swissgrid AG: An efficient grid for the future

Last year, Swissgrid operated the electricity grid safely and without interruption despite strong volatility in electricity flow. While the transmitted energy volume was reduced by about 2%, the situation in the transmission grid nevertheless remained tense at times. Grid bottlenecks occurred regularly, primarily on cold winter nights and hot summer days. As a result, Swissgrid had to repeatedly restrict production of electricity with hydropower in the Alps and the energy exchange outside of Switzerland.

The existing congestions need to be removed as quickly as possible and the grid modernised. For this purpose, eight urgent grid expansion programmes will be implemented over the next few years. In order to be able to complete these projects on time, Swissgrid is dependent on a massiveacceleration of the approval process. This is generally accepted by authorities and politicians. The Swiss Federal Office of Energy (SFOE) has therefore devised measures as part of the Power Grid Strategy in order to accelerate the process. However, Swissgrid does not view these measures as sufficient, and has therefore submitted its own suggestions which call for a definition of the corridor and of the technology already in the Sectorial plan. After the Sectorial plan, a new step will be included with the Federal Administrative Court rendering a binding decision on the continuation of the project. The Planning approval procedure for detailed project planning will follow, at the end of which come a building permit will be delivered. The Federal Administrative Court will again provide a ruling in the case of any objections. As is customary in other areas, an appeal to the Federal Supreme Court of Switzerland will no longer be possible. The additional appeal opportunity in theSectoral Plan process will guarantee that the legal options for those affected remain on two levels. Another proposal is to define maximum limits for the procedures. This includes the rule that a project is considered accepted if an authority is not taking position within a specific time period.

Swissgrid's goal with these measures is to shorten the duration of the process to maximum six years. Until now, the approval procedures lasted from nine to twelve years, even in the fastestcases. In fact, as much as 30 years is often required for project completion as the result of opposition and federal court rulings in a late phase. With such slow processes, the long-term security of supply is not guaranteed, especially as the grid has already reached the limits of its capacity.

With regard to the Energy transition, Swissgrid plans therefore the Network 2035, in addition to the eight urgent network expansion programs. Based on various energy scenarios, Swissgrid simulatestogether with the SFOE the necessary networks, identifies future bottlenecks and defines expansion and modernisation measures.

Partial underground cabling is planned in the transmission grid for the first time
The public often demands that extra high voltage lines be laid underground. For the first time ever in Switzerland, Swissgrid is starting the Planning approval procedure this year for the partial underground cabling of an extra high voltage line. The project involves the underground installation of an approximately one-and-a-half-kilometre section of the 380 kV line from Beznau to Birr (Canton Argovia). The project will show how and under which conditions the power grid can be operated safely and efficiently using this technology. The public and interested groups will be provided with comprehensive information on an on-going basis.

In the course of the next years, Swissgrid aims to standardise and automate operational processes of various large projects. Many of the 130 switching substations in Switzerland continue to be operated locally. In the future, all switching substations will be able to be managed centrally from Laufenburg. The new communications system builds upon Swissgrid's own fibre- optic network, which is located in the wire at the top of the electricity pylon. All switching substations will be managed in the medium-term via this fibre-optic network. In so doing, the grid will be structured in order that every station is controllable from at least two sides – for even more secure and efficient grid operation.

Increased tariffs in the future
After several years of lower tariffs, there are signs of reversal of this trend with tariffs moving upward again. The reasons for this are the urgently needed investments in the grid, as well as various Federal court decisions. Thus, Swissgrid must reimburse the costs of ancillary services to power plant operators in accordance with the latest Federal court ruling; in 2009 Swissgrid had to absorb such costs following a decision by EICom. Altogether, the proportion of the electricity costs of an average household with annual consumption of 4500 kWh, accounted for by Swissgrid’s transmission grid, will increase next year by CHF 20, from CHF 42 to CHF 62 or from 5% to about 7%.

Tariff-related revenue decline
Around 80% of Swissgrid's revenues consist of tariff income. The tariffs for the three most important segments, namely “Grid usage”, “General ancillary services” and ”Individual ancillary services active power losses”, were down in comparison with the previous year's figure. The decrease of net revenue by 24% to CHF 759.7 million is therefore a success for Swissgrid, because the reasons for this are mainly the reduction in tariffs and lower costs. The energy volumes that were charged also stagnated in 2012. The end consumer volume only increased 0.2% to 57.7 TWh year-on-years.

Swissgrid's operating result (EBIT) is based on invested assets necessary for operations (Regulated Asset Base/RAB), multiplied by the weighted average cost of capital (WACC) of 4.14% in 2012. EBIT increased slightly from the previous year's figure of CHF 12.7 million to CHF 13.3 million. This increase is primarily a consequence of the various on-going investment projects and the associated rise in allowable non-current assets. Net income of CHF 9.8 million is at the previous year's level.

Financial forecas
In particular, the balance sheet as well as the operational result and net income will no longer be comparable with the previous year's figures starting the financial year 2013. This is due to the transfer of the Swiss transmission grid, which will raise to more than CHF 2 billion the total assets and as a consequence the balance sheet. This is accompanied by an increase in the Regulated Asset Base (RAB), which will lead to a multiplication of the operational results as well as of the net income. In the years after 2013, higher results are, ceteris paribus, assumed, because the RAB will increase caused by continued network investments. The revision of WACC calculation will tend tolead to a higher cost of capital.

Media Contact:
Swissgrid Media Service Dammstrasse 3 P.O. Box 22 5070 Frick media@swissgrid.ch www.swissgrid.ch Phone 058 580 24 00 Fax 058 580 24 94

Editor's note: Image rights belong to the respective publisher.