Switzerland - 'Next winter will be difficult in Europe without Russian gas'

(MENAFN- Swissinfo)

SWI swissinfo.ch: In Switzerland, the price of gas is now 12 times what it was last summer. Have you ever seen such a price increase?

René Bautz : No, its an absolute record. The rates have climbed to €345 (CHF356) per megawatt hour (MWh). They used to average €30. However, Europe still has enough gas, with stocks at 30%. Russia still supplies 250 million cubic metres a day. The price increase is mostly just an emotional reaction. It's not very cold now, and the temperatures will warm up with the start of spring. Our forecasts say that prices will increase considerably this summer and go down again next winter.

SWI: How can we cope with price spikes in the markets?

R.B.: Once spring comes, gas companies will be filling up their underground reserves in France, Italy, Belgium, Germany, and so on. The biggest reserves in Europe are held in these underground storage tanks. The reserves that Gaznat has acquired in France mean we can be more or less independent for several weeks next winter. Consumption in winter is five or six times higher than in summer, so we will have to invest more in storage. In Switzerland, projects are going to be starting up again, such as in the underground chambers of upper Valais region and the rocky massif of the Grimsel, which is a CHF400 million ($425 million) project. But it's not just gas. Electricity production in the main European countries also depends on Russian coal. All the energy sources coming from Russia are at stake.

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SWI: Washington has decided to do without oil and gas from Russia. The European Union also says it wants to reduce its dependence. But can Europe get by without Russian gas?

R.B.: The US are actually exporters of gas, whereas the proportion of Russian gas imported by the Europeans is as high as 40%. For 2021, in the Gaznat zone which includes western Switzerland, we think it's about 25%. The Russian contribution is even bigger in German-speaking Switzerland. To shut down all Russian gas would mean a big challenge for replenishing our stocks this summer. There would have to be new long-term contracts, and major investments in liquid gas in Europe, which would take three to four years. Bern has asked the Swiss Gas Industry Association to examine the security of supply. We're dealing with a major policy shift here. It's going to be a watershed.

SWI: What supply alternatives are there?

R.B.: There's North Africa, the Caspian Sea, and the North Sea with the 'Baltic Pipe' under construction to link Norway to Poland via Denmark. There's another project in Egypt with deposits discovered in the Mediterranean. It would also be feasible to increase imports of liquid natural gas, but there would need to be ports able to liquify that gas (at -163° C) to compress its volume, then warm it up at destination. Germany, which imports 49% of its gas from Russia, hasn't a single one.

SWI: How much of an increase should the Swiss consumer expect?

R.B.: It really depends on the distributors and their policy on managing price increases. The price of gas includes the price per molecule, transportation, taxes (mineral oils and CO2, which have increased steeply), and not forgetting VAT, of course. These taxes amount to some 30%. One solution would be to reduce VAT (7.7%) temporarily and bring down some of the other taxes. One of our main fears is seeing a growing number of consumers who have trouble paying their bills. Even if there is not yet a problem in Switzerland, 100 million European consumers are in this situation. Petroleum, gas and electricity, everything going up at once. What will be the situation next autumn? We just don't know.

SWI: Will gas distributors make a profit from rising prices?

R.B: They mostly belong to public utility companies. Each one has its own pricing policy. If gas is dearer, the higher costs will have to be passed on to the customers to a certain extent. If it goes above a certain level, that may reduce demand. People may start to use less energy, insulate their homes, or even adopt other alternatives. But there are risks, such as electricity black-outs.

SWI: Gas is now more of an issue for the federal government, isn't it?

R.B.: Bern is studying the idea of building three new high-performance power stations using gas, with eight of the potential sites in French-speaking Switzerland. In the end, two or three of the proposed sites will be approved and shared between French and German-speaking regions of Switzerland - if possible near a gas pipeline and an electrical switching station in the existing industrial areas [editor's note: the thermal power plant at Chavalon in Chablais, Valais, might be reactivated]. The administrative procedures and timeframes will have to be fast-tracked.

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SWI: Is it still going to be feasible to abandon fossil fuels by 2050, as the government has planned?

R.B.: Gas is not out of the picture yet, even though it has been called into question. In the long term, we will have to decarbonise our fossil energy bit by bit and develop renewable energies as well as vegetable-based biomass, which is a potential Switzerland has hardly looked at yet. Electrifying everything wouldn't work and would cost too much. It would be better to rely on a range of energy sources. It will take time, resources, and putting in place a pro-active policy to encourage domestic production: hydro, solar, wind, but also synthetic gas and biogas.

Translated from French by Terence MacNamee

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While there is this deep-rooted tradition of respect of the environment in Switzerland it does not necessarily extend beyond the country's borders.

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