Alternative Energy & Power 2023 Comparisons

The Swiss energy market is highly fragmented, with more than 900 market players active in the electricity sector alone, differing substantially in terms of size and scope of activities. While the operation of the national high-voltage transmission network is in the hands of one single national transmission system operator (TSO), the generation, distribution and supply market is in the hands of a large number of generators, distributors and utilities. The majority is made up of approximately 630 utilities which are active in the distribution and supply of energy. Most of them are owned by local governments and many also supply water and gas, as well as electricity. They operate the local distribution network and connect it, directly or indirectly, to the national transmission network. Some of these utilities, particularly the larger ones, also generate electricity, but mostly they purchase electricity from the key players in the Swiss market, such as Alpiq, Axpo, BKW, EWZ and Repower. These players account for most of the electricity generated in Switzerland and own the largest power plants in Switzerland, together with larger utilities. They are largely state owned. In addition to the large key players, a significant and growing number of smaller, local generators also generate electricity, especially from alternative energy sources. Today, more than 170,000 solar energy systems have already been installed. The national transmission network is owned and operated by Swissgrid, acting as Swiss TSO, which is owned by approximately 30 generators and utilities, most of which are state-owned.

The Swiss Federal Constitution allocates certain powers regarding energy matters to the federal government, while other powers remain with the 26 cantons that make up the Confederation. Most importantly, the federal government is responsible for determining the strategy and principles for the use of domestic and renewable energy in Switzerland, and for legislation in the field of the transmission and distribution of energy, nuclear energy and the use of hydropower to generate energy. In other fields, legislative authority remains with the cantons, meaning that the applicable law is both federal and cantonal law, leading to fragmented and varied legislation.

On the federal level, the most important laws governing the generation, transmission and distribution of energy are as follows:

• the Federal Act on Energy (the “Energy Act”);
• the Federal Act on Electricity (the “Electricity Act”);
• the Federal Act on Electricity Supply (the “Electricity Supply Act”);
• the Federal Act on Nuclear Energy (the “Nuclear Energy Act”);
• the Federal Act on Utilisation of Water Power (the “Water Power Act”);
• the Federal Act on the Protection of Waters (the “Water Protection Act”); and
• the Federal Act on the Reduction of CO₂ (the “CO₂ Act”).

In addition, there are a number of federal ordinances that implement the above laws and contain further detailed provisions.

The largest entities active in the generation of energy include Axpo Holding AG (owned by cantons and cantonal utilities), Alpiq Holding AG (shares delisted, mainly state-owned), BKW AG (shares publicly listed, majority of shares owned by the Canton of Bern), Elektrizitätswerke der Stadt Zürich (EWZ, administrative unit of the city of Zurich) and Repower AG (less than 15% of the shares are in free float and traded on OTC exchange platforms – more than 85% are owned by Elektrizitätswerke des Kantons Zürich (EKZ), the Canton of Graubünden and UBS Clean Energy Infrastructure KmGK). Those few entities own and operate – directly or indirectly – the largest power plants in Switzerland, including hydro and nuclear power plants.

The national transmission network is owned and operated by Swissgrid AG, whose shareholders are mainly state-owned generators and utilities. The largest shareholders of Swissgrid AG include BKW Netzbeteiligung AG, Axpo Power AG, Axpo Solutions AG, EWZ, SIRESCO Société d’Investissement de Suisse occidentale SA and Centralschweizerische Kraftwerke AG.

The distribution facilities are owned by local distributors and utilities, most of which are owned by cantons and local governments.

Generally, Switzerland is open to foreign investments and there are to date no general laws that would provide for a foreign investment review process or general investment limit thresholds in Switzerland. Foreign investments are also permitted in the energy industry. However, the introduction of a foreign investment control regime is now a priority on the political agenda. After being tasked by the Swiss Parliament with preparing a draft bill, the Swiss federal government presented a preliminary draft bill of a Federal Act on Foreign Investment Control (the PD-FDI) in May 2022. The PD-FDI places takeovers of significant domestic market players in the power industry (generators, distributors, and utilities) by foreign investors under investment control (ie, an approval requirement). Given that the draft bill was met with criticism in the public consultation, the Federal Council has instructed the federal administration to present a revised draft by the end of 2023.

