What would be the consequences of failed negotiations over an electricity agreement between Switzerland and the EU? Researchers from EPFL and the University of St. Gallen have investigated this question within the scope of the "National Research Programme Energy", shining a light on how it will affect the Swiss electricity sector, overall economic development and the obtainment of climate goals.
Switzerland used to be a major player in the European energy sector, but its influence is declining due to the expansion of the EU single energy market, which covers more and more economic and legal areas. "Switzerland has become more dependent on the EU, but this is less and less the case the other way round. Without an electricity agreement, Switzerland would be threatened with further exclusion as regards the regulation of key energy issues," says Matthias Finger from EPFL, summing up the current situation. Peter Hettich from the University of St. Gallen adds: "European law leaves little wiggle room in general, and this is also true of the energy sector in particular. If Switzerland continues to negotiate exceptions in legally binding areas, it may have to pay a high price politically."
Trapped in negotiations
All actors involved in the negotiations are in favour of an electricity agreement between Switzerland and the EU in the interests of safeguarding supply. Such an agreement would regulate cross-border electricity trading, harmonise security standards, provide free market access and allow Switzerland to participate in various European regulatory bodies. Currently, however, the EU considers the signing of an institutional framework agreement, including the dynamic adoption of legislation, to be a prerequisite for an electricity agreement. There is a lot less support for such an institutional agreement in Switzerland, and many actors feel it has no majority appeal.
Consequences uncertain - but certainly grave
In view of this, the researchers studied two contrasting scenarios: "direct Europeanisation" via a new bilateral electricity agreement between Switzerland and the EU, and "indirect Europeanisation" without an electricity agreement (for example through autonomous adaptations to the European legal framework).
- Regardless of the chosen scenario, Switzerland’s electricity supply is secured till at least 2030. That said, no country can rely on electricity imports, and Switzerland is no exception: while an agreement would facilitate imports, it would not guarantee the availability of importable energy.
- Even without an agreement, physical connections to the European electricity market would remain in place, but Swissgrid would find trading and balancing of the grid a lot more difficult.
- Without an agreement, the Swiss energy sector overall will have a higher trade deficit of several hundred million Swiss francs per year, which could increase to a billion francs by 2030. Consumers would have to pay significantly more for electricity than their European neighbours, with prices that could reach 15-20 francs per MWh by 2030.
- The simulations did not indicate that an electricity agreement would have a significant effect on the expansion of renewable energies in Switzerland. Lack of an electricity agreement, however, could lead to investments in gas power plants, especially if the expansion of renewable energies is not expedited due to a lack of political backing.
"With or without an electricity agreement - a long-term energy policy that goes beyond the electricity sector is crucial to the energy industry, to economic development in general and to achieving our climate goals. But there is no such policy," Matthias Finger sums up. Peter Hettich specifies the consequences with regard to expansion of the renewable energies sector: "Today there is a tendency to look at issues individually and regulate them ad hoc. For many investors in renewable energies, however, reliable framework conditions overall have meanwhile become more important than just the issue of funding."
Peter Hettich, Philipp Thaler, Livia Camenisch, Benjamin Hofmann, Beatrice Petrovich und Rolf Wüstenhagen (2019): Europeanization of the Swiss Energy System, Dike Verlag
Matthias P. Finger und Paul van Baal: CH-EU - Beziehungen unter Strom. Chronos Verlag, erscheint 2020.
Prof. Peter Hettich
Professor für Öffentliches Wirtschaftsrecht mit Berücksichtigung
des Bau , Planungsund Umweltrechts
Institut für Finanzwissenschaft und Finanzrecht (IFF-HSG)
9000 St. Gallen
Phone: +41 71 224 29 43
E-mail: peter.hettich [at] unisg (p) ch
NRP 70 and 71: The "National Research Programme Energy"
As part of the National Research Programmes "Energy Turnaround" (NRP 70) and "Managing Energy Consumption" (NRP 71) funded by the Swiss National Science Foundation (SNSF), over 300 scientists working on more than 100 research projects have gained fresh insights into how energy consumption could be substantially reduced as well as into new technologies and the societal framework required to implement them in the next 10 to 30 years.
Given the numerous crossover points between the two NRPs and the fact that both have taken place in parallel, NRP 70 and NRP 71 have worked closely together from the outset. Both NRPs will be completed by the beginning of 2020 under the name "National Research Programme Energy". The results for the main topics "Acceptance", "Buildings and settlements", "Mobility patterns", "Market conditions and regulation" have already been published. The synthesis reports on the main topics "Energy Networks" and "Hydropower and Market" will be published soon, and the final programme summary is expected to be available as of January 2020.