The Swiss energy sector has its own distinctiveness. Switzerland has been referred to as the ‘water tower’ of Europe; indeed, hydropower accounts for about 59.6 per cent of electricity production in the country, while nuclear power accounts for about 31.7 per cent. Other conventional thermal and ‘new’ renewable energies, including solar, wood, biomass, wind, geothermal and ambient heat, account for about 8.7 per cent.2
Despite the country’s high dependence on nuclear energy, the Federal Council has decided to gradually phase out nuclear power. On 21 May 2017, Swiss voters endorsed (by a majority of 58.2 per cent) Energy Strategy 2050, thereby paving the way for a new Federal Energy Act (the Energy Act). The new law and related ordinances came into force on 1 January 2018, setting forth extensive measures to reduce energy consumption, increase energy efficiency and promote renewable energy. The new law bans building new nuclear power plants but allows existing plants to operate for as long as they meet safety standards. This followed an earlier referendum on 27 November 2016, by which Swiss voters rejected (by a majority of 54.2 per cent) the introduction of a cap on the lifetime of existing nuclear power plants in Switzerland, and the Swiss Federal Council’s decision of 4 May 2016 to indefinitely delay the full liberalisation of the Swiss electricity sector.
The Swiss electricity market has been described as being highly fragmented owing to the number of market participants. Such a high number is peculiar, considering the size and population of the country.
Electricity represents approximately 24.8 per cent of Swiss energy consumption, while oil and gas represent about 49.2 per cent and 14 per cent respectively. Coal, wood, industrial waste and other renewable energies constitute the remaining 12 per cent.3
Switzerland produces neither oil nor gas. As such, this chapter focuses on the electricity industry.
The Swiss energy institutional framework comprises a number of federal offices, regulatory authorities and specialised agencies. The Federal Office of Energy (SFOE) is the office responsible for all questions relating to energy supply and energy use. It sits under the Federal Department of the Environment, Transport, Energy and Communications (DETEC), which is responsible for ensuring sustainable development and the provision of basic public services in the interests of society, the environment and the economy.
The SFOE pursues the following objectives:
- to create the necessary conditions for ensuring a sufficient, well diversified and secure energy supply that is both economical and ecologically sustainable;
- to impose high safety standards in the areas of production, transportation and distribution of energy;
- to promote efficient energy use, increase the proportion of renewable energy in the overall energy mix and reduce the level of carbon dioxide emissions;
- to promote and coordinate energy research and support the development of new markets for the sustainable supply and use of energy; and
- to create the necessary conditions for efficient electricity and gas markets and an adapted infrastructure.
A number of commissions support the SFOE, including the Energy Research Commission (CORE), the Commission for Radioactive Waste Disposal (CRW), the Administrative Commission of the Decommissioning Fund and the Disposal Fund for Nuclear Installations (ACDFDFNI), the Nuclear Safety Commission (NSC) and the Commission for Connection Conditions for Renewables Energies (CCRE).
The CORE assists with the formulation of guidelines governing energy research and the implementation of research findings. Its members represent the industrial sector, the energy industry, universities and various energy agencies and research institutions in Switzerland.
The CRW is an independent body that is responsible for advising the SFOE and the Federal Nuclear Safety Inspectorate (ENSI) (see below) on geological aspects of nuclear waste disposal.
The two funds administered by the ACDFDFNI were established to secure the necessary financing for the disposal of radioactive waste and spent-fuel elements, and the decommissioning of nuclear installations after their shutdown.
As an advisory body for the Federal Council, DETEC and ENSI, the NSC examines fundamental issues relating to nuclear safety and may submit comments for the attention of the Federal Council and DETEC regarding reports by ENSI on nuclear safety. It took over the duties of the former Federal Commission for the Safety of Nuclear Facilities on 1 January 2008.
