Swiss expect a bright future with alternative lighting
Electricity Abroad The sixth in a new series focusing on international electricity markets. In our latest report, Ellen Wallace looks at the future of Switzerland's electricity.
The move was timid: on January 12th, Switzerland invited bids to meet a temporary electricity shortfall for the first time, establishing a daily auction system on the Austrian border. The invitation was the first concrete step in an ambitious project to open the insular market by 2007, in line with European Union (EU) deregulation. The change will have a significant impact on the future of the Swiss electricity market. It could well add an interesting twist to the current spate of European mergers.
Switzerland, not a member of the EU, is surrounded by neighbours who are powerful European electricity players: France, Italy and Germany. Despite its relatively small size and economic role - the population of 7.4 million spent nearly €5.75 billion on electricity in 2004, and the country had a net electricity surplus of 1.1% - Switzerland is a hub in the region. It consumes only 3% of electricity in the UCTE (Union for the Co-ordination of the Transmission of Electricity) region, but the physical flow of electricity along its borders is 11% of the region's total.
During the summer, when rivers, fed by melting snows, contribute heavily to Switzerland's production, the country exports to Italy. In winter, when hydro power production drops, Switzerland imports from France. Smaller but steady exchanges with Germany create a slight deficit there.
The country can meet its own electricity demand of 56.2 Twh on an annual basis with a mix of hydroelectric (55%), nuclear (40%) and traditional thermal, plus other (5%) power production of 65Twh. But the significant seasonal variations have been met primarily through long-term agreements managed by seven electricity grid companies. They are now the target of Swiss anti-cartel authorities
Ironically, this is the group that started the auctions in January which could lead to a more open market. Switzerland has 1,100 utilities, but 1,000 only distribute, with 127 distributing more than 65% of the electricity. The seven major companies produce and distribute the bulk of this.
Switzerland's labyrinthine political system encourages slow change. Electricity is the business of communes and cantons rather than the federal government. They hold 80.8% of the capital; private industry has 12.9%. Foreign investment is 6.3%. Communal and cantonal authorities oversee most utilities in addition to holding the bulk of their capital.
The debate about the future concerns structural issues, but also electricity sources. By 2020 the country will probably not be able to meet its own needs. Consumption continues to rise steadily, at 1.9% in 2004.
This leaves Switzerland looking to neighbours for electricity in a few years, unless consumption rises more slowly and new sources are found. This is exactly the strategy the federal government is pursuing. High on its agenda: a 5% annual cap on increases in electricity use over 10 years, no fall in hydro power, and an increase of 1% in other renewable sources. This will mean diversifying into solar, wood, wind and geothermal energy, among other sources, with €6.38 million poured into research. EM
