Supporting the energy transition through flexibility

However, wind and solar power alone is not enough to achieve the 1.5°C limit set out in the Paris Agreement. The generation of wind and solar power is not linked to electricity demand but depends on the weather and this intermittent production is not easy to manage. Either we need to build up much greater capacity to meet demand and ensure security of supply or, as a more efficient and cheaper option, we need to use flexible generation and storage systems to integrate and optimise our use of renewable energy.  

This is where Alpiq comes in. Thanks to our highly flexible asset portfolio in Switzerland, Spain, Italy and Hungary, we are already contributing to the security of supply by integrating the intermittent production from renewables into the energy system. And we’re further strengthening our capabilities to provide even more flexibility throughout the energy transition. Lukas Gresnigt, our Head International, discusses what flexibility means, why it’s important, and what role our company will play in this market in the future.

Lukas, what does “flexibility” mean in the context of electricity?

By flexibility, we primarily mean the ability to produce additional electricity when it’s needed and stop producing or storing it when there’s too much. This is important because the electricity grid needs to be in balance at all times, that is, demand and supply have to be equal. This ensures a constant frequency and voltage level, which is essential for the security of supply. However, achieving this has become more complex as demand fluctuates and generation becomes increasingly intermittent. For example, fluctuations in weather conditions such as cloud coverage and wind speed mean we’re limited in our ability to predict how much energy can be generated from wind and solar. 

How can we ensure security of supply in this changing energy landscape?

The geographic diversity across Europe means that different countries and regions can complement one other. Flexible hydro generation from reservoirs in the Alps, the Nordics and the Balkans can be used to balance the fast-growing wind capacity in and around the North Sea and Spain as well as the increasing solar generation from photovoltaics across Europe. This makes it all the more important that we expand the existing interconnections between high-voltage grids. However, this process is complicated and often slow, which puts growing emphasis on demand-side management, flexible generation and storage. These last two factors have always been a strength of Alpiq given our long history in flexible Swiss hydropower.

What does the flexibility market look like?

Basically, there are three distinct categories of flexibility, each of which addresses a different need. First, the short-term flexibility needed to balance the grid during unexpected events such as the failure of a power plant or sudden changes in demand. In these cases, grid operators like Swissgrid provide what is known as ancillary services, whereby they procure installed capacity to balance the grid, usually via auctions, and dispatch this capacity when needed. Secondly, we need flexibility on the intraday or day-ahead markets, for example when the weather forecast changes. At Alpiq, dedicated teams of traders monitor and optimise these developments 24/7. Thirdly, we have seasonal flexibility, which is particularly important in Switzerland, where we have higher production in summer than in winter, but lower demand in summer than in winter. That means we need to store some of our summer energy for the winter in our dams like Grande Dixence or Lake Emosson. 

There’s talk of new developments in technologies such as batteries, hydrogen and virtual power plants. What’s on the horizon?

There’s certainly a lot of innovation in the energy market. We’re encouraged by the potential of battery electric storage systems (BESS) – not for long-term storage, but to serve the short-term and intraday flexibility markets. The fast growth of electric mobility could play a role in these markets too, because electric cars are basically batteries on wheels. Alpiq is experienced in managing the market exposure for large fleets of wind and solar plants, especially in Germany and Spain, so a similar model could be applied for distributed storage capacity. Green hydrogen will also play an increasingly important role in decarbonising industry and could potentially replace diesel in heavy duty transportation. If the cost of green hydrogen falls, it could potentially become a substitute for gas-fired power plants because it’s storable, transportable and climate-friendly. We’re also following developments in sustainable fuels with interest. Increased ambition in aviation and industry could see these fuels take off in the next five years.

How does Alpiq contribute to flexibility in the energy system?

In Switzerland, we already offer a large volume of renewable flexibility capacities. We can react swiftly to changes in the energy system thanks to our powerful Nant de Drance and FMHL pump-storage plants. However, for us to unleash our full potential, it’s important that Switzerland remains integrated in the European electricity market. That’s why we support talks between Switzerland and the EU to reach an agreement in this regard. When it comes to hydrogen, we at Alpiq are pioneers in Switzerland. We’ve been producing green hydrogen for more than four years now to power a fleet of around 50 hydrogen trucks. Alpiq’s highly flexible gas power plants in Italy, Spain and Hungary also contribute to security of supply in their respective markets. Although they were originally built to deliver base load, Alpiq has invested in making these plants highly flexible by increasing the speed at which they can be deployed. This makes it possible to have frequent starts and stops, fewer running hours, and therefore meet the needs in the local electricity system.

You mentioned CCGTs – are those not harmful in terms of climate impact?

I disagree. In markets that don’t have an abundance of flexible hydropower, gas-fired generation is a bridging technology that enables the integration of intermittent renewables and paves the way for the energy transition. Looking at their operating pattern, we see two clear trends: fewer running hours and more frequent starts and stops of these plants. It’s precisely this flexibility that allows more wind and solar to be integrated into the energy system. Of course, we could sell them to improve our carbon footprint as a company, but then they’d just be run by someone else. Instead, our aim is to be the best owner for our gas-fired power plant assets by operating them as cleanly, efficiently and flexibly as possible and in this way improving the security of supply in the energy system. 

You said flexibility will become more important for Alpiq. Does that involve growth through acquisitions?

We’re screening the market and actively seeking opportunities that will increase our flexibility in Switzerland and other European markets. Every country is different and so are its needs. We’re currently prioritising opportunities to grow our presence in flexibility through battery storage, for example. Providing portfolio management services to third parties is also a natural role for Alpiq. We’ll build on our market capability and expertise in the management of our flexible assets to provide solutions to wind and solar generators and to owners of battery storage. In addition, we’re exploring opportunities for flexible hydropower in the markets where we operate. Alpiq’s expertise in hydropower – especially pumped hydropower – is widely recognised thanks to Nant de Drance. Partnerships with local developers and investors could be an interesting way to deploy this expertise. 

What about building up a larger renewable energy portfolio?

Alpiq plays a number of different roles. When it comes to wind and solar, we’re the integrator – our strength is in flexible generation. We have a number of intermittent wind and solar parks but, with the exception of our photovoltaics plants in the Swiss Alps to bridge the winter gap, we don’t plan to invest further in greenfield renewables. Instead, we build on our core competence and will increasingly support the integration of renewables by using our existing flexible assets and by building and investing in new flexibility combined with trading and origination. We believe that these are the areas that will be increasingly important in achieving the energy transition.