The CCRE advises cantonal authorities and the SFOE on the formulation of recommendations and enforcement tools for the implementation of connection conditions for independent producers.4
The Federal Office for the Environment (SFOEN), which also sits under DETEC, plays an important role alongside the SFOE. It is responsible for ensuring that natural resources are used sustainably, that the public is protected against natural hazards, and that the environment is protected from unacceptable adverse impacts.
In accordance with DETEC’s sustainability strategy, the SFOEN pursues the following goals:
- long-term preservation and sustainable use of natural resources (land, water, forests, air, climate, biological and landscape diversity) and elimination of existing damage;
- protection of the public against excessive pollution (noise, harmful organisms and substances, non-ionising radiation, wastes, contaminated land and major incidents); and
- protection of people and significant assets against hydrological and geological hazards (flooding, earthquakes, avalanches, landslides, erosion and rock falls).
In order to achieve these goals the SFOEN has been assigned the following responsibilities:
- environmental monitoring to provide a sound basis for the management of resources;
- preparation of decisions, to secure a comprehensive and coherent policy of sustainable management of natural resources and prevention of natural hazards; and
- implementing the legal foundations, supporting enforcement partners and providing information on the state of the environment and on the appropriate use and protection of natural resources.5
The Federal Electricity Commission (ElCom) is the independent regulatory authority for the electricity sector. It is responsible for monitoring compliance with the Federal Electricity Act and the Federal Energy Act, taking all necessary related decisions and pronouncing rulings where required.
When the new Electricity Supply Act entered into force on 1 January 2008, ElCom was formally entrusted with the task of supervising the liberalisation of Switzerland’s electricity market. As an independent regulatory authority at the federal level, ElCom is responsible for securing the smooth transition from a monopoly situation in the electricity supply sector to an electricity market based on the principles of competition. ElCom’s duty is to ensure that the liberalisation of the market does not result in excessive tariff increases and that the network infrastructure is properly maintained and expanded in order to guarantee an adequate supply of electricity.
ElCom has been entrusted with extensive judicial powers to effectively perform its various duties. It monitors compliance with the provisions of the Electricity Supply Act and the Energy Act, and can pronounce legally binding decisions and rulings as necessary.
The specific duties of ElCom are to:
- verify the electricity tariffs of customers who do not have free access to the network, as well as the remuneration paid for the input of electricity into the grid. It is authorised to prohibit unjustified increases in electricity prices, and may order the reduction of excessively high tariffs, taking action on the basis of complaints or in its official capacity;
- mediate and pronounce rulings on disputes relating to free access to the electricity network;
- rule on disputes relating to cost-covering remuneration of electricity input that is to be paid to producers of electricity from renewable energy sources;
- monitor supply security and the condition of the electricity networks;
- in the case of shortfalls in cross-border transmission lines, to regulate the allocation of network capacities and coordinate its activities with the European electricity market regulators; and
- ensure that the transmission network is handed over to the national system operator (Swissgrid) according to schedule.
ENSI is the national regulatory body with responsibility for the nuclear safety and security of Swiss nuclear facilities. It is an independent body constituted under public law.
ENSI is supervised by an independent board elected by the Federal Council and reports directly to it. Its regulatory remit covers the entire life of a facility, from initial planning, through operation, to final decommissioning, including the disposal of radioactive waste. Its remit also includes the safety of staff and the public and their protection from radiation, sabotage and terrorism. ENSI is also involved in transport of radioactive materials to and from nuclear facilities and in the continuing geo-scientific investigations to identify a suitable location for the deep geological disposal of radioactive waste.6
Articles 76 and 89–91 of the Swiss Federal Constitution address energy matters and bind the Confederation and the cantons to provide a satisfactory, diversified, secure, economic and environmentally compatible energy supply.
According to the Constitution, the Confederation is in charge of determining the principles of the use of all domestic and renewable energies in particular, as well as legislating in certain specific areas such as nuclear energy, hydropower generation and transmission and delivery of electricity. Legislation concerning all other areas is to be provided by the cantons. Consequently, energy laws can vary considerably among cantons.
