Contents lists available at ScienceDirect Sustainable Energy Technologies and Assessments journal homepage: www.elsevier.com/locate/seta Original article Evaluation and recommendation of a subsidy instrument for new large hydropower plants, use case of Switzerland Thomas Gisler a , Massimiliano Capezzali b, ⁎ , Mélanie Guittet c , René Burkhard d , Daniel Favrat e a University of Applied Sciences Lucerne (HSLU), Switzerland b Institute for Energy and Electrical Systems, School of Management and Engineering Vaud (HEIG-VD), Switzerland c Centre de Recherche Energétiques et Municipales (CREM), Martigny, Switzerland d Pronovo AG, Switzerland e Energy Center, Ecole Polytechnique Fédérale de Lausanne (EPFL), Switzerland ARTICLE INFO Keywords: Subsidies Hydropower Switzerland Systems Engineering ABSTRACT Hydropower is the central pillar of the current Swiss electricity mix. The Swiss energy transition will profoundly change the electricity mix by transitioning a third of electricity generation from nuclear towards renewable energy sources mainly. This backbone role of hydropower is hindered by the current Europe-wide sluggish economic situation, characterized by subsidized new renewables energies which distort electricity prices, a partially liberalized market and power production overcapacity. In this difficult context, a strong and compre- hensive political support through long-term policy will be of utmost importance to accompany hydropower across this transformation. This article explores various subsidy instruments, before using the general framework of “System Engineering” to base a precise recommendation for Swiss hydropower. The recommended mixture of investment contribution with discount reclamation appears the most appropriate instrument. Also, the short time horizon means that the subsidization can be quickly terminated if necessary. In parallel, it is a mature instrument since it is already used for other new renewable energies. The discount model allows reclaiming subsidies in case of an excess profitability. The strength of this study is its robust, comprehensive and all- encompassing methodology which can be replicated to other cases (for instance, other technologies or energy sources) and other countries. Introduction Worldwide, electricity production from hydro power could double by 2050 to reach 7000 TWh, and the main part of this growth will be coming from large hydropower plants (HPP) in emerging economies and developing countries [1,2]. In Switzerland, hydro power con- tributes to 60% of the total power generation [3], with an average of 36 TWh of produced electricity per year [4]. In the context of the new “Energy Strategy 2050” targets (thereafter called Swiss energy policy) and the intended nuclear power phase-out, around 40% of the elec- tricity supply will have to be compensated by other energy means. Along with other renewable energies, hydropower represents a crucial pillar of both the current and future Swiss energy mix [5,37]. The actual sluggish electricity market makes it however questionable whether hydropower will be able to fulfill this role, since both an increase in capacity and a lot of investments in existing assets (for retrofitting and refurbishment) are necessary [6]. The envisioned extended role of renewables in electricity generation has been promoted through various government subsidies since 2008, notably with the introduction of feed-in remuneration at cost en- couraging investments in renewables, including photovoltaic solar en- ergy, hydraulic energy and small hydro, biomass energy or geothermal energy [7]. Despite this first step, the growing distortions in the market and the declining value of renewables on electricity trading markets have sparkled many debates around the subsidization of hydropower [8]. The paper is organized along three axes. It first explores and com- pare the existing subsidy instruments, and how they apply to hydro- power in Switzerland. On this basis, this article then explains how the general methodology “Systems Engineering” can be used to assess the performance of those instruments, and how this methodology could be replicated either to other countries or to other technologies. Finally, through this detailed process, validated guidelines and recommenda- tions are provided for a subsidy instrument to support the envisioned expansion of new hydro power capacities in Switzerland, along with other renewable energies, considered as pillars of the future Swiss https://doi.org/10.1016/j.seta.2017.12.004 Received 4 November 2016; Received in revised form 30 September 2017; Accepted 19 December 2017 ⁎ Corresponding author. E-mail address: massimiliano.capezzali@heig-vd.ch (M. Capezzali). Sustainable Energy Technologies and Assessments 26 (2018) 6–16 2213-1388/ © 2017 Elsevier Ltd. All rights reserved. T