Under currently applicable law, certain limitations apply. For instance, in view of the strategic importance of the national transmission network owned and operated by Swissgrid, the Electricity Supply Act requires that cantons and municipalities own the majority of Swissgrid. Moreover, the existing shareholder cantons, municipalities, and Swiss-controlled utilities are granted a statutory pre-emptive right for Swissgrid shares. For power plants co-owned by several generators, which is the case for many of the largest power plants, shareholders’ agreements are typically in place that grant pre-emptive or similar rights to the co-owners, thus limiting potential (foreign) third-party investments. In addition, utilities are often organised as public-sector entities subject to special cantonal or municipal legislation that effectively excludes or limits foreign investment. Finally, there is legislation that controls and limits the acquisition of Swiss real estate by foreigners (so-called Lex Koller). This is not specific to the energy industry, but it may be relevant when it comes to foreign investments in this industry. Furthermore, the Swiss Parliament adopted a parliamentary initiative, according to which this legislation shall be extended to strategic infrastructure of the energy industry, including hydropower plants, nuclear power plants, electricity networks and gas networks. The National Council approved the preliminary draft in June 2023. The legislative process is not yet complete, as the approval of the Council of States is pending.

While there are no general laws limiting the sale of generation and distribution assets, limitations may result from the fact that authorisations and licences granted to power generators, in particular authorisations for the construction and operation of nuclear plants, as well as public law concessions to use hydropower, may only be transferred to a third party with the consent of the authority that granted the authorisation or concession. Consent is usually granted if the third party fulfils the prerequisites that apply to the grant of the authorisation or concession. While the need to obtain consent for the transfer typically arises in the case of asset transfers, it may not be triggered in the case of share deals.

The Electricity Supply Act requires the Swiss transmission network to be owned and operated by Swissgrid acting as the national TSO. Accordingly, Swissgrid may not divest assets or businesses essential for the operation of the transmission network, which prevents assets that are part of the transmission network from being transferred to a third party. So-called “merchant lines” (ie, cross-border lines that have been realised by private investors) may be exempted from this regime. Such merchant lines may be owned by the private investors for the period of the exemption and the obligation to grant third parties non-discriminatory access does not apply. Furthermore, the Electricity Supply Act requires that the majority of the capital and voting rights of Swissgrid are owned – directly or indirectly – by cantons and local municipalities. ElCom (the Swiss Federal Electricity Commission) is responsible for overseeing the status and maintenance of the transmission network that Swissgrid is required to operate.

In addition to these sector-specific laws, the Swiss Competition Commission exercises merger controls under the Federal Act on Cartels (see 2.5 Surveillance to Detect Anti-competitive Behaviour).

Various authorities and other stakeholders are involved in overseeing and administering the electricity supply and the development of transmission facilities; there is no one single authority.

The responsibility for the strategic planning and development of the transmission network lies primarily with Swissgrid, the national TSO, which liaises with the Swiss Federal Office of Energy and ElCom for this purpose. Swissgrid is also responsible for operating the transmission network safely and reliably; it co-operates with generators to ensure the stability of the network. Generation planning is mostly done through co-operation among generators, trading companies and utilities, together with Swissgrid, monitoring supply and demand for electricity and ensuring the ongoing stability of the network.

ElCom has been established as an independent regulatory authority to monitor and enforce compliance with the Electricity Supply Act. It monitors the development of the electricity markets, with the aim of ensuring a reliable and affordable supply of electricity in Switzerland; it also reviews the status and maintenance of the national transmission network operated by Swissgrid. If it believes that the safety and affordability of the electricity supply may be at risk, it may propose remedial measures to be implemented by the Swiss Federal Council. In addition, ElCom monitors electricity prices, regulates issues relating to electricity transmission and trading, and rules as a judicial authority on disputes relating to network access and network tariffs.