At the federal level, the principal pieces of legislation are:
- energy: the new Energy Act;
- hydropower: the Hydropower Act 1916 and the Water Protection Act 1991;
- electricity: the Electricity Act on Electric Facilities for Low and High Voltage 1902 and the Electricity Supply Act 2007;
- nuclear: the Nuclear Energy Act 2003, the Federal Inspectorate Nuclear Security Act 2007 and the Liability in Nuclear Matters Act 1983;
- CO2: the CO2 Emission Reduction Act 1999 (the CO2 Act); and
- pipelines: the Pipelines Act 1963.
Enacted by the Federal Council on 1 November 2017, the new Energy Act took effect on 1 January 2018. Three new ordinances and a series of revisions to other ordinances also took effect on 1 January 2018. The aims of the new Act are:
- to reduce energy consumption;
- to improve energy efficiency; and
- to promote renewable energy.7
The Federal Electricity Supply Act, which was adopted by Parliament in 2007, provides for an opening of the market in two stages, starting on 1 January 2009. In the first five years (2009–2013), only end-consumers with an annual consumption of more than 100,000kWh per site were granted free access to the market. Households and other small-scale end consumers were also supposed to be able to freely choose their electricity supplier as of 1 January 2014, but that full market liberalisation has been delayed, due to the main objective of market liberalisation – the creation of a competitive and secure electricity supply with transparent pricing – not having been achieved. Recent revisions have also been made to this Act in order to make adjustments to the organisation of the electricity market to ensure security of supply, increase economic efficiency and promote energy integration.
In October 2018, the Swiss government reversed its previous stance on liberalisation and presented a draft proposal to completely liberalise the domestic electricity market. Under this proposal, everyone in Switzerland will have the opportunity to choose their electricity supplier freely. The government submitted the proposal to the public for comment and consideration until 31 January 2019. What action the government will take after that date remains to be seen.
Negotiations between the EU and Switzerland to enter into a comprehensive long-term energy treaty began at the end of 2007. The primary aim of such an accord (obtaining this agreement is considered one of the top priorities for Switzerland) would be the mutual access to the free energy market. The negotiations, which were at an advanced stage, came to a halt immediately following the adoption by the Swiss people (9 February 2014) of the Swiss popular initiative ‘Against Mass Immigration’.
The Swiss Federal Constitution, the Energy Act, the CO2 Act, the Nuclear Energy Act and the Electricity Supply Act are all integral parts of the instruments defining a sustainable and modern Swiss energy policy. In addition to legal instruments, the energy policies of the federal government and the cantons are both based on the presentation of energy perspectives as well as on strategies, implementation programmes and the evaluation of energy-related measures at the municipal, cantonal and federal levels.
On the international front, Switzerland has taken action to show its commitment towards a sustainable and modern energy policy. On 20 June 2018, the Federal Council adopted the country report on the implementation of the 2030 Agenda for Sustainable Development. This report, which was presented to the UN in July, showed that Switzerland has already firmly established the UN’s Sustainable Development Goals in its policies, even though some challenges remain.
Energy policy was only anchored in the Swiss Federal Constitution in 1990, when provisions were added stipulating that the federal government and the cantons are obliged to use their competences to ensure an adequate, broad-based, secure, economical and ecological energy supply, and the economical and efficient use of energy. This comprehensive list of requirements places high demands on energy policy at the federal and cantonal levels, while demonstrating how difficult it is to find suitable solutions.
Since 1990, all cantons have drawn up their own energy legislation and regulations, and with the enactment of the Federal Energy Act and the Federal Energy Ordinance on 1 January 1999, the Federal Council fulfilled the mandate it had received following the approval by the electorate of the energy provisions in 1990.
The energy perspectives as drawn up by the Federal Council have served as a basis for all political decisions in the energy field and have been reviewed and updated regularly since the establishment of the General Energy Plan in the mid-1970s.
