Schweizer Personalvorsorge: Energy infrastructure assets as a historic investment opportunity

This article was originally published in German in the April 2023 edition of the Schweizer Personalvorsorge.

The energy crisis is a major issue not only in Switzerland, but also globally. Beat Goetz, Global Head of Client Solutions at Energy Infrastructure Partners (EIP), explains why investments in energy infrastructure are worthwhile.


Ensuring supply security is a high priority and is currently on everyone’s minds. What does this mean for pension funds?

Beat Goetz: Pension funds are the main retirement provision pillar: They represent the most important source of income for the vast majority of current and future pensioners. Due to the long-term nature of their obligations, pension funds also have a very long investment horizon, which in principle corresponds to the longevity of energy infrastructure assets. The holistic transformation and expansion of the energy sector while reducing CO2 emissions and simultaneously ensuring energy supply security is a major challenge. The current energy crisis has its origins not only in the Ukraine war, but is also due to lack of investment over the preceding decades. This has resulted in an enormous need for investment today, offering institutional investors the opportunity to contribute to the security of energy supply with long-term investments in energy infrastructure and at the same time to generate stable, partially regulated and inflation-protected returns. In Switzerland alone, the Swiss Federal Office of Energy anticipates an investment requirement of at least 1.5 trillion Swiss francs by 2050. The global need for investment in the holistic conversion and expansion of the energy sector is many times higher.

You are addressing inflation protection. Rising inflation and the associated measures taken by the central banks are putting the markets under pressure. How does energy infrastructure behave in this environment?

Beat Goetz: Thanks to their macroeconomic importance, investments in energy infrastructure tend to be more robust to economic downturns and therefore less exposed to market fluctuations than other asset classes. As the backbone of modern economies, energy infrastructure is systemically relevant and therefore has increased resilience in crises. We have observed these outstanding characteristics in our investments during the Corona pandemic as well the current energy crisis. In addition, the returns from energy infrastructure are often secured via long-term contracts or regulatory regimes, and in some cases are directly or indirectly linked to the development of inflation. For investors, this generally leads to regular, stable real returns with good predictability.

Energy infrastructure is a complex asset class that requires substantial investment sums. How can institutional investors participate in this megatrend without cluster risks?

Beat Goetz: In view of the enormous investment requirements for the conversion and renewal of energy infrastructure, we have developed a global investment solution together with Credit Suisse Investment Foundation. Geographically, the solution is centered on Europe and OECD countries with a correspondingly high ESG rating. The focus is on the subsectors of renewable energy, energy transmission and distribution, system flexibility and energy storage. These 4 sub-sectors have low correlation with each other and also have low correlation with other infrastructure sectors and other asset classes. This gives investors access to a geographically and technologically broadly diversified investment universe. Diversification must also be required in this asset class. Due to the complexity of infrastructure investments, it is generally advisable to work with sector specialists who focus exclusively on the energy market.

What role does sustainability play in investments in energy infrastructure?

Beat Goetz: Environmental and social responsibility is a key factor for successful investments in energy infrastructure. Together with our investors, we contribute to the holistic transformation and expansion of the energy sector. Institutional investors can play an important role in this by contributing to positive economic and social development, the population’s retirement provision and energy security, and a future with lower CO2 emissions. The impact is tangible: Investments made on behalf of our customers will produce enough renewable energy to power 1.5 million homes over the next 25 years. Moreover, energy infrastructure is a broadly diversified and resilient sector that spans a variety of business models, technologies, and geographic regions with different regulatory regimes. Yet these assets have one thing in common: Their critical role in today’s and tomorrow’s economy and society, now more than ever.


Beat Goetz is Global Head of Client Solutions at Energy Infrastructure Partners (EIP). The company is a Swiss collective asset manager with over CHF 5 billion in assets under management, specializing in long-term direct investments in high-value, renewable and system-critical energy infrastructure assets.


St. Gallen Business Review: Investing in the Infrastructure Asset Class

For the original publication, click here.

In the past year, the energy markets were faced with many unprecedented challenges. At Energy Infrastructure Partners, you have been dealing with critical infrastructure since 2014. In your eyes, what market conditions have led to the current situation?

This question is exciting. Many people think that the reason for the problems in the energy markets is the war in Ukraine. But we don’t believe that the explanation is that simple – the causes lie much deeper. We see the war in Ukraine less as a cause and more as a trigger. The war itself started at a time when the situation in the energy markets was already very tense. Let me give you an example: At that time, about half of France’s nuclear fleet was undergoing an overhaul, which also lasted longer than originally planned. The fact that this refurbishment then coincided with the onset of the war was of course very unfortunate, especially since the overhaul of the nuclear power plants had already reduced the amount of electricity fed into the European energy grid – and now the flow of gas from Russia to Europe was also being throttled. The market reacted very sensitively to this. Of course, the fact that in the past the focus of the expansion and restructuring of the energy system was primarily on decarbonization, and less on the security of supply, also contributed to this.

Very interesting perspective! In the meantime, some of the problems you mentioned have been partially resolved – in France, for example. However, it doesn’t seem that energy prices have largely returned to normal. What is the reason for this?

Currently, seven nuclear power plants in France are still disconnected from the grid. That is one factor. Another factor is that missing Russian gas has to be replaced by substitutes. Any substitute for Russian gas is more expensive than the Russian gas itself. As the gas is then converted into electricity, the electricity becomes correspondingly more expensive. This is because a so-called merit order model is followed in the electricity market. Here, power plant capacities are ordered according to increasing marginal costs. Pricing is then determined by the power plant with the highest marginal costs that are just needed to meet market demand. Due to the general shortage of energy, gas-fired power plants in Europe are usually the power plants that are just needed to meet the demand for electricity. As a result, they act as price-setters, also for all other forms of energy.

