The Swiss Federal Office of Energy (SFOE) has today published a Frontier study, which analyses the suitability of the Swiss market designs to guarantee a continuous secure energy supply in the medium and long-term.
The European electricity market is changing with its increased focus on renewable energy, while coal and power plants are becoming less important in a number of countries. The restructuring of the wider energy system has triggered a debate about secure energy supply, which is particularly relevant for those countries with a clear focus on renewable energy.
The SFOE commissioned Frontier to investigate and evaluate potential market models for the Swiss electricity market. Special features of the Swiss electricity market are taken into account, such as its very high share of hydroelectric power, whose generation varies greatly depending on the season.
The main findings of the study can be summarised as follows:
- While the current Swiss energy-only market design is suitable to ensure a secure energy supply, we propose measures for further development, such as an amplification of the current price signals (compensating energy prices) in critical situations.
- A strategic reserve can be a comparatively inexpensive additional hedge to secure power generation in potentially critical periods towards the end of the winter and spring.
- Comprehensive capacity mechanisms such as those implemented in the UK or France, for example, will not be needed in the foreseeable future in Switzerland, given the high levels of current and foreseeable generation capacity.
- The market models proposed by the Swiss energy industry, Contracts for Differences (CfD) and Supply Security and Climate Change (VKMM), are not suitable to ensure a sufficient supply of energy in scarcity situations in a targeted and cost-effective manner.
Frontier regularly advises public and private clients on market design and energy turnaround issues.
For further information please contact Miriam Rau on m.rau@frontier-economics.com, or call +49 221 337 130).