On 4 May 2016 the Federal Council confirmed that it was indefinitely delaying the full liberalisation of the Swiss electricity market. Due to the economic and political implications of full liberalisation, the Federal Council launched a public consultation process, which took place between 8 October 2014 and 22 January 2015. Following its review of the report on the consultation process and in light of the conflicting views expressed therein, the Federal Council has indicated that full liberalisation will depend on:
- the evolution of the energy pact with the European Union;
- the progress achieved with Energy Strategy 2050;
- the prevailing market conditions; and
- the revision of the Federal Electricity Supply Act.
Since the adoption of Energy Strategy 2050 and the new Energy Act coming into force, there has been renewed discussion of market liberalisation, notably a report by the SFOE in November 2017 and a motion supported by the Federal Council and SFOE in December 2017. It is expected that liberalisation will go hand-in-hand with the establishment of a strategic reserve.8
IIITRANSMISSION/TRANSPORTATION AND DISTRIBUTION SERVICES
iVertical integration and unbundling
The most significant change in the structuring of the transmission and distribution grid in the Swiss electricity market has been the gradual liberalisation in the past decade of the high-voltage transmission network, and more specifically the separation of the transmission network from other core elements in the electricity market such as distribution, power generation and trading.
The liberalisation of the transmission network was facilitated in large part by the foundation of Swissgrid in 2005 as the Swiss transmission system operator (TSO) and the gradual transfer since then of operational responsibility and legal ownership of the network to Swissgrid.
The transfer of the transmission grid to Swissgrid has consolidated the network (which was previously split up into eight control areas) into one zone covering the entire country. Swissgrid is the owner of the Swiss transmission grid which extends across 6,700 kilometres of lines, 12,000 pylons and 125 substations with 145 switching substations, as well as 41 connections abroad. It is comprised of both 380kV and 220kV lines. While the former are used mainly to import and export electricity, the large Swiss power plants feed the majority of their energy into the 220kV grid. This high-tension voltage is necessary in the transmission grid in order to transport energy over long distances with as little power loss as possible.
Modernising the transmission grid is key to ensuring a sustainable energy future. For Switzerland to have the upgraded grid it needs and wants, it drafted and is implementing Swissgrid’s ‘Strategic Grid 2025’ report, which will invest 2.5 billion Swiss francs for grid upgrade until 2025.
On 1 January 2009, the number of Swissgrid shareholders increased overnight from eight electricity companies, directly or indirectly majority-owned by the Swiss cantons (Alpiq AG, Alpiq Suisse SA, Axpo Power AG, Axpo Trading AG, BKW FMB Energie AG, CKW AG, ewz and Repower AG) to 17 shareholders as part of the opening up of the previously closed system. There are now over 30 electricity generators and distributors that share ownership of Swissgrid.
The Swiss Electricity Supply Act mandated that the transfer of the transmission network from the original owners to Swissgrid be completed by the end of 2012. By the beginning of 2013, most of the network components had been transferred with the remainder completed at the beginning of 2015.
The separation of the transmission network from vertically integrated generation and supply companies occurred in three separate stages (principally between January 2009 and January 2015):
- separation of accounting functions from distribution, production and trading activities;
- legal separation and restructuring of operating entities into subsidiaries; and
- transfer of legal ownership of the network to national operator Swissgrid.9
Swissgrid now owns and operates the Swiss transmission system and has overall responsibility for ensuring security of supply. Its main areas of responsibility are:
- the transportation of electricity from the producing power plant to the end consumer via regional and local distributors; and
- the trading of electricity exported and imported from the rest of Europe.
The transfer to Swissgrid was registered in the commercial register on 3 January 2013. To regulate the behaviour of Swissgrid and other players in a newly liberalised market, the Swiss Transmission Code was introduced in December 2013 as a regulatory mechanism to define the technical and organisational principles governing the Swiss transmission system.10 The regulations govern the relationship between Swissgrid and the distribution system operators, power generators and end consumers, as well as other market players and defines the minimum requirements for the operation, use and connection to the Swiss transmission system.
Due to Switzerland’s central location in Europe, approximately one-third11 of all electricity flow through the Swiss transmission network is transmitted from one neighbouring country to another. Swissgrid coordinates its transnational activities through its membership of the European Network of Transmission System Operators for Electricity.
