Critical voices on the revision of the Electricity Supply Act
The revision of the Electricity Supply Act is in full swing. The purpose of this revision is to adapt the act to an electricity market that has changed considerably since its introduction. The aim is to close existing loopholes in the law and to examine new regulations based on the changing conditions in the electricity industry. Among other things, the revision covers:
- full market opening;
- market design aspects (probably strategic reserve);
- roles and responsibilities with a focus on security of supply;
- tariff setting (especially further development of the grid usage model); and
- flexibility and improvement of system services.
The regulatory framework will be adapted in line with the Swiss Energy Strategy 2050 and the European electricity market.
Consultation on the revision has been underway since the end of 2018. This is a phase in the Swiss legislative process that gives various actors and interested parties the opportunity to comment on a preliminary draft legislative proposal. Only after conclusion of the consultation procedure will the Federal Council prepare draft legislation which is then debated by Parliament. Over the course of the consultation process, the majority has been in favour of the proposed changes (For further details please see "Strengthening of domestic renewable energies and liberalisation of electricity market").
However, critical voices were also raised on individual aspects of the revision. One of these was from the Federal Electricity Commission (ElCom) – Switzerland's independent regulatory authority for the electricity sector. This body has repeatedly pointed out – most recently in June 2020 in its report on the security of electricity supply in Switzerland – the possibility of imminent supply bottlenecks.
Danger to security of supply due to lack of investment incentives
It is true that an increase in hours with negative prices has been observed in Switzerland in recent years. Negative prices were introduced on the Day-Ahead Wholesale Market of EPEX Spot in September 2008 at the request of the market. According to ElCom, these appear to occur mainly in March, April and May. However, ElCom also notes that problems could arise during the winter months. The closure of nuclear power stations will result in the loss of 14 terawatt hours of winter electricity production in Switzerland. This is where ElCom sees a lack of investment incentives. According to the 2020 report on the security of electricity supply in Switzerland, the framework conditions for domestic production based on the 'energy-only market' may not generate sufficient incentives for new winter production.
Experts also point to a lack of incentives. This is because Swiss network operators have invested heavily abroad and now reach a capacity of 20% of Swiss electricity consumption, but have not done so in Switzerland. There has been much debate about why there are no incentives for domestic investment, although ElCom does not comment on this in its report.
According to ElCom, relying solely on the future export capability and willingness of neighbouring countries to export – especially in view of the closure of nuclear power plants – is associated with considerable uncertainty.
Against this background, ElCom demands that, when revising the legal framework, it must be ensured that incentives are created to ensure that a substantial part of the lost winter production of Swiss nuclear power plants continues to be produced in Switzerland. ElCom therefore considers it necessary that a legally binding expansion target of at least five terawatt hours of generation capacity in the winter half-year by 2035 be incorporated into law and that the Federal Council be obliged to issue competitive invitations to tender for the expansion of generation capacities if it becomes apparent that the legally specified expansion target cannot be achieved.
It will be interesting to see how the Federal Council will deal with critical voices on the revision of the Electricity Supply Act – especially if it comes from a specialist authority such as ElCom. It would also be particularly interesting to examine in more detail why Swiss grid operators lack investment incentives in comparison to other European countries. However, one thing seems certain: the revision of the Electricity Supply Act is far from complete.