So when people ask how long it will be before we get back to pre-crisis electricity prices, the unfortunate answer is: it won’t happen that quickly. As long as any substitute for Russian gas is more expensive than Russian gas itself, electricity prices will remain high.

Certain substitutes for Russian gas are likely to become available relatively quickly. This attempt to find substitutes for the lack of gas from Russia as quickly as possible could perhaps also negatively affect investments in renewable energy sources. Do you share this fear?

I also believe that appropriate substitutes will be available quickly, whereas investments in sustainable energy sources, which may even be much cheaper in the long term, cannot be implemented as fast. The construction of LNG terminals in Germany proves exactly that. Such constructions, which today take less than 10 months, would probably not even have been completed in 10 years before the current crisis. The expansion of renewable energies, on the other hand, continues to be very time-consuming due to lengthy approval procedures, even though renewables could be built quite quickly compared to conventional energy producers.

By expanding renewables faster, close to the consumer, we can not only reduce our CO2 emissions but also increase our security of supply from a geopolitical perspective.

We will come back to the issue of sustainability later. But to stay briefly on the subject of supply security and current market conditions, do you see any likelihood of simplifying and accelerating planning and approval procedures for sustainable energy sources as in the case of LNG terminals?

At the very least, we can observe an effort on the part of politicians to do just that in many countries. Switzerland is a good example of this, but we are also seeing something similar in other European countries, such as France. Personally, I would argue that the current environment must also be understood as a favorable environment for the restructuring of our energy system. This also involves questions of decentralizing and restructuring the power grids, which have so far been designed inflexibly and built mainly for large centralized plants. Finally, it is not only a question of generating energy, but also of distributing it in a sensible manner. All of this leads to an enormous need for investment. Fortunately, we are seeing the appropriate political will in this regard.

Very exciting! Let’s move on to another topic. With your company Energy Infrastructure Partners, your original goal was to make renewable energies investable as well. You have made many investments in this area since then. What is your next goal?

In the beginning, we wanted to make energy infrastructure investable for the Swiss population via insurance companies and pension funds. We have continued to grow from the inside out over the years since we were founded. Even during our early days, we were asked why we only invest in energy infrastructure. It was always clear to us that energy infrastructure is a defensive sector in the infrastructure asset class, which also has enormous economic significance. That’s why we want to focus precisely on this, which means that we can only grow by expanding our geographical scope. This is exactly what we have done, for example, with a fund set up solely for foreign investments. At the moment, we have an office in Luxembourg in addition to our office in Zurich. We are currently setting up an office in Germany. After that, we want to grow outside Europe with locations in the USA and Asia.

One region you did not mention is Latin America. Enormous infrastructure investments are particularly needed there. Why is Latin America not a priority for you?

As you correctly said, Latin America is not a priority for us. We have applied a very strict filter when selecting the regions in which we currently want to invest. We want to invest primarily in areas where we expect stable conditions in the long term. Criteria in the selection process include, for example, an investment grade rating of the relevant countries and an MSCI ESG Government Rating of at least BBB at the time of investment. In addition, the countries must be members of the OECD. These three filters eliminate a large number of countries: In Latin America, this leaves only Chile, which is not our focus.

Instead, we want to focus outside Europe on countries such as South Korea, Japan, Australia, and New Zealand. In such countries, we find an appropriately high level of legal certainty. Since we have a long-term horizon, this is particularly important to us. We also find such an environment in the USA. The Infrastructure Investment and Jobs Act was only recently passed, which provides for enormous investments in energy infrastructure as well. In such a market, we want to be all the more present.

In private equity, the usual investment horizon is around seven years. Is it at all possible to realize such an investment horizon with investments in energy infrastructure, that is, to sell the investment again after seven years?

You raise an interesting point. Our primary objective is not to generate capital gains, but to reap cash flows over the long term. That’s why when we started Energy Infrastructure Partners, we always said that the typical private equity investment horizons are much too short for this. Even for solar plants, we are speaking of an investment horizon between 25 and 35 years. For hydropower, this is between 40 and 80 years.

Many utilities have also realized over the last few years that there are different types of financial partners with different investment horizons. We have stated from the onset that we want to invest for the very, very long term. That’s why, on the one hand, we have set up vehicles that have an open investment horizon, so-called open-end structures. On the other hand, we have also set up closed-end structures, which are investment structures with a defined investment horizon, in our case usually over 25 years. With such structures, we have great advantages when sourcing investment opportunities. This is particularly the case when it comes to working with the public sector, but we are also much more attractive for industrial partners because we think very long-term.

Let’s leave aside pension funds as limited partners in your funds for the moment. Looking towards international investors who usually do not expect an exit after 25 years, have you seen a similar shift towards longer investment horizons in recent years?

What we are indeed seeing is a growing interest in long-term investment vehicles that harvest cash flows over many years. Aside from pension funds, insurance companies and sovereign wealth funds are particularly interested in these long investment horizons. Family offices are also showing growing interest. We have also noticed that limited partners that invest in products with a shorter term of ten years, for example, often reinvest the money in the same asset class after the cash-out. However, an investment always involves costs, for example for lawyers or advisors. Thus, many have come to the realization that investing over longer investment horizons can be more cost-effective in this aspect.

The term has a negative connotation, but that would make Energy Infrastructure Partners comparable to an energy conglomerate, wouldn’t it?

We prefer to talk about a balanced, diversifying portfolio. But the main value for us is in the ongoing cash flows.

You are acting as a private investor in often critical infrastructure. In this respect, there is usually sufficient public interest and much of the infrastructure is already highly regulated. Do you see a conflict between aspects of market freedom and public interest?

