Would a return to nuclear power call into question Switzerland's hydroelectric future?

This is one of the most controversial stories of the first half of the year in Switzerland, both politically and socially. The debates and recent decisions concerning the future of nuclear power have received rare attention, arousing the enthusiasm of supporters of the atom and the ire of those who no longer want to hear about it. For after having decided to gradually abandon this energy source following the Fukushima disaster in 2011, Switzerland today seems ready to make a 360-degree turn.

In mid-June, the National Council indeed rallied to the Council of States by adopting the Federal Council's indirect counter-proposal to the "Stop the blackout" initiative. This text envisages amending the Nuclear Energy Act and provides that nuclear power may once again be considered an option to guarantee our future energy supply.

Even if this decision does not necessarily mean that a new plant will one day be built in Switzerland, a coalition called "No to new nuclear power plants" is already preparing to launch a signature collection for a future referendum.

One of the recurring arguments against nuclear power concerns its potential impact on the development of renewable energies, the former being likely to do so at the expense of the latter. The issue lies notably in the contested profitability of new nuclear installations. "Every franc invested in nuclear is one franc less for clean, affordable and quickly available solutions," reads a statement from the Swiss Energy Foundation (SES).

Drawing on the Spanish example, a recent study by Stéphane Genoud and Carlo Maino for HES-SO Valais-Wallis sought to quantify these costs with greater precision. A work of around fifty pages, rich in analyses and data that we break down for you in a few key points.

1️⃣

The Spanish example: Described as a "laboratory of Europe's energy future," Spain therefore serves as a reference for the two authors of the study. With more than 60% of its electricity production coming from wind and solar (2024 figures), the country has already reached a level of renewable penetration that many European states, including Switzerland, should only experience in several years.

Its low degree of interconnection with the rest of Europe also makes it easier to observe the effects of renewables on electricity price formation. The study therefore relies on the Spanish case to analyze how an energy system heavily fed by renewables influences market prices and, consequently, the profitability of different production technologies.

"Regardless of the physical location of new production capacities, a strong penetration of renewables in neighboring countries is likely to have direct effects on wholesale electricity prices in Switzerland," the two specialists emphasize.

2️⃣

An impossible payback: According to the study, a new nuclear plant would struggle to reach profitability without public support mechanisms, market prices being too low to cover investment costs. The Spanish example indeed shows that electricity prices rarely exceed the thresholds necessary for the profitability of a new nuclear plant.

"In the context of an electricity market relying solely on energy revenues ('energy-only market'), the price conditions observed indicate that a new nuclear investment would not be able to cover all of its costs within timeframes compatible with the economic lifetime of the installation," the study specifies.

3️⃣

Pressure on prices: When a nuclear project benefits from public financial guarantees, it can operate as a baseload production continuously injected into the grid, regardless of market conditions. In the simulations carried out by the study, this production is thus considered available at an almost zero marginal cost.

This phenomenon, called the "merit-order effect," would mechanically lead to a reduction in wholesale electricity prices by favoring the least expensive production means. The authors nevertheless stress that "demand could show some price elasticity," notably due to transmission grid congestion or certain bidding strategies.

4️⃣

Unfair competition: By simulating the addition of 1.6 GW of nuclear capacity — equivalent to an EPR-type reactor — and then 3.2 GW, the researchers sought to measure the consequences of such a scenario on renewables. Their results show that this additional production reduces not only the average price of electricity but also the number of hours during which prices reach high levels.

These periods of tightness play an essential role in the remuneration of certain flexible and renewable production technologies. As a result, a return of nuclear power could profoundly alter the price formation mechanisms on the electricity market.

5️⃣

Swiss hydropower in peril: According to the study, the most marked economic impact would concern hydropower. The consequences would however vary according to the different modes of production. Run-of-river plants, which produce continuously, would record the largest losses, with a decline in profits ranging between 29% and 42%.

Reservoir dams, which can adapt their production according to needs, would also see their margins reduced, in a proportion estimated between 15% and 19%. As for pumped-storage installations, they could lose part of their economic value depending on the way nuclear energy is valued on the market.

At the scale of the entire Swiss hydropower fleet, the annual shortfall could thus reach several hundred million francs depending on the scenarios studied.

Even though Switzerland has an electricity system different from Spain's, the study's authors believe that the mechanisms observed are transferable to the entire European market and to the evolution of price dynamics. "They will have direct implications for income stability, reinvestment capacity and long-term planning of the energy system," they emphasize.

The study by HES-SO Valais-Wallis also highlights an element particularly important for Switzerland: an increase in nuclear capacities in neighboring countries could also have significant repercussions on the revenues of Swiss hydropower. In this context, the conclusion of an electricity agreement with the European Union appears all the more a strategic issue in the medium term.

This article has been automatically translated using AI. If you notice any errors, please don't hesitate to contact us.

Would a return to nuclear power call into question Switzerland's hydroelectric future?

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Would a return to nuclear power call into question Switzerland's hydroelectric future?

Olivier Wurlod

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