Electricity Agreement agreed between the EU and Switzerland

Briefing

The EU and Switzerland have agreed a comprehensive package of agreements as part of bilateral talks. There was a notable breakthrough in the extremely protracted negotiations on the electricity agreement between Switzerland and Europe. Both sides have been negotiating such an electricity agreement for around 20 years, with interruptions along the way. It is now intended to give Switzerland access to the European internal electricity market. To this end, Switzerland is integrating central EU regulations of the internal electricity market into its national law.

What are the key elements of the Agreement?

The Agreement, which still requires the final approval of the Swiss parliament and citizens, will fully integrate the Swiss transmission system operator Swissgrid into the European electricity transmission processes. Swiss electricity market participants will be able to participate fully in EU trading platforms and technical committees that are relevant for grid operation, crisis preparedness and security of supply. Under the Electricity Agreement, neighbouring EU states may not restrict cross-border capacities to Switzerland, even in the event of an energy crisis.

In return, the Swiss electricity market will be liberalised and opened up in line with European Union requirements. Households and companies will then be able to choose their electricity supplier freely and, in this respect, steps comparable to the liberalisation of the energy market introduced in Germany almost 20 years ago are now being taken. Until now, Switzerland has had a basic supply with regulated prices and, in this respect, a legal situation comparable to the German legal framework in force until 30 June 2007 under the former Federal Electricity Tariff Ordinance (BTOElt). This basic supply remains in place as an alternative - comparable to the legal status in Germany. To date, however, only companies with an annual consumption of over 100,000 kWh have been able to choose their supplier freely. The Swiss electricity market will therefore now also be opened up to competition for most private customers and “smaller” commercial customers.

The Electricity Agreement also explicitly stipulates cooperation in the field of renewable energies and the intention to increase the share of renewable energies in the energy system. A non-binding target for further expansion would be set. With the Agreement, Switzerland also adopts the EU rules on state aid for the expansion of renewable energies. The most important Swiss support measures in this area were declared compatible with EU law during the negotiations. This applies to the so-called one-off payment (investment subsidy) for PV systems. The construction of reserve power plants should also remain possible.

The Agreement also contains a clause stating that Switzerland and the EU will examine whether they wish to further intensify their cooperation in the energy sector. This applies to hydrogen and renewable gases.

What are the advantages of the Electricity Agreement?

For Switzerland, the conclusion of the negotiations on the electricity agreement means greater legal certainty and the integration of the Swiss transmission system operator Swissgrid into the European electricity market. The abolition of the limit on cross-border capacities also increases security of supply and grid stability in Switzerland, which regularly relies on electricity imports from the EU in winter. The 70% rule, which states that EU Member States must make at least 70% of the capacity of their grids available for trade between EU Member States and which reduces cross-border capacities, could further impair Switzerland’s security of supply.

The maintenance and servicing of a largely separately operated electricity grid is also associated with enormous costs. Here, too, cross-border cooperation between all stakeholders is advantageous. The operating costs could be comprehensively reduced.

As part of liberalisation, Swiss companies and households will also be able to benefit from freedom of choice when it comes to electricity suppliers in future and will also be able to choose non-Swiss suppliers. The intensified competition on the supplier side is generally associated with price reductions on the consumer side. It is therefore to be expected that distribution structures that have been successfully established in neighbouring European countries for many years will now also become established in Switzerland.

The Agreement would also be beneficial for the EU. Due to its geographical location, Switzerland plays an important role in the European electricity grid, particularly as a transit country. A liberalisation of the Swiss electricity market would also be welcome, not least from the perspective of southern German industry. Importing green energy from Swiss pumped storage power plants could be cheaper than importing green energy from northern Germany.

What procedural steps remain?

Even though an agreement in principle was reached between the EU and Switzerland on 20 December 2024, the Swiss parliament must first give its approval. This could happen at the beginning of 2026. The Swiss citizens would then also have to decide on the Agreement. This would probably happen in 2027 at the earliest.

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