Applying a systemic approach to a renewable future

When Antje Kanngiesser was notified last year that she was a candidate to take over as chief executive officer of Alpiq, she did not need to spend much time getting up to speed with the Swiss energy company. The German native was already working in a management position and was at that time a member of the Group Executive Board of another Swiss company in the same sector, and had worked at Alpiq before.

Kanngiesser was also well aware of the opportunities and challenges at Alpiq, a medium-sized company that covers about 20% of Switzerland’s energy needs.

Like many energy companies around the world, Alpiq is rethinking its business model as the energy sector is transforming to meet the goals of a decarbonized, net zero world – one characterized by zero-carbon electricity, the electrification of transport, homes, and commercial buildings, and the production of green fuels such as hydrogen. Switzerland’s overarching goal is to eliminate net greenhouse gas (GHG) emissions by 2050.

This means there is significant scope for Alpiq to expand into renewable energy along the value chain, reaching from generating renewable energy and trading to its supply to customers. “The overarching mandate I have been given is to inspire and energize the company, and position Alpiq in the sweet spot of the markets,” Kanngiesser explains. “We really are operating in a very interesting environment now because energy is a growth market due to decarbonization.”

For Kanngiesser, the challenge is one for which she spent much of her career preparing. As a young lawyer in Germany, she specialized in renewables long before solar and wind power were receiving a fraction of the attention they are today. Later, Kanngiesser spent seven years in various leadership functions at the rival Swiss energy company BKW Group, where she reformed the company’s sustainability strategy.

“In Switzerland, as in the rest of Europe we need to invest more in renewables,” says the 47-year-old. She notes that, with wind not in plentiful supply in Switzerland, innovative solutions must come into play, for example solar cells installed on Switzerland’s many lakes or hydropower dams.“ Especially, we need to invest in energy storage capacity, in hydrogen, and other solutions that support the growth of renewables..”

Lausanne-based Alpiq was formed from a merger in 2009 of two companies in a deal that was intended to create “a powerhouse for energy in Europe”, according to a corporate statement at the time. The combined business had 10,000 employees and generated annual revenues of CHF16 billion. Today the company is much smaller, due largely to the divestment of its former engineering services businesses. It now has fewer than 1,300 employees and generates annual revenue of CHF 3.8 billion.

Its core activities are hydropower, which accounts for 44% of its power generation capacity, thermal power (38%), nuclear (12%), and wind and solar (5%). Alpiq was delisted from the SIX Swiss Exchange in 2019 and is now privately held by Swiss investors including regional electricity companies.

Kanngiesser was recruited last year from BKW Group and started at Alpiq on 1 March this year. Kanngiesser’s job is to review the current strategy and focus on sustainability in line with a new corporate purpose, which states that Alpiq’s “sustainable energy business contributes to a better climate and an improved security of supply”.  

Yet Kanngiesser will also have to deal with Alpiq’s heavy reliance on hydropower, which not only accounts for half of its business but also is a vulnerability.

Every year, seasonal glacier melt in the Swiss Alps helps to provide the water needed to power the vast hydropower plants that supply 60% of the country’s electricity. The problem is, many glaciers are melting even when they are not supposed to. As the New York Times chronicled in 2019, climate change is accelerating glacier melt, reducing the size of thousands of glaciers worldwide, including in Switzerland. Over time, that means less meltwater for hydropower.

Then there is the unwieldy economics of hydropower itself. Historically, there was stability  in being a quasi-monopolistic provider of hydropower in Switzerland. But, as Kanngiesser explains, conditions have changed. Such power assets are highly capital-intensive, while the dynamics of today’s energy markets are complex, with operators contending with price volatility and government policy that operators have sometimes criticized as unsupportive.

“Nowadays, nobody would invest in these assets that we have in the Swiss Alps,” Kanngiesser says. “These are also assets that were built in a monopolistic world, and now we are in a fully liberalized energy sector. Things don’t fit together anymore, as they were also built for the supply of neighboring countries, so it’s a challenge.” Today, Switzerland is increasingly being excluded from the EU market.

In addition, nuclear no longer fits with Switzerland’s energy future, since in 2017 the country pledged to phase it out in the wake of the Fukushima disaster in Japan in 2011. That means the gradual decommissioning of nuclear power plants, further emphasizing the need of Switzerland to expand in renewables to ensure there will be enough electricity in the future.

Kanngiesser was a strong advocate for environmental issues as a young woman, even creating and leading an environmental activist group as a teenager. But she has previously described herself as a “realo” rather than a “fundi” – referring to factions that formerly existed in Germany’s Green Party between pragmatists and ideologues in their approach to green issues. “Personally, I am not a real friend [of] nuclear power,” she explains, “but I think for the moment, we have these power plants and we have to exploit them for as long as they are safe and profitable.”

She is, however, a friend of hydrogen and its potential in renewables. Since the 2015 Paris Agreement, momentum has been building on the potential of the gas, in particular so-called “green” hydrogen, which is produced by using renewable energy to split hydrogen from oxygen in water through electrolysis. Not only can hydrogen be burned with zero emissions, helping to decarbonize hard-to-abate sectors such as power and long-haul transport, it can also be used in energy storage to help deal with the intermittency of solar and wind power supply.

“I really think hydrogen has enormous potential. I first encountered hydrogen in 2005 and at that time the logic of its applicability – with electromobility, for instance – was already established,” Kanngiesser says. “But the environment was not there to allow it to take off. Now I feel a really different energy, and it has been substantially boosted by the EU’s hydrogen strategy  so I think the current situation is promising, and we now need to put in the energy required to drive things forward.” 

A big part of Alpiq’s renewables drive will involve European markets where the company has been active for many years. Half of the company’s energy generation capacity is spread across Spain, Italy, the Czech Republic, France, Hungary, and Bulgaria. In May, Alpiq made its first acquisition in solar energy in Spain, buying the rights to develop two solar plants near Toledo, in the center of the country. Alpiq plans to expand its renewable portfolio under management in Spain, either with self- or third-party-owned assets, believing there are “clear synergies in operating jointly renewable and thermal assets as the market advances”. 

Her understanding of the company’s culture will doubtless help Kanngiesser as she drives change as the new strategy takes shape. She worked at Alpiq for six years until 2014, latterly as head of the power generation development unit.

She sees her role as CEO to ensure that everyone – from shareholders to board members to colleagues – is on board with the changes to come. “What is the right path for us? I am very much a realist. We can’t just suddenly turn on renewables everywhere and cut off all the other problematic energy sources we still have. There will be compromises all along the way so we need to discuss, reflect, and make the best decisions.”

“Alpiq is a small player now, European and globally speaking, so we have to adopt a strategy where we can play our strongest cards, which are the management of flexible power plants, the management of energy portfolios, and the related risk management, both for our customers and for our own assets”, says Kanngiesser. “We need to go about this in a very smart way because we can’t compete on scale, and we can’t compete on cost, but we can compete on talent and culture.”