Energy – an intensive exchange

A dam
A dam © FDFA, Presence Switzerland

Switzerland and the European Union (EU) have exchanged energy intensively for decades. Whereas European energy markets used to be regulated through state monopolies, a competition-oriented EU single market for energy has emerged over the last 25 years. The result of this development is a new legal and economic reality of the energy markets surrounding Switzerland. This is particularly relevant in the electricity sector. Switzerland and the EU therefore negotiate an electricity agreement which is intended to allow full access for Switzerland to the single market for electricity and ensure cooperation in this sector with the EU in the future.

Switzerland and the EU are both striving for an environmentally-friendly, competitive and secure energy supply. Both the Swiss Federal Council and the EU announced in 2019 their goal of zero net greenhouse gas emissions by 2050. This will require far-reaching changes in the ways that energy is currently produced, traded and consumed. Electricity, for example, is increasingly being generated from renewable energy sources. Because sun and wind are not available round the clock, more flexibility and interconnectivity are needed. With its single energy market, the EU wants to ensure that those challenges are met across borders and in a cost-effective way.

In the electricity sector, Switzerland is very well connected to the European network. Since the synchronization of the French, German and Swiss electricity grids in 1958, at the so-called ‘Star of Laufenburg’, our country has played an important role as an ‘electricity hub’ in Europe. 41 cross-border power lines connect Switzerland to its neighboring countries. This allows a flourishing electricity trade. Economically speaking, both Swiss consumers and producers profit significantly from this integration, as electricity supply becomes safer and cheaper. Furthermore, Switzerland contributes to achieving the EU’s energy and climate policy objectives with its power lines and flexible hydroelectric power plants.

Electricity agreement between the EU and Switzerland

Electricity supply is currently undergoing an important transition and the European single energy market continues to develop steadily. The integration of Switzerland in this market is no longer always guaranteed. Switzerland lacks a legal basis with the EU as an underlying condition. Because both sides profit from the exchange of electricity, the EU and Switzerland are currently negotiating an electricity agreement.

The negotiations cover mainly the following aspects:

  • equal, free and fair market access;
  • common application of rules in the field of electricity for all market participants and fair competition;

  • integrity and transparency in wholesale electricity markets;

  • electricity infrastructure - in particular transmission grids and cross-border lines;

  • cross-border electricity trade;

  • promotion of electricity from renewable energy sources;

  • environmental protection in the electricity sector;

  • rules for state aids;

  • cooperation between contracting parties, authorities and institutions.

The electricity agreement being considered a market access agreement, the conclusion of this negotiation depends on the progress of the institutional agreement negotiations between Switzerland and the EU.