I believe that private operators and the public hand should ultimately work together closely: That’s where the solution lies. The private sector is usually very good at accumulating capital and then moving it to the right places. The biggest contribution that the public sector can make is to provide a stable framework for the long term, so that uncertainty on the part of investors can be prevented. Stable conditions help to reduce volatility, i.e. risk, which in turn reduces risk premiums. Ultimately, this also reduces the cost of capital, which makes infrastructure investments more favorable overall. This observation applies to both equity and debt. The bottom line is that this is also beneficial for consumers, as it means that infrastructure can be operated more efficiently and at a lower cost. This, in turn, should actually also be in the interest of politicians.

In the last issue on the topic of aspiration, we also spoke with Mirjam Staub-Bisang, the Country Manager of BlackRock in Switzerland. One interesting statement she made was that it is also important to invest in assets that are not yet sustainable from the outset, in order to make them sustainable step by step. Some dirty assets are not going to disappear just because more and more investors are following clear sustainability guidelines. Does investing in previously environmentally unfriendly assets for the purpose of transformation also represent one of your approaches?

We certainly see these opportunities, although it must be said that we would never invest directly in coal or oil ourselves – that is also a risk consideration. But what I would say is that gas, in particular, has a right to exist in a transition phase. Presently, we would not be able to keep the energy system stable enough with renewables alone. At any given time, as much electricity must be fed into the power grid as is being withdrawn at the same time. If this is not the case, then the entire power grid becomes unstable and endangers the security of supply. Renewables alone cannot generate a secure baseload due to the volatility of wind and sunshine. To stabilize the supply situation, we, therefore, need pumped-storage and gas-fired power plants, for example, which can be connected to the grid very quickly to compensate for any lulls in renewables at peak load times. That’s why gas-fired power plants currently have their raison d’être. Interestingly, the gas transport infrastructure could also be reused for the transport of hydrogen. So there is a lot of potential in this area, even in the long term.

But not all that glitters is gold, and not everything that appears green is green. In Brazil, for example, there are hydroelectric dams that emit enormous amounts of methane through the decay of organic materials at the bottom of the reservoirs, which is around 25 times more harmful to the climate than the greenhouse gas CO2. Researchers estimate that the climate damage of such dams per kilowatt-hour of electricity is up to 40 times that of a kilowatt-hour produced by a coal-fired power plant. How are such climate dangers, some of which are not obvious, dealt with?

I can only speak for us on this issue. ESG is a very important and present issue. That means environmental, social, and governance issues. We even have a separate Investment Committee that initially reviews investments solely on the basis of these criteria. Only when the investment has been approved by this committee, it can move forward to the regular investment committee. Concerns such as the one you raised would, of course, be closely scrutinized. I am not a biologist, but I would imagine that these kinds of problems are also strongly related to where the dam in question is located in the first place and how much organic material is stored at the bottom of the lake.

You recently invested in Repsol Renovables, the sustainable subsidiary of the oil company Repsol. Other fossil fuel companies have also established subsidiaries focused on sustainable energy production in recent years. In the future, should more of these corporations partner with investors who already have experience in this area?

It’s exciting for industry partners to work with sector specialists like us. By selling minority stakes, companies increase their liquidity without relinquishing control. In the end, however, they have the choice of which partner to go with. That’s where it’s up to us to convince. We can do this through our expertise in sustainable energies and supply-critical energy infrastructure, as well as through our long time horizon of 25 to 30 years. With our know-how, we then help to move the company forward in the longer term.

Will such partnerships become even more important for you in the future?

Partnering with industrial companies is in our DNA. From the very beginning, we wanted to invest with industrial partners. The fact that we started working on this topic before everyone was talking about it helps us today, of course. For us, this idea also made sense at the time for risk considerations.

One might think that it is difficult for you to get new capital for investment at the moment, as infrastructure investments are very highly valued in asset managers’ portfolios. Excessive exposure to a market is usually avoided in order to minimize risks. Do you currently feel this?

It’s more that other asset classes have corrected, and infrastructure is overweighted among some investors as a result. However, we have talked about the huge need for investment. Along with other factors, this has a positive impact on expected returns and provides an incentive for investors to continue investing in the sector.

Is it perhaps also because institutional investors are paying more attention to ESG criteria and therefore want to invest specifically in sustainable energy infrastructure?

Definitely; this is a huge topic. In Switzerland, but also in the EU with the taxonomy, it is very relevant. You can’t really launch an investment vehicle anymore without taking ESG factors into consideration. But it also makes sense from a business perspective – after all, risks and opportunities are considered. I want to avoid risks as much as possible, and I want to realize opportunities. So it’s essential to consider issues like climate change, precipitation patterns, or similar factors. For us, this is also a part of the investment process that we look at closely.

You are not only stewards but also operators of critical infrastructure. Recently, we have seen more and more cyber attacks on infrastructure units. How do you plan to deal with this problem in the future and what precautions are you taking?

During my time at St. Gallen, I majored in information management and thus have a high affinity for this field. Especially in recent years, the explosiveness of this topic has increased greatly. In the past, you had to physically go into a plant to do damage. Since power plants have been digitized and connected to the grid, new protective measures must be taken. For us, in concrete terms, this means making even more frequent queries of security systems and taking appropriate measures to protect ourselves against such cyberattacks.

You just mentioned that in the past you had to physically go into facilities to do damage. The events surrounding the damage to the Nord Stream pipelines also point to physical sabotage. Does this mean that problems from the past are becoming topical again?

As a private-sector company, we do everything we can to ensure the physical protection of infrastructure units. However, when it comes to territorial integrity, this is fundamentally the responsibility of the state. The state must ensure that the population and, in particular, supply-critical infrastructure are protected. Politicians are very aware of this task. In this context, we try to minimize our risk through diversification and draw up plans to be prepared in a worst-case scenario and to minimize the damage. I also come back to what I said about the countries in which we invest. These already meet high-security standards.