Swissgrid is also part of the TSO Security Cooperation, an initiative between 13 TSOs to ensure secure energy supplies among its members. The initiative brings together a standing security committee and uses a joint real-time information system (the Real-time Awareness and Alarm System) and shared IT platform to meet its main objective of increasing security on Europe’s high voltage transmission network.12
Swissgrid has been a shareholder of the auction platform Capacity Allocation Service Company since 2010, which acts as a service company and single point of contact for the implementation and operation of the power transmission capacity allocation between counties in Europe.
In 2018, Swissgrid began to implement Strategy 2022 to further consolidate its position as the backbone of security of supply in Switzerland. There are four key areas of focus:
- safety for people;
- integrated plant and system operations;
- intelligent use of new technologies; and
- close cooperation with partners in Switzerland and Europe.13
iiTransmission/transportation and distribution access
The Electricity Supply Act stipulates that electricity grid operators must allow power generators access to the transmission and distribution network. The expenses incurred for making these connections are borne by the individual generators. Power generators of electricity from renewable sources (particularly hydropower) are given priority when it comes to allocating capacity on the grid.
Swissgrid must also by statute allow other regulated third parties access to the grid without discrimination, on a transparent and non-discriminatory basis. Access to the network may be denied, however, for ‘legitimate business reasons’, including when the safe operation of the network could be endangered or when the network is congested.
Swissgrid sets the rates for use of the transmission grid. These are subject to provisions of the Electricity Supply Act and also to review by ElCom. The legislation stipulates that the tariffs (for all distribution and transmission grids) shall not exceed the recoverable costs, fees and royalties. Recoverable costs consist of the operating and capital expenditure associated with Swissgrid’s operation of the grid.
ElCom acts as a price monitor and regulator for the Swiss transmission network operated by Swissgrid. ElCom is vested with the power to order reductions and to prohibit tariff increases.
ElCom takes a proactive approach to its price monitoring duties and has ordered the lowering of grid usage tariffs on several occasions, notably in four consecutive years from 2009 to 2012. These tariff reduction orders were, however, struck down by the Federal Supreme Court in 2013. The method by which ElCom calculates tariffs was subject to another Supreme Court Ruling in 2016 that is expected to have a significant impact on how ElCom is able to regulate tariffs in future.
ElCom also rules as a judicial authority on general disputes relating to network access and tariffs. ElCom monitors electricity supply security and regulates issues relating to international electricity transmission and trading.14
Swissgrid sets the tariffs for use of the grid in accordance with statutory requirements and publishes them at the end of March annually.15
Swissgrid effected reductions in tariffs for 2018, attributing this reduction to the ‘drop in operating costs brought about by Swissgrid’s ongoing efforts to increase efficiency’.16 In March 2018, Swissgrid announced that in 2019 the tariff for system services will decrease by 25 per cent (when compared with 2018) and that grid usage tariffs will be up to 21 per cent lower than in 2018.17 Lower ancillary costs are made possible, according to Swissgrid, as a result of lower operating costs and control reserve power costs. Swissgrid attributes these lower costs to the increase in the number of providers, leading to more competition.
Swissgrid’s grid usage tariff18 (charged to the distribution system operators directly connected to the transmission grid) is split up in three components:
- working tariff (the energy component);
- power tariff (the power component); and
- fixed basic tariff (per weighted outflow point).
The working tariff is calculated on the basis of the active energy consumed by end consumers directly connected to the transmission grid, and in the case of a grid operator (of which there are more than 800 in Switzerland), the active energy used by end consumers connected to its grid and all lower-level grids. The actual active energy being consumed is multiplied by the working tariff published by Swissgrid.19
The power tariff is calculated on the basis of the annual average of the actual monthly ‘quarterly-hour’ peak demand values used by each end consumer directly connected to the transmission grid and by end consumers connected to its grid and all lower-level grids. Deductions are made for the energy required for a power plant’s own consumption and the pump energy used by pumped storage power plants (if declared by the grid operator directly connected to the transmission grid).
