In the news: Interview with Roland Dörig on the energy crisis

Energy prices explode: “The electricity bill can quickly become almost as expensive as the cost of rent.”

In the news: Interview with Roland Dörig on the energy crisis

Roland Dörig invests billions in energy infrastructure on behalf of pension funds. What happens when Putin turns off the gas tap? How will electricity prices develop? And what is going wrong in energy policy? The co-founder of Energy Infrastructure Partners speaks plainly.

By Rolf Cavalli and Patrik Müller

Originally published on July 20, 2022 by CH Media.
Download the original article (in German).

Shortly after the war began, you painted a bleak picture in a background interview with us. You said that without Russian gas, the European economy was threatened with collapse. How do you see the situation today?

Roland Dörig: Unfortunately, it has come true: Western Europe cannot do without Russian gas for the time being.

At the time, we were discussing whether the West should boycott Putin’s gas. Now, conversely, we fear that Putin will cut off our gas.

In my view, this was not a serious discussion at the time, but rather an emotional reaction to Putin’s war of aggression. Because not buying any more gas from Russia at all would not have been feasible in the short to medium term, both for the economy and for the population.

The Germans were more reticent from the outset with demands for a gas boycott.

Of course, Russian gas has been a particularly important energy source for Germany for decades, especially since most of the nuclear power plants there were taken off the grid without replacement. Ironically, a green economy minister there has now, of all people, brought coal-fired power plants back into play in an emergency exercise and tried to organize liquefied gas from Qatar.

Do we have to throw green resolutions and climate targets overboard?

I’ll have to backtrack briefly on this: At the turn of the millennium, the electricity market was liberalized and, at the same time, decarbonization was declared the central issue in Europe. Politicians have subsequently promoted the expansion of electricity production from wind and solar power with hundreds of billions of euros in subsidies…

…which depressed prices.

The rapid expansion of these heavily subsidized production facilities led to a massive drop in the price of electricity from non-subsidized generation. As a result, existing electricity production – for example, also from our domestic hydropower – no longer even covered its costs in economic terms for many years, even though it was necessary for security of supply.

Did this lead to price distortions?

Yes, and this led to a situation where not enough has been invested in the European energy infrastructure over the last 10 to 20 years. We have a lot of catching up to do! To come back to your specific question: No, we must not throw ecological goals overboard. But a viable energy supply must also be economical, i.e. affordable – and above all: secure!

At present, however, security of supply is given much higher priority than ecology.

Because we have not paid any attention to security of supply in the last 20 years. We have lived on the substance. Now this omission is catching up with us. Without security of supply, there can be no decarbonization and no affordable energy supply. The bad thing: We are actually emitting more CO2 worldwide today than ever before.

What went wrong?

Unfortunately, the ecological transformation was approached in a planned economy. Individual technologies were promoted instead of the overall system required for this. This forced all other technologies out of the market, even though wind and solar power require reserve capacity and sophisticated grid infrastructure. Gas-fired power plants, for example, didn’t stand a chance, even though they were needed.

But you are investing on a grand scale.

Yes, that’s precisely why we have specialized exclusively in the energy sector. We invest for our clients in supply-critical and ecological energy infrastructure assets – with a conservative, even boring investment strategy. The basic idea: The Swiss population invests in its own energy supply via pension funds. In this way, they can secure this and at the same time generate a contribution to their own pension.

How have these investments performed in the current price turbulence?

Excellent, of course. We invest in plants that are in short supply. And not for the next winter or the one after that, but for the next decades. Electrification is advancing and we will have a much higher demand for electricity in the near future; yet we already have too little electricity today.

Where should Switzerland expand?

In Europe and worldwide, we are investing primarily in wind and solar energy. In Switzerland, the focus is on hydropower and – very importantly – the transport and distribution of energy. The expansion of the grids and more flexibility in electricity production are becoming important. If there is too little sun or wind, it must be possible to tap other energy sources accordingly. That’s why energy storage is also central.

Under decarbonization, there would also be room for nuclear energy…

…yes, but from our point of view that is only a long-term option. We have an energy supply problem in the short and medium term. It may be 20 to 25 years before we have the first megawatt hour from a new nuclear power plant. By then, however, we must have solved the energy problem long ago.

Switzerland has been pursuing an import strategy since the energy policy introduced by Doris Leuthard. Is that still the right focus in times of Putin?

It wasn’t right before. It relied on renewable energies with very sporting assumptions that are now proving to be unrealistic, and simply relied on electricity imports for the rest. That has always been the Achilles’ heel of this strategy.

Is it realistic to supply Switzerland with electricity without imports in the long term?

No, but Switzerland definitely needs to become much more independent. We have to use everything that is renewable. In Switzerland, this is primarily hydropower, which still offers great potential for expansion.