The Swiss Federal Inspectorate for Heavy Current Installations (ESTI) is the supervisory and regulatory authority for electrical installations (including high-voltage installations, low-voltage installations and low-current systems) other than those under the supervision of the Federal Office of Transport. ESTI ensures that these installations are designed, constructed and maintained in a safe manner.

Other authorities are also involved in overseeing compliance with regulation in the electricity market. For instance, the Swiss Federal Office of Energy is responsible for monitoring and enforcing compliance with the Energy Act and certain other federal acts, to the extent that the relevant powers are not delegated to ElCom or another regulatory authority.

With regard to Swiss nuclear power plants and related facilities, the Swiss Nuclear Safety Inspectorate (ENSI) is the national body responsible for their supervision. The statute that created ENSI provides for an independent board, whose members are directly elected by and report to the Swiss Federal Council. ENSI is responsible for ensuring that licence holders comply with their obligations under the Nuclear Energy Act. It has substantial powers to order measures to ensure compliance with nuclear safety and security requirements.

Recent significant regulatory changes mainly relate to the Federal Council’s Energy Strategy 2050, which aims to reduce the overall amount of energy consumption, increase energy efficiency, phase out nuclear power, and increase the use of renewable energy sources. The cornerstones of the Energy Strategy 2050 have been implemented by the revised Federal Act on Energy which dates back to 2018. Under this Act, it is no longer permitted to grant authorisations for the construction of new nuclear power plants. Furthermore, the Energy Act sets out targets for the reduction of overall energy consumption and measures for strengthening renewable energy sources.

With effect from 1 June 2019, the Electricity Act and the Electricity Supply Act were amended with a view to facilitating the optimisation and future-proof development of the electricity network.

With effect from 1 June 2021, the Electricity Supply Act requires network operators to prepare a ten-year development plan in accordance with the scenario framework outlined by the Federal Office of Energy and the estimated future demand in their respective network area. The national TSO (Swissgrid) must submit its multi-year plan to ElCom for review.

Finally, a number of changes to the regulations promoting alternative energy sources have come into effect. For example, in the first half of 2021, ordinances were revised to refine the incentives for small solar power generation facilities and to reduce the corresponding red tape. Similarly, the Water Power Act was amended, effective as of 1 July 2020, to lower the hurdles in the context of environmental impact assessments for the purpose of renewing hydropower concessions. As per 1 January 2022, further regulatory changes have come into effect: the revised Energy Supply Ordinance sets out legal clarifications on the planning instruments and the thresholds that need to be met for hydropower plants to be considered in the national interest. Moreover, the revised ordinances incentivise energy efficiency measures and implement regulatory changes in the EU law related to the efficiency of electrical equipment. The package includes measures to optimise the grant of subsidies for solar systems. With effect from 1 January 2023, new investment contributions for renewable energy sources have been included in the Energy Act.

Revision of the Energy Act and Electricity Supply Act

The Federal Council presented a new draft bill of the Federal Act on a Secure Electricity Supply from Renewable Energy Sources, which includes important revisions of the Energy Act and the Electricity Supply Act. The Federal Council aims to strengthen the expansion of domestic renewable energy and Switzerland’s security of supply, especially during winter.

An important pending policy change is the full liberalisation of the Swiss electricity market. To date, only large customers (with an annual consumption of 100 MWh or more) can freely choose their electricity supplier; other customers must buy their electricity from the local utility. Several years ago, the Swiss Parliament had already decided to fully liberalise the market. However, the implementation of the liberalisation was delayed due to Switzerland’s negotiations with the European Union on a framework agreement on bilateral relations and on a bilateral agreement regarding Switzerland’s access to the European Union electricity market. After the negotiations with the European Union ended with no result in early 2021, the Federal Council presented a draft bill for a revision of both the Electricity Supply Act and the Energy Act in June 2021. One of the key goals of the proposed revision of the Electricity Supply Act is to also allow small consumers (ie, customers with an annual consumption of up to 100 MWh) to buy electricity from the supplier of their choice, thus abolishing the supply monopoly of local utilities in their network area. Under the revised law, consumers may choose, on an annual basis, whether to buy electricity from their local utility, which in that case would continue to be obliged to supply the electricity, or from a third-party supplier. However, the National Council as well as the Council of States have rejected the full liberation of the Swiss electricity market for customers with annual consumption of less than 100 MWh.