If a customer (either end customer or distribution system operator) has feed-out points into the transmission grid, then the tariff calculation is based on the ‘quarter-hourly’ netted values after the appropriate deductions are made. Similar deductions are made to take into account the energy required for power generation and pump energy.
For the fixed basic tariff calculation, each feed-out point for a grid distribution operator is weighted using the ‘K-factor’, where the share of energy being fed out is considered in relation to a formula based on the sum of energy being fed in and out; from an average taken over the previous 12 months.20
The grid usage tariff is therefore the result of the following formula:
- multiplying the energy volume by the working tariff;
- multiplying the monthly peak output by one twelfth of the power price; and
- multiplying the number of weighted feed-out points by the fixed basic tariff per weighted feed-out point.
Swissgrid estimates that in 2019 the average Swiss household will pay a total of 45 francs towards the cost of the transmission grid. Swissgrid forecasts that 5 per cent of electricity price paid by end consumers will go towards the operation and maintenance of the national transmission grid in 2019 and that 47 per cent of costs will be attributed to the distribution grids.21
ivSecurity and technology restrictions
The most significant technology restrictions (and sources of vulnerability) on the Swiss transmission and distribution grids are caused by the fact that most of the network is 40 to 50 years old (and only a third of the network dates from after 1980). Until 2013, planning for the development and expansion of the network was carried out at a local level and therefore considerable work remains to be done to modernise the grid.
Additionally, the limited number of transfer points on national borders with main trading partners Germany, France, Italy and Austria (approximately 40) means that capacity is limited and congestion can occur. The Strategic Grid 2025 is an initiative put in place with the main objective of upgrading the grid in order to ensure that it is technically secure, environmentally friendly and economically efficient.22
Swissgrid acts as the single point of contact for other national TSOs and foreign electricity distributors in the negotiation and scheduling of cross-border supply to fill gaps in the Swiss domestic supply. Swissgrid also facilitates capacity auctions for cross-border supply.
Swissgrid is responsible for the safe operation of Switzerland’s high-voltage network from two linked control rooms, operational around the clock and every day of the year.23 Swissgrid controls a comprehensive IT infrastructure from which it is able to map a real time model of the Swiss transmission network from approximately 40,000 data points. Thousands of measurements and switch positions from the network are collected and processed in cycles of less than 20 seconds. With these many data points, the system is unquestionably vulnerable to cyberattacks.
The Swiss Federal IT Steering Unit is tasked with implementing a national strategy for the general protection of Switzerland against cyber risks.24 Produced annually, the latest report on progress was published in 2016.25 The report does not, however, contain any specific policy for dealing with cyber threats to the electricity grid.
Swissgrid has established a new technology business unit in order to design and implement a digitisation and automation strategy.26 The Swissgrid research and development unit is tasked with developing new technologies for the efficient transmission of electricity, including the new ‘smart grid’ and ‘super grid’ initiatives. The R&D unit also provides support for third-party innovation projects through sponsorship deals and partnership programmes.27 This is part of the Strategic Grid 2025 initiative. This has led to the implementation of the first smart grid system by Romande Energie in September 2017, and the banding-together in August 2017 of 11 energy companies to form the Smart Grid Switzerland Association.28
iDevelopment of energy markets
The decision by the Federal Council to indefinitely delay the full liberalisation of the electricity market followed an earlier announcement on 7 March 2016 by major hydropower producer ALPIQ of its intention to divest up to 49 per cent of its hydropower portfolio with a total installed capacity of 5.2GW. The stake for sale represents roughly 8 per cent of the total Swiss hydropower production or 5 per cent of Switzerland’s total power production.