In theory, it could be assumed that investments in Nordic areas should receive a higher risk premium due to the threat from Russia. Can this be seen in the market?

That is an interesting thought. So far, we haven’t observed this, which is probably due to the political stability and the strong military defense of these countries.

Leaving behind the many crises we’ve spoken about, what advice would you give to students who want to get to grips more intensively with the subject of infrastructure investing?

I can recommend reading a lot and doing internships. I think there are two clear reasons to be interested in infrastructure investment. On the one hand, you can invest pension funds’ money and contribute to beneficiaries having a better pension. On the other hand, you can participate in a transformation that moves our society forward. Overall, there is probably no other area that is as relevant to the national economy as the energy supply. During Covid, we saw that there was always an attempt to maintain the operation of necessary infrastructure, including by politicians.

To conclude: What gives you personal hope these days?

First and foremost, it’s the team that we work with. When I come into the office in the morning, there are 90 highly motivated specialists working every day on issues relating to investments in energy infrastructure. Working with employees from 26 countries every day never ceases to excite and motivate me. On the other hand, of course, it motivates me to see the impact we have through our work. Currently, our portfolio could supply the equivalent of half of all Swiss households with sustainable electricity.

Investments in Hydrogen: What Switzerland has to contribute and gain — NZZ Nachhaltig Investieren 

Around 15 percent of carbon dioxide emissions cannot simply be eliminated by clean energy. That’s where hydrogen, the Swiss Army knife of the energy transition, steps in.

The classic answer to solving the energy transition seems obvious: By powering everything with green electricity, harmful carbon dioxide emissions disappear. Sounds simple – but there’s a catch.

Torsten Kowalski and Beat Goetz

Originally published on 2 December within the NZZ’s December 2022 issue of “Nachhaltig Investieren.”
Download the original article (in German) or read it online.

According to Columbia University’s School of Climate Research, around 15 percent of carbon dioxide emissions cannot simply be eliminated by clean energy. That’s where hydrogen, the Swiss Army knife of the energy transition, steps in.

Like a versatile Swiss Army knife, hydrogen can be used in a variety of ways to significantly reduce remaining carbon dioxide emissions – but the possible use of hydrogen must be carefully weighed for each application. “You could change the tire on your bicycle with a Swiss Army knife, but you wouldn’t. There is always something cheaper, safer and easier,” says Michael Liebreich, founder of Bloomberg New Energy Finance and an expert on the energy transition. That’s because hydrogen has a weak point: If hydrogen is produced from green electricity, up to a third of the energy used is lost. The same occurs if the energy stored in the hydrogen is used to create electricity in a power plant.

Yet the flexibility and dynamics of hydrogen are unique and make it particularly valuable as a means of storing and transporting energy. From the margarine on your breakfast table, to the chemicals in your car, to the plastic bag at the supermarket – you can’t do anything without the hydrogen molecule. Its primary use is in industrial applications, where greenhouse gas emissions cannot be eliminated even by green power. This group of use cases includes fertilizer manufacturing, steel production and dozens of other industrial processes that cannot be electrified.

New infrastructure for the energy transition

Many advanced economies have made progress by adding renewable generation sources to their energy mix, integrating wind farms and solar power plants into existing infrastructure. To achieve the same with hydrogen, the infrastructure for its production, transport and application must simultaneously be developed or retrofitted. That requires investors – and the investment requirements are high.

According to the “Hydrogen4EU” study conducted by Deloitte, up to 5.5 trillion euros will be needed over the next 30 years – or the equivalent of seven times Switzerland’s annual economic output. This figure includes the cost of repurposing existing infrastructure, like natural gas pipelines, which will be much more cost efficient than developing new infrastructure from the ground up.

Energy Infrastructure Partners (EIP) was founded in 2014 with the aim of helping to shape the future of the global energy sector. Since then, the Zurich-based company has been investing over the long term on behalf of clients into high-quality, large-scale renewable energy infrastructure such as wind farms and solar and hydropower plants. The company also focuses on energy transport assets such as power grids and pipelines, infrastructure that today transports natural gas but could be converted in the near future to transport hydrogen.

Supplying Europe with hydrogen

Just a few weeks ago, EIP signed an agreement to participate in the Belgian gas transmission system operator Fluxys on behalf of its clients. Fluxys’ 12,000-kilometer network connects Europe’s core regions and is also linked to import routes from Asia via Greece.

Fluxys is also preparing for a post-fossil fuels future. However, “it is not yet possible to say today what the future will look like in 30 years,” says Fluxys CEO Pascal De Buck. “What is needed is a combination of different solutions, including hydrogen.” The pipeline network will play a key role. An analysis by the industry association Hydrogen Council in collaboration with McKinsey & Company predicts that 60 percent of hydrogen and hydrogen derivative consumption will be imported over long distances in the future. Countries with a bountiful supply of sunlight that can be used for solar power in southern Europe, and even in North Africa and the Middle East, could deliver green hydrogen at low cost across Europe. Therefore, the ability to import and transport hydrogen across Europe would become invaluable within the next decades.

Switzerland’s early involvement

EIP is also heavily committed at home in Switzerland. As portfolio manager for a Swiss investment group in which a significant number of Swiss pension funds participate, the company manages a large stake in energy company Alpiq, which makes an important contribution to Switzerland’s security of supply. Alpiq has also driven the construction of one of the country’s first industrial hydrogen generators. In the electrolyzer at the Gösgen run-of-river power station, green electricity is used to split water into its components, oxygen and hydrogen. “Hydrogen is becoming a key energy carrier that will play a similarly central role in a net-zero world as natural gas does today,” says Alpiq CEO Antje Kanngiesser. “As a first mover in Switzerland, Alpiq can gain valuable experience and know-how early on,” explains Kanngiesser.