A second key goal of the proposed revision is the promotion of renewable, locally generated electricity, which is a central element of the Federal Council’s Energy Strategy 2050 (see 3.1 Climate Change Law and Policy). In particular, the draft bill of the Electricity Supply Act includes an obligation for electricity suppliers to offer a standard product consisting of electricity exclusively generated in Switzerland from renewable energy sources. Furthermore, the draft bill includes tools to strengthen the long-term security of the electricity supply in winter after the phase-out of nuclear power generation. First, a “winter surcharge” to be levied from electricity consumers will be introduced to finance additional large-scale storage power plants (hydropower) whose capacities can be reliably called up in winter. Second, the draft bill provides for a mechanism to establish a strategic energy reserve. This reserve shall ensure that sufficient electricity is readily available especially towards the end of the winter when the situation is particularly tight.

The proposed revisions aiming at promoting locally generated electricity from renewable energy sources include an amendment to the Energy Act. The draft bill of the Energy Act contains revised binding target values to be achieved by 2035 and 2050 relating to the expansion of hydropower and other renewable energy sources as well as the reduction of electricity consumption per capita. For this purpose, support measures for renewable electricity generation shall continue but will be brought closer to the market conditions. For example, large solar power plants would be promoted by means of competitive tenders.

Securing Electricity Supply in Winter

In particular due to import risks, concerns have arisen around the security of electricity supply in winter. Consequently, the Federal Council adopted, in early 2022, two mitigation measures for shortage situations:

• As per winter 2022/23, a hydropower reserve will be set up. This provides for power plant storage operators to retain a certain amount of energy in return for a fee, which can be called up when needed. The hydropower reserve is to be introduced by ordinance and later replaced by the regulation envisaged in the revision of the Electricity Supply Act mentioned above.
• The Federal Council instructed the Department of the Environment, Transport, Energy and Communications (DETEC) to draw up the necessary provisions for the construction and operation of peak-load (gas-fired) power plants. The reserve power plants are to be available in the event of extraordinary shortage and are to be operated in a climate-neutral manner.

Furthermore, by way of an emergency federal act, a bailout fund endowed with up to CHF10 billion will be set up to rescue insolvent system-critical undertakings in the power industry. Against the background of rising gas prices, a major player (Alpiq) submitted a request for financial aid to the Swiss authorities at the end of 2021. In 2022, another major player (Axpo), submitted a request for temporary liquidity support to the Federal Council due to extreme price increase on the energy market. The liquidity issue was triggered in particular by the high security deposits to be provided when trading on the power exchange in order to cover the difference between the transaction price and the current market value. The war in Ukraine has prompted reflection on the possibility that skyrocketing electricity prices may threaten the liquidity of system-critical players. To address concerns that a chain reaction could jeopardise Switzerland’s electricity supply as a whole (“too big to fail”), the Federal Act on Subsidiary Financial Assistance for the Rescue of System-Critical Companies in the Electricity Industry was adopted in October 2022 and will remain in force until 31 December 2026.

Due to its geographic situation and lack of natural resources, the Swiss electricity market is largely dominated by hydropower and nuclear energy. Almost two thirds of Swiss-generated electricity comes from hydropower, and approximately one third from nuclear power. Thus, the local generation of electricity is largely carbon-neutral. The need to increase the share of other renewable energy sources is mainly the result of the decision to phase out nuclear power. Furthermore, electricity consumption is expected to increase if the carbon-based fuels that are currently used for heating and transport are to be replaced by electricity.

The wholesale electricity market in Switzerland has been liberalised. The price is set by competitive offers among market players and, as such, is determined by supply and demand. Electricity is traded on foreign exchanges, as there is no power exchange in Switzerland. In the spot market, electricity for physical delivery is traded using day-ahead and intraday transactions. In addition, futures and forwards are traded, either for physical delivery or for financial settlement.

