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The Case of Switzerland - the Benefits of Stored Hydro Power

Switzerland has few natural resources besides mountains. In terms of energy this means a significant potential for electricity production from hydro-power including about 8.8 TWh (ca. 15% of annual demand) of seasonal storage in the form of large artificial lakes behind large dams. 

Contrary to pumped hydro storage (e.g the Nant de Drance or Linth-Limmern plants) which is more typically associated with energy storage, conventional stored hydro power stations in the alps can typically accumulate water in an artificial lake from melting snow and rain during spring and summer and can delay generating electricity to whenever needed, typically in the winter.

By extending the previous optimization model, we can see the impact of stored hydropower as a source of flexibility and dispatchable power generation on the cost-optimal system configuration:


We are assuming a production cost of 70 Euro / MWh for up to 8.8 TWh per year at a nameplate capacity of 10GW. This capacity is dispatchable anytime during the year without modelling the state of the reservoir and the distribution of the inflows over the year.

Compared to our standard configuration (see image below),  the ratio of wind to solar PV generation remains roughly at two to one. We can also see that even the considerable reserves of available seasonal storage would not be enough to fully balance out the intermittent generation from wind & solar.

Including the existing hydro capacity at roughly its largely depreciated production cost violates the principle of "green-field new construction at today's cost". However their existence and continued existence for many decades to come is significant for the Swiss energy policy.

The current plan or record for the energy policy until 2050 aims to cover most of the additional demand from increased build-out of solar capacity and very little additional investment in wind or other renewable sources. 

In 1959, Laufenburg in northern Switzerland has been the starting point of the European integrated power grid and cross border electricity market. Ever since the Swiss power grid has been highly interconnected with its neighbors and is supporting significant cross-border trading flows relative to its size.

As long as Switzerland remains as well integrated into the pan-European power grid, trading will likely push the Swiss power mix more closely towards a joint economically optimal configuration with its neighbors.

Which means that if Switzerland continues developing wind below an optimal mix, the "missing" wind power will likely be imported during wind surplus hours from its neighbors. Similarly a good part of the relatively low-cost flexible renewable generation will be exported at high market rates during times of low wind and solar production ("Dunkelfaute").

While international trade can help to keep prices lower on average during good times, it also carries a significant counterparty risk in times of crisis.

This recent paper is proposing on cost optimization for a Swiss energy system that relies on a blended  combination of cost-efficient import most of the time and expensive reserve capacity when necessary in times of hopefully rare crisis.