Since 2016, EIP has also managed a stake in the Ticino-based company FluxSwiss, which organizes the Transitgas pipeline’s cross-border trading activities. Transitgas connects Switzerland with Italy, France and Germany. Today, it is an artery that supplies Switzerland with natural gas, but in the future, it could play a decisive role in transporting hydrogen from southern Europe to Switzerland and further north. The associated technical adaptations can, in principle, be implemented with appropriate investments at competitive costs.

“We need a strategy”

As with all major infrastructure projects – be it railroads or telecommunications – the energy transition and the shift to a hydrogen economy will only succeed through a joint effort between the private sector and the state.

“Hydrogen is seen by a wide variety of circles as an important element in the development of the decarbonization of our economy in the coming years,” Federal Councillor Simonetta Sommaruga told the National Council in 2021. “Switzerland has a lot to offer here.” At the same time, it’s not as simple as it sounds. “We need a strategy,” she added.

This strategy includes reaching an understanding with neighboring countries and the European Union, for example, to define regulatory and technical requirements as well as the tariff framework. While Switzerland’s neighbors have already developed hydrogen strategies up to 2050, Sommaruga pointed out that such a mission statement is still lacking in Switzerland. To encourage sustainable investment in the long term, Switzerland must promptly formulate a clear strategy and swiftly put it into action.


Dr. Torsten Kowalski, Vice President, and Beat Goetz, Global Head of Client Solutions, both work at Energy Infrastructure Partners in Zurich.

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.”

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.

Now is the time to invest in the energy transition — NZZ Nachhaltig Investieren

A global energy shortage and decades of underinvestment have created an opportunity to rewrite the future of the energy industry.

By Roland Dörig and Beat Goetz

Originally published on June 24 within the NZZ’s June 2022 issue of “Nachhaltig Investieren.”
Download the original article (in German).

Behind closed doors, captains of the energy industry say they have been having a difficult time at home. “How could you let this happen?” their children and grandchildren want to know.

The world the younger generation is inheriting is one that is playing catch up. While populations have grown and old power plants have started to crumble, it’s hard to think of one country in the world that has invested enough in new energy infrastructure.

Switzerland is no exception. Like many rich countries, we have flirted at times with irresponsible decadence: We powered down nuclear power plants, but we also didn’t want wind turbines blocking our views or photovoltaic panels covering our valleys.

The price we must pay for the urgently needed energy transition is increasingly becoming clear at home, across Europe and around the world. According to the Swiss Federal Office of Energy, Switzerland alone must invest at least 1.5 trillion francs in energy infrastructure by 2050, equivalent to Switzerland’s annual gross domestic product.

Limited electricity supply has meanwhile pushed power prices to record highs, sometimes 10 times the price from just a year earlier in 2021.

In Texas, six power plants failed at the same time this spring, making power prices jump more than 20 times year over year. At least 12 of the United States will face blackouts this summer – a shocking reality for the richest country in the world, but unfortunately a global trend. In March, an earthquake and cold weather pushed Tokyo to the edge of blackout.

Decisively shaping the future of the energy system

“We are running out of time – literally running out of time,” German Economics and Climate Protection Minister Robert Habeck recently told the German Bundestag. His country fears that the lights will go out if Putin turns off flows of gas into Germany.

Despite this emergency, the present circumstances can also be seen as a unique opportunity to fundamentally redesign and renew our energy systems.

Today we employ more than 70 sector specialist who spend every day of the year thinking about energy infrastructure. One portfolio company at a time, we are working to make the energy world more sustainable. At the same time, each of our global energy investments – currently more than 45 assets in 17 countries – contributes to shaping the energy system’s future.

Even as we navigate unprecedented and sometimes scary times, we cannot give up the hunt for innovation and improvements to our energy supply. Seldom do necessity and opportunity stand so close together. As Churchill once famously said, “Never let a good crisis go to waste.”

For us, sustainability means more than just removing carbon from energy systems – although of course many of our investments do. According to a 2021 study by the consultancy Energie Zukunft Schweiz AG, investments made by Energy Infrastructure create three times more renewable energy globally than any other Swiss investor, including the largest utilities.

Sustainability for us also has to include security. In the wake of the war in Ukraine, we have seen how vulnerable the current energy mix is.

Alternatives for future generations

Germany at present has no other option than to continue buying gas from Russia and, by extension, funding the invasion of a sovereign country. We believe the world and the next generation deserve better. At Energy Infrastructure Partners, we invest to not only add security of supply but to create sovereign security of supply.

We are not against trade and globalization, but we see evidence every day that self-reliance and self-determination are the safest ways to a secure energy supply. In concrete terms, this means building out renewable energy sources in order to capture the natural resources available: hydropower where there are mountains; wind where there are plains and sea; and photovoltaic where there is sun and desert.

Putting aside climate change for a moment, there is no better way to increase supply security than by adding more local and abundant energy sources to a country’s mix.

More and more, it’s the obvious choice economically as well. According to the investment bank Lazard’s most recent Levelized Cost of Energy Analysis, renewable energy sources are also increasingly competitive against classic sources like coal, nuclear and gas in terms of cost.

Even in Switzerland, where the previous generation had the forethought to invest in our mighty hydropower plants, we are facing a shortfall: Our electricity needs are growing and we are taking nuclear power plants offline. According to a study commissioned by the Swiss Federal Office of Energy, or SFOE, electricity imports will continue to increase until 2050. The SFOE also states that, on average, we already import up to 10% of the electricity consumed in Switzerland annually.

Ultimately, the investment approach is crucial

Given the state of our export partners – France is dealing with unexpected and unprecedented maintenance issues across its fleet of nuclear power plants – this strategy isn’t sustainable. The only way out is to significantly invest in Swiss energy infrastructure.

This investment approach is crucial to ensure and further promote sustainability.

