New electricity market: more steering, more flexibility, more renewables

The image shows the grid control centre of Swissgrid in Aarau.

The NRP “Energy” provides recommendations for action so that the electricity market can develop in line with the objectives of Energy Strategy 2050.

The Swiss electricity system is complex and closely intertwined with other energy sectors as well as the European market. The National Research Programme "Energy" provides recommendations for action to ensure that the electricity market can develop in line with the objectives of Energy Strategy 2050.

"For a well-functioning electricity market, steering measures are preferable to promotion. Steering is much more effective from a macroeconomic point of view and more cost-effective. The new requirements for the electricity system must therefore be translated into market incentives and the various areas - in line with developments in the EU - organised and regulated accordingly," says Beat Hotz-Hart. "Levies on CO2 emissions with reimbursement to the population and the economy have hardly any negative impact on economic development, are efficient and contribute to innovation", states Hotz-Hart in justifying this recommendation of the synthesis on the main topic "Market Conditions and Regulation".

However, if the market is to operate efficiently and in a socially responsible manner, further coordinated measures are needed.

Gradually exposing renewable energy to the market

Today, the market alone cannot yet trigger the investment required under Energy Strategy 2050 for the expansion of new renewable energy - solar, wood, biomass, wind, geothermal and ambient heat. In order to integrate these into the electricity system and gradually transfer them to the free market, temporary support is needed, depending on the market maturity of the individual technologies; in the coming years, for example, through an auction model in which additional volumes are auctioned off technology-neutrally, or with flexible price control through market premiums.

Increase flexibility in supply and demand

With the growing share of new renewable energy, there is a massive increase in the demand for capacity that can be used flexibly. In future, this will not only apply to the supply side. Instead consumption should also be used to smooth demand peaks and adjust to supply fluctuations. As various studies within the framework of the NRP "Energy" show, dynamic tariffs, bonus-malus systems for electricity or energy consulting services are suitable measures. Flexibility in grid use should also be given a price by replacing the current consumption-dependent grid tariffs with dynamic power tariffs. In addition, decentralised storage solutions need suitable framework conditions for cost-effective operation.

Integrating new stakeholders

With the expansion of renewable energy, new stakeholders are entering the electricity market: energy cooperatives, self-consumption communities, regional distribution grids and electricity storage operators as well as "prosumers", who act both as small producers and as consumers. Regulation must create optimal conditions for the development and efficient integration of these new stakeholders into the electricity system.

Increase supply security economically

In the medium term, contractually secured strategic reserves and certificate-based performance obligations as well as a diversified power plant network can further increase security of supply. Additional financial support will probably be needed in the longer term for reserve capacity and special grid and storage infrastructures. In the absence of an electricity agreement with the EU, however, the costs for supply security are also likely to rise. Nevertheless, even with an EU electricity agreement, Switzerland's generation capacity will have to be increased in the longer term.

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Prof. em. Beat Hotz-Hart University of Zurich
Member of the Steering Committees of NRP 70 and NRP 71
+41 79 720 51 40