Market reforms spark political electricity

Schaer says market liberalisation requires a hands-on approach Keystone

More than two years after Swiss voters rejected plans for electricity market competition, liberalisation efforts are still proceeding in fits and starts.

However, in an interview with swissinfo, energy policymaker Dori Schaer says the impetus for reform is unprecedented – despite popular misgivings and a new legal setback.

The liberalisation process hit an unexpected stumbling block on Thursday when the competition authorities announced a probe into plans to set up a new national grid operator.

The probe means January’s planned launch of the new firm, Swissgrid, will be delayed by at least several months.

Schaer, the head of an expert group commissioned by the federal government to draft guidelines for a new liberalisation law, says the “tempo” of change is virtually unprecedented, given that the electorate rejected similar plans barely two years ago.

But she adds that the pressures for reform are also unprecedented – echoing the common view that the only choice is between organised change and a “free-for-all”.

On the domestic front, there is growing pressure from companies who are tired of paying the highest electricity prices in Europe – backed by a federal court ruling last year that the Swiss market is already open to competition in strictly legal terms.

Perhaps even more significantly, Switzerland – a major European hub for electricity transmission – is under growing pressure from the EU to open up its market or face retaliatory measures.

In the light of these and other factors, the federal government approved a new draft liberalisation law earlier this month, based on the findings of the Schaer group report.

swissinfo: The open electricity market will become reality in the EU in 2007. What will that mean for Switzerland?

D.S.: [On the transmission front,] we need two new organisations. First, we need Swissgrid as the grid operator to guarantee and regulate non-discriminatory transmission, and to ensure security of supply. The operating company must be independent in organisational and legal terms.

Second, we need a regulator, for control purposes and to negotiate with non-Swiss partners at the official level.

The idea is that both the operating company and the regulator would be provisionally anchored in the electricity law in the course of 2005. If parliament keeps to the timetable, the new law will come into force by summer 2007 at the latest.

That way, we would be ready to open the market for large and medium size users, which – while not making us quite “EU-compatible” – would, based on discussions to date, be acceptable to the EU. Foreign power companies are primarily interested not in households, but in large customers and corresponding transit rights [through Switzerland].

swissinfo: The government is proposing a new law, which would lead to market opening in two stages: by 2007 for larger companies and by 2012 for private customers. Is this realistic, just two years after the electorate rejected a market liberalisation law

D.S.: The tempo is indeed unusual – the expert group started work on a new draft legal framework just five months after the vote. There are three reasons for this: first, the government recognised what was [already] happening in the EU; second, the federal court confirmed that we already have an open market in [purely] legal terms; third, there is strong corporate pressure for competitive prices.

I am optimistic, because I feel there is growing willingness to accept [a compromise solution as foreseen by the new draft law]. This would continue to “spare” smaller consumers, who will be able to choose from 2012 whether they want to be part of the free market or not. If not, they will notice no change.

swissinfo: In the 1980s and 1990s, nuclear plants seemed to be consigned to the historical scrap-heap but now new plants are back on the agenda. What has changed?

Doris Schaer: The question of how to replace output once current nuclear plants cease operation is becoming increasingly pressing. The failure of anti-nuclear initiatives in 2003 has given proponents a fresh headwind. And nuclear power today is a major business. What’s more, there are growing hopes that new technologies with improved safety aspects and fuel efficiency will be developed, although the timeframe is still far from clear.

On the other hand, development of renewable energy sources is running up against clear boundaries. Electricity from plants powered by “new” renewable energies, such as biomass and biogas, wind, solar energy or geothermal energy, are simply not competitive.

swissinfo: Will the nuclear question – and therefore the environmental debate – be back on top of the political agenda within a few years, as was the case in the 1980s and 1990s?

D.S.: Yes, but not in a few years’ time – much sooner. The operating licence for the Mühleberg nuclear plant runs out in 2012, and it will then be a choice between closure and unlimited extension [subject to safety regulations].

Licences for other nuclear plants run out starting in 2020. When you think that approval and construction of a plant can take more than ten years, you realise that time is rapidly running out.

swissinfo: Renewable energy – excluding hydroelectricity – is having a hard time, and there has even been talk of ending the federal “Energy Switzerland” programme. Is this just a result of low oil prices in years gone by?

D.S.: As regards the future of “Energy Switzerland”, I am optimistic. The strong cross-party reaction to the government’s proposal to cut the programme means it may be slimmed down, but should continue.

The recent rise in oil prices and the issue of climate change have also increased awareness of this issue. People today know that oil supplies are limited, even if there is disagreement over the time frame. What is more, oil is far too valuable just to be burned.

swissinfo, Renat Künzi (adapted from the German)

Key facts

In 2002, Swiss voters rejected plans to liberalise the electricity market along EU lines.
In 2003, the government set up an expert group to find a solution allaying fears that competition could endanger security of supply.
The Schaer report formed the basis of the latest government proposals, which must now be approved by parliament.

In brief

Schaer says the national grid operator would guarantee equal access for all producers and ensure security of supply.

The speed with which the government has come up with new reform proposals is virtually unprecedented – but so is the situation.

And Schaer says the issue of new nuclear plants will top the political agenda again “very soon”.