The import and export of electricity are permitted. In theory the export of electricity that is generated through hydropower requires authorisation from DETEC. However, this requirement has not been enforced in recent years, and it is currently of no practical relevance.

The Swiss transmission network is interconnected with the networks of Austria, France, Germany and Italy. While imports from Austria, France and Germany typically exceed exports to these countries on an annual basis, exports exceed imports for Italy. Therefore, the Swiss transmission network is used for the transit of electricity to Italy. On an annual basis over past years Switzerland mostly exported more electricity than it imported, although imports generally exceeded exports during winter. In 2021 and 2022, however, domestic electricity generation dropped while imports rose, which resulted in higher imports than exports. Given that Switzerland – due to the lack of a bilateral electricity agreement with the EU – is not included in the coupled electricity markets (flow-based day-ahead market and intra-day market), ElCom expects congestion management to be more challenging in the future. Swissgrid noted that the recent entry into force of the clean energy package in the EU further widened the regulatory differences with Switzerland. The likelihood of unplanned flows in the Swiss grid which may have a negative impact on grid security is, hence, increasing. Although Swissgrid is trying to solve the problem by concluding bilateral technical agreements with other European network operators, these agreements cannot replace electricity agreements with the EU.

In 2022, electricity generated in Switzerland was mostly generated by hydropower plants (52.8%), nuclear plants (36.4%), various renewable energy sources (9.4%) and conventional thermal power plants (1.4%).

There are no specific concentration limits in the energy market and, due to the largely fragmented market, this is not currently a major concern. Concentrations resulting from mergers and similar transactions may be subject to merger control exercised by the Swiss Competition Commission under the Federal Act on Cartels (see 2.5 Surveillance to Detect Anti-competitive Behaviour).

In general, the Federal Act on Cartels and other Restraints of Competition (the “Cartel Act”) prohibits anti-competitive behaviour. As per 1 January 2022, the concept of relative market power has come into effect: this means that not only dominant undertakings but also those with relative market power behave unlawfully if they are abusing their position in the market. Public enforcement of the Cartel Act is the responsibility of the Competition Commission (ComCo) and its Secretariat. The Secretariat monitors the markets, conducts investigations and prepares the decisions of the ComCo, while the ComCo acts as the decision-making body. If there is prima facie evidence of anti-competitive conduct, a formal investigation may be opened. The Secretariat has broad investigatory powers within such investigations. It may conduct dawn raids on the premises of companies or at the private residence of company employees, order the production of documents, and interview company employees. Based on the results of the investigation, the Secretariat will provide a draft decision to the ComCo, which then takes a decision, usually after holding a hearing of the company concerned. Fines for certain anti-competitive behaviour (hardcore anti-competitive agreements or unlawful practices by dominant undertakings) may amount to up to 10% of the turnover achieved in Switzerland by the infringing company’s corporate group in the preceding three financial years.

The reduction of CO₂ emissions in accordance with the Paris Agreement is one of the key goals of Swiss climate change policy and the Federal Council’s Energy Strategy 2050, complemented by Switzerland’s Long-Term Climate Strategy of January 2021. In 2019, the Federal Council set a net-zero target for 2050, thus requiring Switzerland to limit greenhouse gas emissions to what natural and technical reservoirs can absorb. However, the Swiss electorate rejected, in a popular vote on 13 June 2021, a revision of the CO₂ Act which would have implemented various measures (such as a controversial levy on air travel) aimed at reducing greenhouse gas emissions to finally achieve the target of halving CO₂ emissions by 2030 and the net-zero target by 2050. The CO₂ Act currently in force is hence not based on the net-zero target and stipulates only that by 2020 CO₂ emissions are to be reduced by 20% from the level they were at in 1990 (a goal that Switzerland narrowly missed). Until 2024, CO₂ emissions are to be reduced by another 1.5% each year, compared to the level in 1990. To comply with the obligations of the Paris Agreement, the Federal Council presented a new draft bill for a revision of the CO₂ Act with a different mix of measures and incentives than the previous proposal. Public consultation took place in the first half 2022 and the Swiss Parliament will discuss the bill in a next step. In parallel, a popular initiative (the so-called glacier initiative) demands that the net-zero target by 2050 be anchored in the Swiss Federal Constitution, accompanied by a ban on the use of fossil fuels as of 2050. However, the popular vote on the glacier initiative was withdrawn due to the Climate and Innovation Act being passed in June 2023.