In Switzerland, our original and still largest market, we manage investment portfolios for millions of pensioners in system-critical energy infrastructure: Examples of this are Switzerland’s power grid and some of the biggest hydropower plants across the Alps. Without this infrastructure, the Swiss economy doesn’t run.

And when we achieve a return from our investments, which run for decades, it goes to fund the pensions of Swiss workers. At Energy Infrastructure Partners, this is what we mean when we think of sustainability. The Swiss population invests in its own energy infrastructure, securing its security of supply and benefitting from long-term returns.

We see this end-to-end approach to sustainable investing – sustainability in security, economics and protecting the prosperity of future generations – as something that partners, investors and governments across the world can get behind.

Today’s children and grandchildren are counting on us.

Mr. Dörig is founder and Managing Partner and Mr. Goetz is the Global Head of Client Solutions of Energy Infrastructure Partners in Zurich.

In the news: “Now is the time to invest in the energy transition” — Infrastructure Investor

Keynote interview. Russia’s invasion of Ukraine was a wake-up call that energy security is just as important as decarbonisation, say Energy Infrastructure Partners’ managing partner Roland Dörig and head of global client solutions Beat Goetz.

Originally published by Infrastructure Investor in the May 2022 issue.
Download the original article.


The term energy transition has been around for years. What does it mean to you?

Roland Dörig: The energy transition is a global movement to reduce carbon emissions in the energy industry. In gross financial terms, the OECD has said we need to invest $6.9 trillion annually in infrastructure until the end of the decade. That is about twice the GDP of Germany every year.

Countries across the world are generally aligned – everyone understands we need to reduce the role of carbon in our energy mix. Where we see differences is in the path from point A to point B.

At EIP, we are focused on making sure the transition happens in an intelligent manner that optimises for security of energy supply amid the transition. We want to add renewables to energy systems without jeopardising economic growth.

And we want to do it without any backsliding, as has been the case when coal-fired power plants needed to come back online to shore up energy supplies in some countries.

The EU decided to accelerate its renewable growth plans in the wake of the current geopolitical tensions. Do you expect a similar response in other regions?

Beat Goetz: Yes, absolutely. First, it is tragic that it takes a war, but Russia’s invasion of Ukraine has brought the topic – not only security of energy supply, but sovereign security of energy supply – to the forefront.

Countries especially here in Europe realise the risks. Germany, for example, imported 40 percent of its natural gas from Russia in the first quarter of this year (albeit down from an average of 55 percent previously). Four days after the Russian invasion, Germany announced they will dramatically accelerate their energy transition plans. Now they will be using almost 100 percent renewable electricity by 2035, 15 years earlier than planned.

That is the way out, but it won’t happen overnight. Germany’s last three nuclear power plants are shutting down for good this year and the country’s economics minister has said there is no way to completely phase out Russian gas before 2024.

So, it is imperative that we all invest now in decarbonisation but also in security of supply and self-determination.

The EU has been considering adding natural gas as a ‘transitional’ green investment under its Sustainable Finance Taxonomy. And yet, we just touched on some of the intrinsic risks. What role does natural gas have in the energy transition?

RD: We are convinced that natural gas has a key role to play in the energy transition. Gas-fired power plants offer the on-demand power needed to complement renewables. We are talking about plants that can power up and down tactically in case the sun isn’t shining or there is weaker wind. Natural gas also emits less than 50 percent as much carbon dioxide as coal.

The end goal, of course, is to minimise reliance on carbon-based power sources. To get there we need flexibility: grid-scale batteries or smart grids that leverage electric vehicles for balancing effects; classic hydropower reservoirs; or new technologies like hydrogen. It just takes time and, again, it is important that we start now.

Institutional investors are increasingly looking to add exposure to the energy transition to their portfolios. Some are considering it a separate asset class, with fixed allocation targets. Are you seeing that trend play out on your side and how do you explain the shift?

BG: Investors want to build diversified portfolios that generate strong risk-adjusted returns. Depending on the needs of the institution or investor, some may want dividends along the way.

If you look at it like that, it is clear why there is so much money looking for a way into energy transition infrastructure. Allocations to the infrastructure space last year were 30 percent above the five-year average, according to the latest Bain & Company report.

At EIP, we look for system-critical energy infrastructure, assets that are vital to the security of energy supply in the countries where they operate. These assets are the backbone of society. Regardless of what is happening in the broader economy, politicians need energy infrastructure that works.

Then you have industrial customers who want to buy power at predictable prices. Those are just two reasons why investors in the space can count on very predictable cashflows.

Once you consider that we invest in different geographies, technologies, parts of the energy mix and economic mechanisms, then you see the intrinsic diversification that comes with this new asset class, energy transition infrastructure. The appeal to investors is obvious.

Energy transition is such a broad asset class. If we are talking about infrastructure assets that generate power, you can look at different parameters: generation technology, like wind, solar or hydro; different geographies; the development stage of the assets. We also look at energy distribution assets like power networks or gas distribution.

There is also diversification through the economics of the asset. Are the returns regulated? Is there a private offtake agreement to sell power at a fixed price?

We can also talk about diversification in terms of type of portfolio company that we are investing in: Is it a group of operating assets? Is it an owner-operator of assets with its own development pipeline? Is it a platform that has power-generating infrastructure assets on its balance sheet but also adjacent business lines?

Is there a lot of competition for deals in the space?

RD: Of course there is. But, if I can say this with some humility, we designed EIP and our approach to stand out. First and foremost, we are focused 100 percent on our asset class. We have 65 specialists who work exclusively on energy infrastructure. We are not a big firm that has an infrastructure strategy or an energy team. We are all-in on energy transition infrastructure every minute of the day.

Of course, there is also a snowball effect here. The longer we invest, the stronger our advantage. We are growing into a platform, we know the players, we hear about the deals. This edge was critical to our recent partnership with the leading Canadian utility Boralex to invest in their French platform.