The sale process initiated by ALPIQ, though now suspended, is a testament to the challenges facing Swiss hydropower producers. Now that the Swiss government is considering full liberalisation, it remains to be seen what impact this will have on said producers and other stakeholders. Under Energy Strategy 2050, the share of hydropower is expected to be well over 50 per cent. Yet for the time being, hydropower producers are struggling. Wholesale prices remain low and the Swiss franc remains strong. Profitability of Swiss power plants has come under strain due to:
- high subsidies for new renewable energies (e.g., wind and solar power);
- low prices for primary energies (e.g., oil, gas and coal);
- the stagnation of the world economy;
- lower carbon dioxide taxes; and
- high duties.
Producers like ALPIQ lack access to end consumers in the non-liberalised segment of the Swiss market, while their traditional clients (including power distributors and large-scale consumers that benefit from partial liberalisation) have been buying abroad.
The Swiss energy market comprises several hundreds of players, including a small number of major consortia with vertically integrated operations, and about 80 power producers, who differ considerably in terms of size and operations. The vast majority of market players are publicly owned regional and local utilities that distribute electricity to their local municipalities. Only some of these regional and local distributors can produce electricity. The largest utilities are responsible for approximately 80 per cent of the power production and 90 per cent of the energy supplied in the country.
iiContracts for sale of energy
As there is no power exchange in Switzerland, Swiss trading companies trade on the Powernext in Paris, the Energy Exchange in Austria and the Leipzig-based European Energy Exchange. The Dow Jones Swiss Electricity Price Index (SWEP), which was initiated by Aare-Tessin AG für Elektrizität and Elektrizitäts-Gesellschaft Laufenburg AG, and launched in cooperation with Dow Jones in March 1998, provides price indications for over-the-counter electricity trading in Switzerland for next-day delivery. The SWEP is the volume-weighted average of the profile adjusted price for hour 12 of all transactions having an impact on hour 11am to 12pm, also taking into account the Index for the past 20 days.29
On 30 October 2013, Elcom gave its green light to an accord between Swissgrid and the European power exchange EPEX Spot. This accord paved the way for the introduction of market coupling at the Swiss border, which is expected to make power trading more efficient. As a power exchange, EPEX Spot is already overseeing short-term electricity wholesale trade in Switzerland.
VRENEWABLE ENERGY AND CONSERVATION
iDevelopment of renewable energy
Historically, Switzerland’s longest-serving and most important source of renewable energy has been hydropower, but the ‘new’ renewables including solar, wood, biomass, wind, geothermal and ambient heat also play an increasingly important role in today’s Swiss energy mix. Such role will be accelerated with the endorsement by the Swiss people of Energy Strategy 2050. The revised Energy Act that will come into force on 1 January 2018 specifically aims to increase the use of renewable energy, especially from domestic sources, in addition to securing an economic and ecological supply and distribution of energy and using energy economically and efficiently. To that effect, it sets forth specific goals and measures, including the following:
- the domestic production of hydroelectric power will be increased to 37,400GWh by 2035, while domestic electricity production from other renewable sources will be increased to 4,400GWh by 2020 and 11,400GWh by 2035;
- the current feed-in compensation for energy from renewable sources (i.e., solar, wind, biomass and geothermal energy) will be extended until 2022, and large-scale hydroelectric power plants and photovoltaic and biomass power plants may obtain subsidies until 2030;
- subsidies for local renewable sources and energy efficiency measures will be financed by increases in the grid fee;
- promotion of the construction and expansion of power plants, by declaring that renewable sources use is a national interest equal to the protection of nature and heritage; as a result, it will become more difficult to object against new power plants by referring to nature and heritage protection;
- the cantons will have to provide fast approval procedures for the construction and expansion of power plants;
- recourse to the Federal Supreme Court regarding disputes over planning approvals for power plants, will be possible only for legal issues of fundamental importance; and
- the right to use self-produced energy will be expanded.