Given that the majority of Swiss-generated electricity is CO₂-neutral, the focus of the CO₂ reduction laws is on reducing CO₂ emissions resulting from burning carbon-based fuels for heating buildings and transportation, through various measures to incentivise energy-related refurbishments of buildings, and by lowering targets for average CO₂ emissions of imported cars and trucks: as of 2021, the average level of CO₂ emissions from delivery and light articulated vehicles is 186 g/km. To enforce these goals, average CO₂ emission targets are determined for each car importer. If such targets are not achieved by the car importer, sanctions of up to CHF152 per gram of CO₂ emission in excess of the individual target average CO₂ emission may be charged for each vehicle put into circulation by the relevant importer. Finally, a CO₂ tax of up to CHF120 per ton of CO₂ is levied on the creation, extraction and import of carbon-based fuels. To compensate CO₂ emissions, an emission certificate trading system is available to companies that are active in an industry that operates facilities with large CO₂ emissions. In so far as participating companies compensate their CO₂ emissions with corresponding certificates or emission rights, they are reimbursed for the CO₂ tax.

There are no programmes to encourage or require the retirement of carbon-based generation, because carbon-based generation in Switzerland is not material.

The Energy Act encourages the development of renewable energy sources, including hydropower (which is already the source of almost two thirds of electricity generated in Switzerland), solar, wind, geothermal and biomass power. The target for the average annual production of electricity from renewable sources, excluding hydropower, is set at 11,400 GWh for 2035; the target for hydropower is set at 37,400 GWh for 2035 (compared to a total consumption of electricity in 2022 of approximately 57,000 GWh). In 2022, 6,000 GWh were generated from renewable sources excluding hydropower, exceeding the statutory target for 2022 (4,400 GWh). The draft bill for a revised Energy Act provides for higher target values (see 1.7 Announcements Regarding New Policies).

To achieve these goals, the Energy Act has introduced a variety of measures, including the following:

• The process for obtaining authorisation to construct renewable energy generation facilities shall be enabled by the stipulation that a national interest exists in the construction of such facilities, which is to be considered when balancing conflicting interests (such as protecting natural and cultural heritage, fisheries, shipping, the interests of private land owners, etc) in the authorisation process, and further by requiring cantons to implement a quick and efficient authorisation process.
• Distributors and local utilities are obliged to accept and compensate electricity generated from renewable energy that is fed into their network, provided that the generation facility does not exceed a capacity of 3 MW or an annual net output of 5000 MWh.
• Investment subsidies can be granted to support the construction of renewable energy generation facilities. Depending upon the type and size of the generation facility, either a one-time investment subsidy or a feed-in remuneration is granted. One-time subsidies are intended to be granted to small solar power generation facilities (less than 100 kWp). Larger solar power generation facilities, mid-size hydropower generation facilities (1–10 MW) and other renewable energy generation facilities may participate in the feed-in remuneration scheme, in which they have to sell the energy at market prices but can profit from certain contributions in addition to the price at which they sell. The administration of these investment subsidies is delegated to Pronovo AG, a subsidiary of the Swiss TSO, Swissgrid. New applications to the feed-in renumeration systems are no longer accepted.
• Large hydro plants with more than 10 MW power can be compensated with a market premium for electricity they have to sell for less than the production costs.

To finance these measures, a charge of up to CHF0.023 per kWh is levied by utilities on the electricity they supply to their customers.

The principal laws governing the construction and operation of generation facilities depend upon the type of generation facility, as follows.

