Electricity agreement: Switzerland’s full integration into the EU internal market

At a press conference in Bern on 20th December 2024, President of the Swiss Confederation Viola Amherd and President of the European Commission Ursula von der Leyen announced the successful conclusion of negotiations between Switzerland and the EU. The overall package includes an electricity agreement: If this agreement comes into force, Switzerland would become part of the EU internal electricity market. This would open up new opportunities for cross-border electricity trading, improve security of supply and create incentives for the further expansion of renewable energies.

Now that the negotiations have been concluded, the formal proposal, comprising the agreement package, legislative adaptations, and accompanying measures, can be drafted. According to SRF Tagesschau, the Swiss Federal Council plans to start consultations on the outcome of the negotiations on the framework agreement of 20th December 2024 before summer 2025. A total of four federal decrees are to be submitted: one decree to stabilise the bilateral path and three separate decrees for the new agreements, including the electricity agreement. The subsequent consultation marks the start of the parliamentary legislative process, including a possible referendum. It is possible that the Swiss electorate will vote on the individual federal decrees. According to the press release issued by the Federal Department of the Environment, Transport, Energy and Communications (DETEC), the Federal Council will take a final decision on the structure of the package and the type of referendum when the consultation is in progress. In parallel, the agreement must also be ratified by the EU. 

The following analysis of the negotiated Electricity agreement is based on the two-page “Electricity” fact sheet published by the Federal Council on 20th December. The wording of the agreement is not yet known. According to the Swiss Federal Council, its negotiating objectives have been achieved. 

EU internal electricity market: full participation of the Swiss energy industry 

The agreement is supposed to ensure non-discriminatory access to the EU internal electricity market for Swiss energy companies: they will receive equal market access, e.g. to relevant trading platforms, thereby benefiting electricity trading, grid stability, and security of supply.

Swissgrid: full integration into the European power grid 

Swissgrid, which operates Switzerland’s transmission grid, is to be integrated into the processes of the European Union for maintaining and improving grid stability as an equal member in the future. This reduces unplanned electricity flows and improves the integration of the Swiss infrastructure into the European grid. Measures to enhance cooperation between Switzerland and the EU are to be taken as of now, i.e. even before the electricity agreement comes into force. 

Full liberalisation of the Swiss electricity market 

In the future, all Swiss end users should be able to choose their electricity supplier freely. However, according to the results of the negotiations, households and smaller companies will continue to have the option of basic supply with regulated prices. This reform creates more freedom of choice for consumers without weakening consumer protection. 

Long-term contracts (LTCs) and border prioritisation France-Switzerland 

A seven-year transition period has been agreed for the abolition of Switzerland’s privileged access to the France-Switzerland cross-border capacity – for the long-term electricity supply contracts between Swiss energy companies and the French energy company EDF – as requested by the European Commission. The agreement also foresees a financial compensation for the affected Swiss contractual partners. 

Swiss hydropower 

According to the Swiss Federal Council’s fact sheet, the electricity agreement should contain neither specifications regarding the amount of water fees nor the manner in which concessions for the operation of hydropower are awarded. Existing support mechanisms for hydropower plants are safeguarded, which will promote investment in this important energy source. 

Security of supply 

According to the “Electricity” factsheet, the electricity agreement ensures that EU member states will not be allowed to reduce cross-border capacities with Switzerland, not even in the event of an energy crisis. This would eliminate possible uncertainties regarding the application of the EU's so-called 70% clause. (According to the 70% clause, 70% of the cross-border capacities must be made available for trading. Without an electricity agreement, there could be an optimisation of intra-EU cross-border capacities to the detriment of cross-border capacities with Switzerland). 

The construction of reserve power plants in Switzerland should remain possible. A transitional period of six years agreed in the negotiations allows Switzerland to gradually align existing reserves that do not comply with the electricity agreement to EU law without endangering its security of supply. 

Expansion of renewable energies 

The result of the negotiations includes an ambitious but non-binding goal for the expansion of renewable energies in Switzerland. In addition, the most important Swiss measures to promote renewable energies could be safeguarded. 

Environmental law 

According to the factsheet, Switzerland won’t have to adopt any EU environmental law, provided that equivalent levels of environmental protection in the Swiss electricity sector can be guaranteed. It will still be possible to implement stricter rules in Switzerland (a so-called 'Swiss finish'). 

Cantonal competencies

The agreement is not intended to affect the cantons' competencies in matters such as electricity consumption or energy efficiency measures. This would preserve the cantons' competencies in energy policy. 

European hydrogen economy and renewable gases 

As of now, the negotiation result includes the option for more extensive cooperation in the fields of hydrogen and renewable gases. 

Conclusion 

The Switzerland-EU electricity agreement, if ratified and implemented, would represent a milestone for the bilateral energy cooperation. It would ensure Switzerland's integration into the EU internal electricity market while creating the basis for a secure energy supply. 

Ahead of the formal signing scheduled for spring 2025 and the subsequent legislative process, extensive work by the Federal Administration is required before the Swiss parliament gets involved in 2026. The way in which the agreement is implemented and the actual entry into force are subject to the successful completion of the legislative process. Moreover, a referendum could be initiated against the overall package and possibly also against the electricity agreement itself, which would result in a vote on the federal level. 

Axpo is available to support the Swiss Federal Administration, politicians and the public with its energy expertise and experience in the Swiss electricity market and in the liberalised EU markets.