-up to a referendum.”

The current flow of nuclear energy means Switzerland can make profits by trading electricity from its hydro sources with neighbors, including Germany. Without reactors, the Swiss may have to keep their hydroelectric resources all to themselves. That would wipe out 1 billion francs ($1.08 billion) a year of cross-border energy trading earnings and deprive nations such as Italy of ways to balance their power flows.

‘Giant Battery’

“Switzerland functions as a giant battery for Europe,” said Schlaepfer, the chief energy consultant at PricewaterhouseCoopers Switzerland AG. Hydro sources currently provide 56 percent of the country’s power needs. When demand is low, power prices fall and Switzerland imports electricity to pump water into Alpine reservoirs. As consumption peaks, water is released to generate hydropower that’s exported at a profit.

“With the development of big European wind farms around the North Sea, electricity flow has become more erratic,” making Europe more dependent on Switzerland’s pumped storage to help even out supplies, Schlaepfer said in a phone interview.

About 40 percent of Switzerland’s power from hydro sources was sold abroad in 2007 for a profit, according to the Swiss Energy Foundation, a Zurich-based research institute.

Such gains would vanish unless Switzerland builds new nuclear plants, said Manfred Thumann, chief executive officer of Axpo AG, which has holdings in three Swiss nuclear plants.

“Switzerland faces a power supply gap,” he said in an interview at his office in Baden. “So far, we’ve been successful in making sure it hasn’t been felt. But in terms of planning tomorrow’s production, that gap needs to be filled.”

Higher Prices?

Beznau and Muehleberg, the two oldest of Switzerland’s four nuclear plants, were completed in 1969 and 1972 and are reaching the end of their lifespan, while long-term electricity import contracts with France are due to be phased out from 2016, according to Axpo.

“When you are forced to go to the market for something you urgently need, you are in the worst position imaginable to pay a reasonable price,” Thumann said.

Axpo teamed up with Swiss competitors Alpiq AG and BKW FMB Energie AG (BKWN) in December to make a joint tender for two new atomic plants. BKW estimates they will cost 7 billion francs to 9 billion francs each. There’s no guarantee they’ll be built.

“A ‘yes’ vote is crucial because nuclear plants are so important for the country as an Alpine transit nation,” Alpiq CEO Giovanni Leonardi said.

Switzerland isn’t alone in pondering its nuclear future. Finland is building Europe’s first atomic facility in 15 years, while Spain and Germany have extended the so-called runtimes of their plants.

Germany began phasing out nuclear power in 2000 and in November saw protests against the transport of nuclear fuel turn violent at Gorleben when as many as 50,000 people clashed with about 17,000 police. European Union Energy Commissioner Guenther Oettinger has said the disputes in Germany may affect the Swiss referendum.

‘Emotional Debate’

“Unfortunately, we have a very emotional debate in Germany,” he said on Jan. 10 at an energy conference in Bern. “There will be new nuclear power plants in Europe if there are investors here and I welcome that.”

For now, Axpo, Alpiq and BKW FMB are focusing on technical aspects of the project and have invited bids from reactor suppliers.

“We are moving in parallel and waiting for the political decision,” Leonardi said. Kurt Rohrbach, chief executive of BKW FMB, said in a January phone interview that the partners’ joint project company, Resun AG, held talks with potential builders of two 1,450-megawatt plants including Paris-based Areva SA (CEI), the biggest maker of nuclear reactors. He declined to elaborate.

“The scarcest resource for atomic energy in Switzerland is locations,” Leonardi said. “No one wants to give up a valuable site.”

A “no-vote” in 2013 isn’t something Axpo’s Thumann wants to think about. “There’s no plan B,” he said.

To contact the reporter on this story: Leigh Baldwin in Zurich at lbaldwin3@bloomberg.net

To contact the editors responsible for this story: Angela Cullen at acullen8@bloomberg.net Reed Landberg at landberg@bloomberg.net

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