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10.12.2019

Switzerland's influence on European energy policy continues to decline

The picture shows the flags of Switzerland and Europe.

As part of the NRP “Energy", researchers from EPFL and the University of St. Gallen have examined the effects of an electricity agreement with the EU.

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 a 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."

Publication

To the results of the research projects:

Further information on this content

 Contacts

Prof. Matthias P. Finger Chair in Management of Network Industries (MIR)
College of Management of Technology (CDM)
École Polytechnique Fédérale de Lausanne (EPFL)
EPFL CDM CSI ODY
+41 21 693 00 01 matthias.finger@epfl.ch

Prof. Peter Hettich Professor for public economic law as well as construction, planning and environmental law
Institut für Finanzwissenschaft und Finanzrecht (IFF-HSG)
Universität St.Gallen
Varnbüelstrasse 19 9000 St. Gallen +41 71 224 29 43 peter.hettich@unisg.ch