Harassment around the Electricity Agreement Switzerland – EU

by Dr.-Ing. Ernst Pauli

An integrated European electricity grid has existed for more than 50 years. The Star of Laufenburg, which connected the European high-voltage grids for the first time, is an example of European cooperation, to which 24 nations have joined over time. At that time, each country could produce its own electricity, but in the event of a power plant outage, it wanted to be able to draw on electricity from a neighbouring country. So there has already been European-wide cooperation and, since 1975, a steadily increasing volume of electricity trading starting from small amounts, long before an Electricity Agreement with the EU was under discussion. Still a new Electricity Agreement was fully negotiated in 2014, when the EU stopped the negotiations for political reasons and made the institutional framework agreement a mandatory prerequisite for further negotiations and the conclusion of the Electricity Agreement. However, cooperation in the area of electricity supply and also electricity trading currently works without an Electricity Agreement.

Small power station on the river of Thur. In a liberalised EU-power maket there would be definitely no place for the over 600 independent small and middlesized electric power companies owned by the communities and the cantons. (picture mt)

For decades, European electricity trading and supply to Switzerland was coordinated through voluntary cooperation within the UCTE (Union for the Coordination of the Transmission of Electricity), legally protected by the 1972 Free Trade Agreement and the GATT Customs and Trade Agreement to which Switzerland is a party. The Electricity Agreement as it is now planned, described by many Swiss politicians as “mandatory”, doesn’t contribute to the perfectly functioning electricity trade. It is like “bringing coal to Newcastle”. However, it is meant to serve as a means for Switzerland to ultimately bring its sovereignty to Brussels. For Swiss politicians, there seems to be no alternative but to completely open up the Swiss electricity market via the Electricity Agreement in an important area of public service, both for large consumers, as has already happened, and for private households, who can then obtain their electricity from private providers at home and abroad.

“The idea of self-sufficiency and public service has no place in the numerous studies and expert opinions. It seems to have been abandoned by the Federal Council.” (Kopie 2)

“The idea of self-sufficiency and public service has no place in the numerous studies and expert opinions. It seems to have been abandoned by the Federal Council.”

Switzerland will need more electricity imports

Due to the 2050 energy strategy, more and more electricity imports into Switzerland will become necessary. This is referred to as the “electricity gap”, which is said to arise around 2020. However, by 2015 Switzerland was only in a position to produce significant electricity surpluses in three summer months and to hardly achieve a reasonable balance of electricity imports and exports over the year. The situation will worsen if the Swiss nuclear power plants are shut down as planned and the expansion of new renewable energies continues as slowly as today. The political manoeuvring, the current uncertainty has lead to a situation that not even the trump card of the Swiss electricity generation, the hydropower, is being rapidly expanded. Federal Councillor Doris Leuthard, head of the Federal Department of the Environment, Transport, Energy and Communications, does not see this a problem. She wants to secure Switzerland’s power-supply with electricity from abroad. Logically, the Electricity Agreement is “mandatory” for her. However, in situations of widespread electricity shortages, each country will use up its own power with priority, and electricity imports from abroad will then no longer be ensured. The abundant capacity available in Germany today will be significantly reduced with the planned shutdown of the last nuclear power plants and of existing coal-fired power plants. Switzerland’s now planned “strategic reserve capacity” will also only be a drop in the ocean in an prolonged shortage period, especially towards the end of winter, when the water reservoirs are empty, and will not even suffice for short-term supply.

“Ultimately, in addition to the desired open market, the electricity agreement is a means to force Switzerland closer to the EU by linking it to the institutional framework agreement and to increase the pressure on Switzerland to conclude it. But the Electricity Agreement is definitely not needed for Switzerland’s electricity supply and electricity trading.”