Finally, high inflation and central bank measures to combat it have been putting pressure on equities this year. To what extent would you say infrastructure, and in particular energy infrastructure, is up for these challenges?

BG: Look at the consumer price indexes that central banks use to measure inflation. According to the US Bureau of Labor’s statistics, gasoline prices have been the biggest contributor to CPI in the last five years. We don’t invest in anything related to the petroleum industry, but you can see how energy prices and commodities prices more broadly play a key role in inflation.

Now consider that the majority of energy usage is non-negotiable. Factories don’t power down and commuters in America don’t stop driving to work when there is a price increase of, say, 10 percent, which would be a serious level of inflation. Households don’t stop using power grids when electricity gets more expensive. All of this is to say, the assets we look at have clear pathways to perform in inflationary environments.

Of course, tightening of the monetary policy by central banks will generally create headwinds to growth, with implications across the economy. The energy industry is obviously not immune. But our team has really studied this asset class. If you look at distributions and capital gains, privately held infrastructure assets have really held their own if not outperformed against typical assets, like stocks, bonds and real estate, across all manner of growth and inflation scenarios.

Partners in growth. Funds managed by Zurich, Switzerland-based Energy Infrastructure Partners recently reached an agreement to take a 30 percent stake in Boralex’s French renewables platform, one of the largest portfolios of wind assets in the country.

Boralex and EIP will work together on plans to nearly triple the size of the portfolio to three gigawatts by 2030.

The plans support France’s renewable energy programme, launched in 2018, which aims to double the country’s onshore wind capacity and triple its solar capacity by the end of the decade.

“Boralex is a real success story in France, having built up the largest independent renewable power producer in the country, alongside Engie and EDF, of course,” says Roland Dörig. “We had been following the development of the business for a number of years and had good relationships with the management team. When we learnt that they were looking to sell a minority stake and bring a knowledgeable partner on board, of course we were interested.”

Beat Goetz explains that the combination of Boralex’s defensive risk profile and potential for value creation made it a compelling proposition for the firm. “Boralex already owns one of the largest independent wind portfolios in France, producing stable returns based on commercial and regulated power purchase agreements with big players like IBM,” he says.

“At the same time, Boralex has a pipeline in place, ready to be built out. This opportunity means there is value in terms of returns, cashflow and higher valuations in the long run. This type of defensive investment would not usually produce the returns that investors are seeking. But here the combination of defensive characteristics coupled with the ability to generate value as a partner in the development platform is what appealed to us.”

Of course, other firms also spotted that potential and competition was fierce. “Everyone was interested in this participation, but the vendor was looking to select a partner based on experience and sector know-how,” Dörig says. “That was our edge.

“Boralex has ambitious goals to grow its portfolio, at least in line with the French market, and is perfectly positioned as one of the largest players to benefit from ongoing market consolidation in French renewables. Through our partnership, we will work together to realise that ambition and achieve those goals over the long term.”

In the news: “Hydropower will be the greenest storage solution of the next decade” — source: Agefi

ENERGY. Facilities and infrastructure that are crucial for supply in Switzerland must be controlled by Swiss investors, according to Roland Dörig, co-founder of EIP.

Christian Affolter, originally published by Agefi on January 13, 2021 in French.
Download the original article or view it on Agefi.

Energy Infrastructure Partners (EIP) has quickly become one of the most important private energy players in Switzerland and the market leader in the electricity sector. It is also one of the largest investors in renewable energy in Europe, with shares in four of the top ten wind farms. Being able to act independently from Credit Suisse since the transfer to his team of management at the end of the year last year, with a Finma license since 1st December, makes this role very much more visible.

On behalf of its institutional clients, in particular Swiss pension funds, EIP manages stakes in, among others, the second largest Swiss electricity group Alpiq, the operator of the Swiss electricity transmission system Swissgrid and the company operating the gas pipeline through Switzerland, Transitgas. The role of this specialized player is no longer limited to that of a purely financial investor who manages almost three billion francs, including about 1.7 billion in Switzerland on behalf of some 180 pension funds. Its partner and co-founder Roland Dörig is unveiling strategic directions that should also influence political choices.

How has EIP been able to become a European player in the field of energy so quickly?
Our approach simultaneously covers two topics that are trendy among institutional investors. Firstly, in the field of energy, we defend an ecological, profitable and secure supply. Second, infrastructure is establishing itself as an asset class. What helped us is that EIP positioned itself from the outset as a specialist in these areas.

Do you share the idea that your role now goes beyond that of a purely financial investor?
Let me remind you that we are only the trustee manager of the capital of Swiss pension funds. In this way, the people of our country invest in their own infrastructure and supply. They are the ones who benefit from the economic income. The link to the public economy is central to our activities in Switzerland. In contrast to financial investors, who have an average investment horizon of 3 to 4 years, we aim at a commitment for almost perpetuity. The aim is to generate stable cash flows in the long term.

Are you implying that you are close to the assumption made by Pierre-Yves Maillard, then President of the Vaud Cantonal Government, in 2014, that strategic assets for the electricity supply must remain in Swiss hands?
On this point, we are on the same wavelength. The Swiss population must control the strategic assets; the interests of the owners must be aligned with those of the beneficiaries. It is therefore not only a question of protecting the heritage, but also an extremely sensitive aspect for us.