Shortly before the war, Federal Councillor Sommaruga announced gas-fired power plants for 2025. Is that good or already outdated?

A broad portfolio of energy sources is important. For the time being, this also includes gas-fired power plants. But first and foremost, as I said, is hydropower, which we absolutely have to expand.

What can be done in the short term so that we don’t freeze next winter or the winter after that?

You’re putting me on the spot here. I only see the principle of hope. Hope for a warm winter, hope for an easing of tensions in Ukraine, hope that Nordstream 1 will come back online. Nevertheless, it is essential to make an unsparing analysis now and to derive measures.

In addition to the hope principle, there is also the deal principle: Ems leader Magdalena Martullo-Blocher is calling for peace negotiations with Putin to ensure that Russian gas continues to flow.

This is a political question. If you look at it in isolation in terms of security of supply, you would have to seek such a deal, because it is a fact that fossil energy from Russia cannot be completely replaced in the short term. But there are, of course, other aspects than security of supply. Politicians have to make this trade-off.

According to the federal government’s emergency concept, if bottlenecks were to occur in winter, large companies would first have to forego energy and shut down factories, and only then would households have to bleed. Does this prioritization make sense?

It depends on how long the shortage lasts. If it only lasts a few days, industry could probably bridge the bottlenecks best. But if you assume a long period, six months or even a year, that’s not nearly enough. The emergency concept is not designed for this. It works, for example, in the case of accidents like the one in Italy when a branch fell on a neuralgic line and the power failed there for a day. But not in the case of longer interruptions.

If gas stops flowing, this affects not only industry and households that heat with gas, but also everyone who needs electricity. This is because Switzerland imports a lot of electrical energy during the winter months, which comes from European gas-fired power plants…

That’s right, and there is far too little awareness of this in Switzerland. Because we don’t produce any electricity from gas ourselves. At least until now. Switzerland’s dependence on gas is completely underestimated in public opinion. The existence of the chemical industry would be threatened if supplies were to stop.

Russia has already cut back on supplies, with the result that energy prices have risen sharply.

Yes, and not just for gas from Russia, but also – and massively – for electricity. And because one disaster rarely comes alone: In France, about half of the nuclear power plants have been at a standstill for several months due to unplanned maintenance work – a megawatt hour there costs about 2,000 euros on average during the day – i.e. peak load – if you buy it today for November. The normal price is less than 100 euros.

Can that be? That the price has gone up 20 times?

These are the prices currently in force. Just imagine what that means for a household’s electricity bill. It can quickly become almost as expensive as the rent for an apartment. The situation is dramatic for industry: no car can be manufactured competitively in France at these energy costs. No industry can be sustained in Europe under these conditions, since energy is many times cheaper in Asia and North America.

For your understanding, the electricity price for November that you mentioned – is that a forecast?

No, these are the prices currently in effect. If a company buys electricity today, it currently pays 2000 euros for every hour in November instead of the usual 100 euros.

Why should I buy electricity now for these exorbitant prices?

Because you don’t know whether you will pay 5000 euros for it in October instead of 2000.

It’s like mortgage interest rates: you hedge for the long term?

Yes. Let’s take a look at the prices in Germany: There, we’re at about 650 euros per megawatt hour for November, and over 700 francs in Switzerland. These are average values for the fourth quarter.

So in Switzerland it’s about ten times more than usual?

Yes, that is correct as an order of magnitude. The accelerated expansion of renewables described above has resulted in increasingly low prices for electricity in recent years. As a result, the expansion of other types of generation became unattractive and was neglected. This is now having double revenge.

So in the fall and winter, Swiss electricity consumers will receive massively higher electricity bills.

Yes, but it will vary from utility to utility because they have different procurement and hedging strategies for electricity. There could be huge differences.

Then you don’t have to move to another canton or city for tax reasons, but for energy cost reasons….

That’s an exaggerated way of putting it, but it’s a new situation that we’ll have to adjust to.

With these enormous prices, many households will no longer be able to pay the bills. Should the state step in – as it did with the Corona hardship cases?

That, too, is a political question. It is important that the public sector does not make the mistake of directly influencing the price of electricity. That’s what Italy has done. Then no company invests in long-term electricity production and infrastructure. The most important thing that politicians should do is this: Create reliable framework conditions so that companies and investors invest in the energy sector for the long term. This is the only way we can achieve security of supply and decarbonization at the same time at a sustainable cost.


This document does not constitute individual investment advice and does not release the recipient from making its own assessment with respect to an investment. The recipient must not take any investment decisions solely based on the information contained in this document and shall, if necessary or appropriate in consultation with external advisers, assess the information based on the recipient’s individual circumstances in terms of suitability and appropriateness and any legal, regulatory, tax, accounting or other consequences such an investment may have.

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