iiEnergy efficiency and conservation
The new Energy Act, which came into force on 1 January 2018, also presents goals and measures targeting energy saving and efficiency, including the following:
- a substantial reduction in energy and electricity consumption is to be achieved by 2035. Compared to the 2000 figures, average energy consumption per person per year is to be reduced by 16 per cent by 2020 and 43 per cent by 2035. Average electricity consumption per person per year is to be reduced by 3 per cent by 2020 and 13 per cent by 2035;
- the existing subsidy programme for energy building refurbishments is to be continued after 2019. The subsidies will be increased and partly financed from revenues of the carbon dioxide (CO2) tax. In addition, tax deductions for such refurbishments will be extended;
- as of 2021, the average CO2 emission of new passenger cars must be reduced to 95g of CO2/km (currently 130g of CO2/km). The average CO2 emission of delivery vans and light-duty vehicles must be reduced to 147g of CO2/km; and
- the existing mechanical electricity meters are to be replaced by smart metering systems that provide more specific data and allow efficient electricity supply and consumption.
In 2017, 25 million francs in subsidies was available for electricity saving proposals, through a competitive tender process. In 2018, 50 million francs has been made available, paid for by the surcharge on transmission costs of high-voltage grids.
On 16 August 2017, the Federal Council adopted two proposals to approve the signing of an agreement to link the carbon market in Switzerland to the Emissions Trading Scheme (ETS).30 Once ratified by the EU and Switzerland, the proposed agreement will provide for fungibility of EU (1,800 million tonnes) and Swiss (5 million tonnes) carbon allowances. It is expected that the earliest the proposed agreement could take effect is 2019, which would follow amendment of the CO2 Act.
VITHE YEAR IN REVIEW
The most important development in the Swiss energy sector in the last 12 months has been the government’s proposal to fully liberalise the electricity market. This action, if allowed, will give a major boost to Swiss hydropower companies.
Last year also saw a boost in support of Energy Strategy 2050 achieving one of its goals, as it was agreed that the Muhleberg nuclear power plant will cease to operate in 2019. This should provide huge support to those wishing to fill that energy void left by the closing of the nuclear plant with renewable energy.
In order to support the environment and meet some of the emission goals, the National Council had hoped to pass the CO2 Law, which was to transpose the commitments made in the framework of the Paris Climate Agreement into Swiss law.
After eight years of previous leadership under Doris Leuthard, Minister of the Department of Environment, Transport, Energy and Communications (DETEC), a new minister took office on 1 January 2019.
VIICONCLUSIONS AND OUTLOOK
The year 2019 is expected to be busy in the Swiss energy sector depending on the Swiss government actions after 31 January. The liberalisation has the potential to provide a boost for consumers in lower energy prices, while at the same time giving a boost to the renewable energy sector and companies that specialise in hydroelectric power.
1 Georges Racine is a partner at HFW in Geneva, Switzerland. He would like to thank Micah Wells for his assistance in researching materials for this chapter.
3 Confédération Suisse/DETEC/SFOE ‘Aperçu de la consommation d’énergie en Suisse au cours de l’année 2016’, Extrait de la statistique globale suisse de l’énergie 2016, 22 June 2017.
7 Article 1 of the new Energy Act.
9 Swissgrid press release, 4 January 2013: https://www.swissgrid.ch/dam/swissgrid/about-us/company/ governance/shareholders/swissgrid-shareholders-en.pdf.
10 The transfer to Swissgrid was registered in the commercial register on 3 January 2013. https://www.strom.ch/fileadmin/user_upload/Dokumente_Bilder_neu/010_Downloads/ Branchenempfehlung/Branchendokument_TC_2013_VSE.pdf.
11 25TWh of 78TWh in 2014, according to Swissgrid (2015).
16 Swissgrid press release, 29 March 2017: https://www.swissgrid.ch/en/home/about-us/newsroom/ newsfeed/20170329-01.html.
18 The grid use tariff covers the cost of renewal, development and maintenance of the transmission grid, as well as of operations and monitoring via the control centres.
25 www.isb.admin.ch/dam/isb/en/dokumente/themen/NCS/NCS-Jahresbericht- 2016-en.pdf.download.pdf/ NCS-Jahresbericht-2016-en.pdf (2016 Annual Report).