Electricity Act – implementation is progressing

In mid-February, the Federal Council adopted the second package of ordinances relating to the Electricity Act. In addition to topics such as the minimum feed-in remuneration for renewable energies, local electricity communities or the curtailment of solar installations, various requirements for grid tariffs were also defined. There were improvements for small-scale solar producers compared to the consultation. But there are also losers. An overview.

On 19 February 2025, the Federal Council adopted the second package of ordinances to the Electricity Act (press release in German). The first package of November 2024 already defined the provisions applicable in 2025 (e.g. promotion of renewable energies, procurement requirements for the basic supply, winter reserve and efficiency obligation scheme), the second package now contains the remaining provisions that will come into force from 2026 and focuses on grid issues. Some important provisions for small-scale producers and consumers are also included.

(Minimum) feed-in remuneration

Distribution system operators will continue to be obliged to purchase electricity from small-scale producers, e.g. solar installations, in their supply area. The Electricity Act has introduced a harmonised feed-in remuneration based on quarterly market prices. This applies if the grid operator and the producer cannot agree on a different tariff. In order to give small-scale consumers a certain degree of investment security despite the link to the market price, a minimum feed-in tariff was specified, the amount of which has now been set by the Federal Council by ordinance. It is differentiated according to the size of the plant and the amount of self-consumption. For small solar plants, for example, it is 6 cents/kWh. For larger systems with self-consumption, it is reduced as the size of the system increases. For systems without self-consumption, it is actually slightly higher than for small systems.

The minimum feed-in tariff is high in view of falling electricity prices, especially in summer. This is good news for system owners. It provides them with investment security, while also allowing them to benefit from high market prices. However, small consumers without their own systems are the losers in this implicit support. The costs for the remuneration of electricity are included in the regulated basic supply and are thus borne by the consumers with basic supply. However, system and grid stability are also to some extent the losers. The quarterly review means that there is a lack of incentives to control the production of the systems over time. In fact, the minimum feed-in tariff makes it financially attractive to continue feeding electricity into the grid when prices are negative and the system is under stress. The Swiss parliament is already discussing how to address these problems by reforming the current feed-in tariff system (e.g. hourly tariffs, suspension of minimum tariffs when prices are negative).

Local electricity communities

The Electricity Act introduced the possibility of forming so-called local electricity communities (LEG). This model has two advantages: firstly, the participants in the LEG benefit from reduced grid usage tariffs for the electricity exchanged among themselves. Secondly, it also allows small consumers, who do not actually have market access, to purchase electricity from third parties in their area. It is thus, to a certain extent, a ‘light’ form of market liberalisation. The LEC also represents an expansion of the existing ‘consortia for own consumption (ZEV).

The Federal Council has now defined by decree that the LEC will benefit from a 40% discount on the grid usage fee for internally exchanged electricity. Compared to the consultation, the discount has been increased again. The winners, in addition to the participating consumers, are also the small-scale producers whose electricity supplied within the LEG gains in value as a result of the discounts. Conversely, there are also losers. The resulting loss of income for the grid operators will ultimately have to be borne by the remaining consumers through rising grid usage tariffs. It is not a given that the spread of LEG through local electricity exchange will significantly reduce grid expansion and thus overall costs. The Federal Council also expressed doubts about this in the explanatory report on the ordinances.

Dynamic grid tariffs

With the ordinance package, the Federal Council has now explicitly allowed the introduction of dynamic grid usage tariffs. Dynamic tariffs are characterised by the fact that they can change during the course of the day. Transparent and comprehensible tariff structures are required, along with incentives for grid-friendly behaviour. Dynamic tariffs can be differentiated locally within a grid area. The basis for setting the level of the dynamic tariff is the expected grid load for the following day.

With dynamic grid tariffs, distribution system operators can create incentives to adjust consumption in the interests of grid stability. This could help to bring more flexibility into the system. However, for there to be a relevant effect on the system as a whole, many of the 600 distribution system operators would also have to implement such tariffs. The new regulation on dynamic tariffs is limited to the grid usage tariff, which only makes up 40% of the total electricity price. Dynamic tariffs for energy supply in the basic supply are still excluded as a standard product, although they are possible in principle as voluntary optional tariffs.

Capping of production facilities

The Electricity Act lays the foundations for capping (solar) facilities up to a certain production loss free of charge. This is intended to enable distribution system operators to break the strong production peaks associated with solar facilities and thus prevent inefficient grid expansion. The Federal Council has now defined by decree that capping may lead to production losses of up to 3%. The background to this is that by limiting solar installations to 70% of their peak output, grid expansion can be massively reduced. At the same time, the total production of solar installations is only reduced by about 3%, and this tends to occur at times when market prices are very low. Furthermore, solar operators can continue to consume the electricity themselves during curtailment. The curtailment of solar installations thus has a very good balance between great benefits for the overall system and small losses for solar installation owners.

While the Federal Council has specified the framework conditions for curtailment, questions regarding its implementation remain. For example, it will be necessary to define which plants should be dynamically curtailed and where a flat-rate curtailment at the grid connection point is more appropriate. The ordinance also stipulates that larger plants using other technologies (e.g. flexible hydropower plants) can also be curtailed, which raises questions about the appropriateness of this.

Other topics and unresolved implementation issues

In addition to the topics mentioned above, the ordinances also contain many other provisions, in particular for distribution system operators, for example on the design of metering tariffs, the reimbursement of grid usage fees for storage facilities or the cost allocation between different grid levels.

Together with the first package of final ordinance provisions, all the requirements on the part of the Federal Council have now been defined. However, many implementation issues remain, which now need to be further defined by the electricity industry, among others. In addition, future revisions of the ordinance will be needed to resolve problems that have already been identified. The Electricity Act will therefore continue to occupy the authorities and the industry in the future.