So much so that he decided to join a group like Alpiq, the largest Swiss electricity supplier but lacking in profitability?
Alpiq has gone through a difficult economic period, I agree. But its transformation process has begun. Above all, we have succeeded in getting the pension funds into one of the largest hydroelectric power stations in Switzerland. At the same time, we were able to buy out the French company’s shares in EDF. I am very satisfied with the excellent cooperation between the three main shareholders (Schweizer Kraftwerksbeteiligungs AG, chaired by Roland Dörig, EOS, and the consortium of small shareholders, each holding a third). Everyone’s interests are in the same direction, we complement each other well. EIP brings its expertise in the field of energy and finance. This was the very first step to take, given the difficulties we had before. Together with Antje Kanngiesser, a new CEO has been appointed. We are fully aware of the importance of this company and its facilities for the supply of electricity of the country. It is a project that is moving forward.

Today Alpiq represents above all large hydropower plants. What is the role of these?
Hydropower is a central pillar of Switzerland’s decarbonized and flexible electricity supply. We have no oil. Switzerland’s natural resource is the mountains. We therefore support this form of electricity generation, which must be maintained and cared for. This means that we have to exploit the potential for capacity expansions, but also maintain the fleet we already have, which is a real jewel. We have to ensure that the necessary investments are made to achieve these objectives.

Are commitments in the form of public-private partnerships (PPPs) possible in this context?
We never act alone, but in partnership with public authorities and electricity distributors to cover the capital requirements to ensure supply. With large hydroelectric facilities and the transmission network, we are involved in critical elements of supply. For this reason, we invest in small hydroelectric facilities when they are grouped in a portfolio.

You could also be involved in a hydropower project run by Axpo, another major Swiss electricity producer?
We are interested in all projects in the field of hydropower and all other energy infrastructures that are essential for the supply of energy.

Don’t the political framework conditions ignore the importance of hydropower, especially as a storage solution compared to batteries?
We share this view. Large-scale hydroelectric facilities must be given their rightful place at the policy level. Hydropower will be the largest, safest and most environmentally friendly storage solution in the next decade, not only in Switzerland but also in Europe. We will only be prepared to invest in battery-based solutions if battery technology takes a leap forward.

Are you committed to the political recognition of hydropower?
We have an enormous responsibility towards our investors. Our focus on the energy sector also means keeping a close eye on the political framework conditions. We have a unit dedicated to political and regulatory issues. We also have to defend the interests of our clients, Swiss pension funds, at the political level. Because these framework conditions represent a major risk factor. We need conditions that are realistic and reliable over the long term.

The full opening of the electricity market is back on the agenda. What do you think about this?
As an observer, I see that the political process is difficult. What matters to us is that this opening must be accompanied by conditions that guarantee a sustainable, cost-effective, secure and environmentally friendly supply of energy.

Is an agreement with the EU, for which Swissgrid is one of the main advocates, one of the important framework conditions?
Our electricity transmission system is connected to the whole of Europe in terms of both its physical functioning and its economic viability. It is only natural that we should define common rules. For the supply of electricity to Switzerland, which is very important to us, the functioning of the network connections must be guaranteed.

Do you expect prices on the European electricity market to rise?
There are studies that forecast prices and model demand. They establish a trend for the next decade. For each power plant in Europe, the date of its exit from the grid is known. In addition, electric mobility and heat pumps will generate additional demand. Even if consumption would only remain stable, the trend in electricity and energy prices is upward.

You also have an interest in Transitgas. Isn’t gas another energy that the Swiss Federal Office of Energy has somewhat forgotten about?
No, the federal authorities are well aware of the different scenarios for Switzerland. And this pipeline that runs through Switzerland from north to south, which has recently become bi-directional, is a stroke of political genius for Switzerland. It has convinced the Europeans, who were planning to use France as an alternative, that the current line is the best solution. It is a huge opportunity. It ensures a secure, cheap and as environmentally friendly supply as possible. Look at the proportions: 80-90% of the gas consumed in Switzerland passes through this pipe, but 90% of its capacity is used to connect Germany and France to Italy, especially northern Italy.

What do you think of the relationship between gas and electricity?
In the European context, gas plays a very important role in power generation. An exit from coal means that the share of gas, as a transitional technology, must be increased. This is because the supply has to be secured when the sun is not shining and the winds are not blowing very strong. Storage solutions, such as Power-to-Gas, are more a matter for our subsidiary companies. We prefer to invest in proven technologies. Venture capital is not part of our mandate.

You just mentioned new renewable energies. EIP’s investments in this area are mainly abroad. Why is this?
EIP is one of the top three private investors in wind farms. Europe’s largest wind farm, Fosen Vind in Norway, has just been completed. EIP has a 40% share in it. In Sweden and Finland, we work together with leading regional partners. Our principle is to invest where these technologies are fundamentally relevant. In these northern regions, there are 3,000 to 4,000 hours of full-powered wind per year. Switzerland, on the other hand, has only a quarter of this power and does not have the space required to build facilities of this scale.

How do you assess the projects or installations?
We look at which projects are best suited to the conditions in the countries in which we operate. Our goal is to make high-quality investments within a reasonable time frame. To meet our criteria, a facility must be profitable without any subsidies. Subsidies are a welcome help at the beginning, but economic independence must be aimed for. We aim at commitments until the end of the life of the installations. In this context, we prefer long-term sales contracts with electricity distributors or data centers. The interest of companies of this type attests to the relevance of a project.

Switzerland does not qualify for solar or wind energy?
No, solar energy in particular is a topic for Switzerland too. By the way, BayWa r.e. for renewable energies, in which we acquired a 49% share for our customers in December, is also by far the most important importer of solar panels in Switzerland. We may invest in solar installations directly or through our portfolio companies.

EIP in figures
Some 180 pension funds throughout Switzerland have entrusted part of their assets to Energy infrastructure partners (EIP). EIP’s first investment, which at the time was still linked to Credit Suisse, dates back to 2014. It was a CHF 50 million investment in Swissgrid. Since then, its portfolio has grown to more than one billion francs in Switzerland, and more than 3 billion in total. Based in Zurich and regulated by Finma, EIP has been operating on its own since the end of 2020 and employs 40 people.