Questions on the Future Energy System

To counter the global threat imposed by climate change, the Swiss Government made a commitment to achieving net-zero greenhouse gas (GHG) emissions by 2050 in ‘The Climate and Innovation Act’, confirmed by public vote. For the energy sector this means totally renouncing fossil fuel usage (i.e. gasoline and diesel, heating oil, natural gas). As many of the strategies replacing fossil fuel usage rest on electrification, the electricity sector needs to prepare for growing demand while remaining carbon-free.

Switzerland obtains a large proportion of its energy from abroad in form of fossil and nuclear fuels; accounting for approximately 75% of Switzerland’s total gross energy consumption. Local renewable sources, mainly hydropower, cover the remaining 25%. Oil products are mostly used in the mobility sector and for heating, natural gas for heating and industry needs, and nuclear fuel for electricity generation.

Switzerland produces about as much electricity as it consumes, and it is embedded into the European electricity system with a high volume of exports and imports. About 50% of the Swiss electricity demand is covered by hydropower facilities, ca. 36% by the Swiss nuclear power stations, about 6% are covered by solar photovoltaic, and the rest is mostly covered by other renewables and waste incineration. Switzerland usually exports electricity during the summer months and imports during winter months.

Various options are possible. These options share however two common denominators: 1) today’s fossil fuel imports will gradually be reduced (to zero or a low level) and need to be replaced and 2) the energy system needs to serve a new demand structure with more electricity demand and less overall energy demand.

Yes. For the energy sector, there are many options to replace the CO2 emitting energy supply with CO2-free alternatives. The objective of Switzerland is net-zero greenhouse gas (GHG) emissions by 2050. This means that one can emit some quantity of GHG if they are compensated by removing the corresponding amount of CO2 from the atmosphere. Such compensation will however be reserved for sectors of the economy for which cutting emissions is extremely difficult—if not impossible, e.g. in agriculture. Energy is not one of these sectors. In fact, the energy sector can provide compensation, that is, negative emissions.

For industries and technologies for which cutting greenhouse gas emissions is extremely difficult, synthetic fuels and hydrogen may play an important role in the future. These fuels may also play a role in providing energy storage, so called ‘Power-to-X’ applications, where they are produced with renewable electricity. However, model scenarios disagree about how important these fuels will be in the future and whether they will be largely imported or also produced domestically.

Overall, no. The electrification of the energy system will lead to an increase in electricity consumption but a strong overall decrease in energy consumption. This is due to the fact that electric processes and engines for heating and mobility use less energy for the same result (i.e., they are more efficient) than the current fossil-based processes and engines. Furthermore, energy efficiency and conservation will continue improving.

Model-based scenarios show that hydropower and solar PV will be the dominant technologies in the future. Extensions of our existing hydropower plants are already planned, and in the coming decades, Swiss citizens and businesses will also invest in additional solar PV generation. Other technologies such as wind power and biomass will play complementary roles.

Electricity trade helps to flexibly compensate for the fact that local electricity production does not match local electricity consumption at every time of day and season. This is even more true for generation from weather dependent renewables like solar PV and wind power, which will increase their electricity production. Consequently, electricity trade will continue to be important into 2050 and beyond and will make sense both economically as well as from a security of supply perspective.

Currently, we cannot estimate future system costs with high confidence as there is uncertainty about future cost developments (i.e., renewable technology and battery cost developments, e-mobility developments, and synthetic fuel import prices). What is clear, is that large investments are needed in power generation, the distribution grid, and for replacing fossil-based industrial processes. However, large investments would also be needed if we kept the current, aging system.

Reducing fossil fuel use comes with secondary benefits such as health improvements due to reduced air pollution, and it contributes to mitigating climate change. While no energy technology is without external cost, they are significantly lower for electricity generated from renewable sources. Furthermore, imports of fossil energy, which amount to 7 billion francs per year on average (2018-2022), will be avoided.

Questions on Supply Security

For a renewable-dominated electricity system, supply is secured differently than with today’s conventional system. In the current fuel-dominated system, supply security depends on international fuel availability and prices. In the future renewable-dominated system, supply security relies on system-based flexibility addressing the changing weather conditions. This flexibility could be provided e.g. by pumped hydropower, batteries, demand flexibility, biomass based generation, or via synthetic fuels. These developments make the future supply security a more technical and less geopolitical challenge.

Imports and exports are an important and normal aspect of electricity markets. Countries import goods if it is cheaper than producing them locally, and this basic economic logic also holds in electricity systems, as different countries have price advantages at different moments, e.g. when wind power has favorable conditions in northern Germany or solar generation is high in Southern Europe in summer.

No. Electricity flows in an integrated network follow physical laws. Some of the electricity flows are caused by trade, while others are the automatic result of the interplay between local production and demand patterns. Even if Switzerland stopped trading completely, which would anyway be very costly, there would still be electricity flows across our borders due to those physical properties of an interconnected power grid.

No. Hydropower plants with reservoirs are a valuable flexibility asset on the European market, which Swiss utilities generate important revenues with. They can produce on short notice during hours when prices are particularly high, e.g., because supply is short and costly in Europe. Thus, both Switzerland and the European system benefit from our hydro capabilities.

