CKW launches a future-facing model for electricity pricing

Axpo’s Swiss subsidiary CKW is introducing a new type of electricity tariff from 2025, demonstrating what the future of energy might look like. The tariff offers incentives for customers to spread their electricity consumption as much as possible throughout the day, helping to prevent unnecessary power peaks in the grid.

The conventional electricity tariff model with high and low tariffs, still widely used today, dates from a time when there was significantly less variability on the generation side, with low consumption at night and peak consumption at noon and in the evening. However, the expansion of solar power generation has seen production peaks increase and become more irregular. Electricity consumption is also rising sharply as the adoption of electric vehicles to transport people and goods continues to increase, while domestic and commercial demand is growing for air and ground source heat pumps. 

As a result of these and other factors, electricity surpluses in summer and shortages in winter look set to worsen in future. The challenge over the coming years is threefold: integrating into the energy system as much photovoltaic, e-mobility and electric heat pump capacity as possible; continuing to invest in the expansion of power generation and grid infrastructure; and keeping costs for domestic and business users as low as possible.

This rapidly evolving situation is putting a particularly heavy strain on grid infrastructure, which must be able to reliably transport the additional energy produced and consumed. This is why reinforcing the grid with new power lines and transformer stations is so essential. Every year, the Axpo Group invests tens of millions of francs in its grid in Switzerland, which covers around 10,000 kilometres.

Tariff incentivises more targeted daytime use of solar power

CKW’s new tariff model rewards customers who distribute their consumption as much as possible throughout the day, thereby reducing the burden on the grid. This not only reduces the strain on infrastructure but also results in lower costs for customers who adjust their electricity consumption.

Specifically, this means that high and low electricity prices for day and night-time consumption are no longer applicable. By implementing this change, CKW aims to incentivise more targeted use of solar power during the day. The utility’s grid demand rate for private customers makes it pay to not burden the grid with high power peaks. For some time, CKW has been applying this pricing model to business customers with an annual consumption of more than 50,000 kilowatt hours (kWh). Under the new grid demand rate, the price is calculated not only on kWh consumed but the maximum power used, which is measured in kilowatts (kW).

This innovative and forward-thinking approach only became possible because CKW became the first major utility company in Switzerland to replace all its conventional electricity meters with digital smart meters.

Further innovative tariff models are being considered 

The new tariff model, enabled by the switch to smart meters, has also laid the foundation for CKW to offer further innovative tariffs in future. For example, in the medium term the utility intends to introduce different summer and winter electricity rates. During daytime hours in summer, Switzerland will increasingly enjoy electricity surpluses thanks to the large-scale expansion of photovoltaic systems. As a result, prices will fall in summer while rising in winter.

Power peaks could also be dynamically priced in future. This would create a targeted incentive to consume electricity at lunchtime on sunny days, for example. Conversely, it could relieve the grid during periods of peak demand by intelligently controlling flexible consumption such as the charging of electric vehicles or use of heat pumps and hot water boilers.