Harassment around the Electricity Agreement Switzerland – EU

The planned market opening gives the opportunity for more turnover and profit, above all to the large and also foreign companies. It endangers the existence of Switzerland’s electricity supply system, which has grown over decades having more than 600 utilities at municipal and cantonal level. It is thus intended to ensure the supply of electricity to a Switzerland that can no longer fully rely on its own electricity production. This also means that potential foreign suppliers can supply electricity to the end customer in Switzerland, can participate in water concessions, offer in all Swiss projects and, for example, can buy Swiss power plants. In preparation for the required free market and the free choice of the utility company, the Swiss electricity grids have already been transferred to an independent grid company “Swissgrid” in anticipatory obedience. An electricity supply company may no longer have its own supply grid, as it was the case in the past. Access to a private customer or a major customer by other companies, including foreign companies, must not be hindered or prevented.
The Electricity Agreement with the EU is intended to regulate all requirements for an open market in Switzerland. It had already been practically completed by 2014. In this situation, after the vote on the mass immigration initiative, which did not go according to Brussels’ taste, Brussels introduced the coupling of the Electricity Agreement to an institutional framework agreement as a purely new politically motivated demand, and thus the Electricity Agreement was put on hold at that time. The EU negotiator and EU Commissioner Miguel Arias Caņete, apparently satisfied with the outcome of the negotiations, tried his best and proposed a provisional agreement in 2015 on the basis of the fully negotiated Electricity Agreement with Switzerland’s immediate participation in Europe-wide electricity trading, even without prior clarification of institutional issues, i.e. without the framework agreement. However, he was not able to assert himself against its EU Commission colleagues, who apparently pursue politically far reaching plans, namely to bring Switzerland very close to full EU membership by means of the Institutional Framework Agreement and to realise an open market on their terms.
Contrary to popular opinion, Switzerland with its pumped storage plants and reservoirs is not even really interesting for the EU as a reserve electricity supplier. Switzerland’s storage capacities are rather small in view of the huge quantities of volatile wind and solar power that might have to be substituted in the EU. It’s not about the power anymore. It is about economic liberalisation and the institutional framework agreement.

Electricity Agreement and the EU’s third Internal Market Package

The content of the Electricity Agreement, as it was probably negotiated, is not public. However, it can be expected to adopt the objectives listed in the EU’s Third Internal Market Package. These are ambitious environmental targets to be achieved by 2020, namely a 20% share of renewable energies, a 20% reduction in CO2 emissions (1990 basis) and a 20% reduction in energy consumption (1990 basis). These targets will probably be revised upwards again for Switzerland due to its good starting position. Fully open markets will also be included as a major and important objective. As already mentioned, the unbundling of ownership of electricity production and grids is already anticipated in Switzerland. The State Aid Act excludes certain subsidies and tax privileges, which must also be interpreted as aiming for privatised utilities which must no longer be owned by the municipalities or cantons. All activities in the field of electricity supply will have to be put out to international tender. In return, Switzerland will be able to sit at the table in all European regulatory bodies on the subject of electricity and at least find out what is planned in detail. Access to European regulatory bodies is still partially denied today. There are no more advantages for Switzerland.

The Federal Council is now only pursuing an open market

The Federal Council has been supported by a large number of consultancies in these matters. These are companies whose profile and history directly show the proximity to market liberal ideas (Frontier Economics), which from a purely economic point of view see the open market positively (Polynomics) or companies under clear American influence (Booz Allen Hamilton). There is a voice lacking that supports good Swiss policy and supports the interests of national utilities in Switzerland today, to keep them as granularly structure as possible. All consultants are pursuing the idea of a free market, other solidary, cooperative or communally organised forms are not taken into account. Nowhere is it mentioned that the supply contracts and capacity reservations with French nuclear power plants, which will soon expire, will no longer be possible in the liberalised market, and thus a significant pillar of today’s Swiss electricity supply will be lost. The idea of self-sufficiency and public service has no place in the numerous studies and expert opinions. It seems to have been abandoned by the Federal Council.

What is the Electricity Agreement?

Today, there is a well-functioning electricity trading, even with an office of the Swiss branch of the European electricity exchange EPEX in Berne. Switzerland has long been a transit country for large quantities of electricity to Italy. The links with the neighbouring EU-countries Germany, Austria and France work perfectly. Ultimately, in addition to the desired open market, the Electricity Agreement is a means to force Switzerland closer to the EU by linking it to the institutional framework agreement and to increase the pressure on Switzerland to conclude it. But the Electricity Agreement is definitely not needed for Switzerland’s electricity supply and electricity trading.    •