The nature of the dependencies shifts. The electrification of the Swiss energy system will gradually reduce the dependency on fossil fuel imports and at the same time make electricity trading and the integration into the European market more important. Whether there will still be fuel imports (i.e. synthetic fuels/hydrogen), and if so, for which sectors, is not fully clear yet. Furthermore, we remain dependent on foreign resources such as critical minerals.

We will still have surplus electricity in summer (both hydro and PV have their production peaks in summer) and high electricity needs in winter (adding heating demand to the electricity sector). Electricity exports and imports will continue to be an important aspect of Swiss electricity supply in the future, complementing our domestic sources of flexibility.

Most scenarios foresee that Swiss utilities will continue to import more electricity than they export during the winter months, regardless of the overall yearly trade balance. In situations of high demand, we will always have enough domestic electricity, given the large share of flexible hydropower units in Switzerland. This means that we can import at low prices when in Europe demand is low or supply high. It is therefore essential that imports are generally possible throughout the winter, but less important that they are available at any specific hour.

Any domestic generation increase or demand reduction helps during winter months. It saves hydropower reserves, which can be used for shifting generation to high consumption hours when imports from Europe may be less readily available. It doesn’t matter much whether the additional generation comes from more PV, renewables that are better suited for the winter (e.g. wind), or other sources. Demand reductions can be achieved by improving energy efficiency or by reducing unnecessary energy use (e.g. heating unused space).

Europe will also have a renewable dominated electricity system with a stronger weather dependency than today. Many scenarios foresee a significant role of wind and PV in Europe with a strong share of wind energy during winter months. In addition, the larger geographic extent of Europe allows more diversity across the same renewable technologies (i.e. cloud and wind conditions are not uniform across Europe). This contributes to the possibility for surplus energy in Europe during at least a significant number of hours in any given season, which in turn enhances the import potential for Switzerland.

Trade between Switzerland and its neighboring countries is mutually beneficial for all and improves our and the European system stability. Consequently, even without a bilateral electricity agreement between Switzerland and the EU, there is likely always some trade opportunity remaining. Nevertheless, the European Union is moving ahead with its market integration and system transformation, and Switzerland will need to take those developments into account.

Questions on Impacts for Consumers

As future energy costs are uncertain, so are the costs any individual will need to pay. The envisioned electrification of heating and mobility could lead to a higher share of electricity costs in household spending. At the same time the share of costs for fossil fuel will need to go to zero. Whether this shift will make energy costs rise or fall cannot reliably be predicted.

As the output of many renewables tends to be weather-dependent and volatile, demand-side flexibility becomes increasingly valuable in a renewable-dominated electricity system. The electricity tariff is the central element for utilities to send incentives to consumers and enable their flexibility potential. Thus, adjustments to electricity tariffs are likely. However, it is also likely that there will always be the opportunity for households to opt out of demand-side flexibility measures, i.e., to choose a tariff similar to today’s average or night-day tariffs.

Partly. While a large focus in the ongoing political and societal debates is on the extension of renewable energies, the choice for a specific renewable strategy is just one element affecting the overall cost development. A major factor for the push towards renewable energies is the commitment to get rid of fossil fuels to mitigate climate change. At the same time, an increase in electricity demand will happen regardless of the renewable strategy.

Large-scale investments in power generation, grid extension and system stabilization will be carried out by the electric utilities and paid for over time by their electricity customers. Therefore, electricity tariffs are an important part for financing the investment costs. The deployment of renewable generation will also depend on myriads of small investments (e.g. rooftop photovoltaics), which will be paid for by the saved electricity costs.

In general, homeowners have an advantage over tenants, as they have better opportunities to become prosumers (i.e. to not only be consumers of electricity, but also producers of their own electricity) and therefore to benefit from electricity tariff and investment incentives. Although tenants can organize themselves in associations for own consumption, they largely depend on their landlords. Regulations for rental buildings, overall tariff design, as well as incentive structures for landlords are therefore important elements of the energy transition.

Today public support for renewables in Switzerland is fragmented between the federal government, cantons, and municipalities, with some private organizations also offering subsidies. These intertwined responsibilities are likely to remain, with provisions and regulations being defined at the different levels.

In a net-zero energy future, households will consume a major part of their energy in the form of electricity. For many of us, this will mean that we will not fill up the car with gasoline or diesel anymore nor order heating oil for the coming winter. Instead, our energy will mostly be provided by network-based services with a tariff (electricity, distance heating).

Although the demand side is expected to become an important source of flexibility in the electricity system, the idea is that this will not necessarily interfere with our energy use habits. Many of the envisioned options are so called ‘smart solutions’. In this context, smart means that some form of automatic control optimizes the energy use of flexible electricity applications (i.e. battery, heat pump, air conditioning, fridge). The provision of those demand-side measures needs to be incentivized (i.e., via cost savings for the consumers). Anyway, households will probably be able to opt out of such demand-side measures if they don’t want them.

Prof. Dr. Hannes Weigt

University Basel

Peter Merian-Weg 6

4052 Basel