Hydropower

For hydropower plants, the Water Power Act and the Water Protection Act are relevant on a federal level and govern, among other things, the use of hydropower and the protection of waters. Concessions to use hydropower for the purpose of generating electricity are granted by the competent authority of the relevant canton; if a generation facility serves the purpose of supplying electricity to federal transportation services, the Confederation has the power to grant necessary rights to the generator (this is mainly relevant for generation facilities built for the purposes of the Swiss national railway). Details of the authorisation process are regulated in the Water Power Act, which also contains the minimum requirements that need to be observed by cantonal authorities when reviewing and approving projects. In particular, it requires adequate public consultation prior to a concession being granted, and that nature, heritage landscapes, fishery and shipping are adequately protected.

Nuclear Power

For nuclear power plants, the Nuclear Energy Act governs the construction and operation of the relevant facilities. The operation of a nuclear power plant requires a general licence from the Federal Council and a further authorisation from DETEC. Whether or not a general licence is granted is within the discretion of the Federal Council. The decision is subject to confirmation by the federal parliament, and the parliament’s confirmation is subject to an optional public referendum. Therefore, whether or not a general licence is granted is essentially a political decision. Once the Federal Council has granted the general licence, a DETEC authorisation will have to be obtained in order to proceed with the project. Such authorisation is to be granted if the relevant prerequisites are met, particularly those regarding safety. The same process would apply to the construction of nuclear power plants as for their operation, but the Nuclear Energy Act prohibits the granting of authorisations for the construction of new nuclear power plants.

Other Forms of Power

There are no specific federal laws that govern the construction and authorisation of other generation facilities. They have to comply with applicable cantonal and federal law, and authorisations are granted by the competent cantonal authority, as defined under applicable cantonal law. Nevertheless, certain federal laws are also relevant for cantonal authorisations. In particular, the Energy Act requires cantons to implement an efficient authorisation proceeding for the construction, extension and renovation of facilities generating electricity from renewable energy sources. The purpose of this requirement is to support the construction of facilities that generate electricity from renewable energy sources. Additional federal authorisations (eg, under the laws mentioned in the following) may also be required, depending on the specific project. In such cases, the Swiss Federal Office of Energy is mandated to ensure adequate co-ordination among the various federal authorities that are involved, with the aim of also facilitating the authorisation process on the federal level.

Other Relevant Laws

The Electricity Act and the ordinances implementing its provisions are relevant for all generation facilities; in particular, they govern the safety of electrical installations. Provisions of a number of other federal laws also have to be taken into account by federal and cantonal authorities granting authorisations, including the Federal Act on the Protection of the Environment (the “Environment Act”), the Federal Act on the Protection of Nature and Cultural Heritage (the “Nature and Cultural Heritage Protection Act” or NCHA) and the Federal Act on Forests (the “Forest Act”), each of which provides for a certain minimum level of protection for its respective subject matter (ie, of the environment, nature, cultural heritage and forests) that may be affected by the construction and operation of generation facilities. In addition, the Energy Act states explicitly that the construction of large generation facilities using renewable energy sources is in the national interest, which facilitates the issuance of authorisations in practice.

As there is no one single law that applies for all generation facilities, the process may differ according to the type of generation facility and the canton in which authorisation may have to be obtained. Typically, the process is started with a request to the competent authority, which will review the project and assess, in particular, safety considerations, the impact on nature and the environment, the affected local community and further specific private interests (eg, of affected land owners) that are at stake. Usually, public consultation is required and local municipalities as well as private persons are given the right to file complaints where their interests are at stake. Decisions of the competent authorities are subject to court review upon appeal.

The typical terms differ depending on the type of generation facility and the canton in which the authorisation is obtained. The authorisation is issued to a certain project owner (ie, the legal entity that obtains the authorisation), and a transfer to a third party usually requires the authorisation of the authority that has granted the initial authorisation. Furthermore, authorisations will typically include provisions regarding the scope and purpose of the project and the authorisation, safety requirements that need to be adhered to during the construction phase and operation, reporting obligations, and measures that need to be implemented to protect and minimise the impact of the project on nature and the environment. Authorisations will also include provisions regarding expropriation rights granted to the project owner, and the terms on which expropriations are to be compensated. The authorisation may further determine a fee that is payable in consideration for rights to use public land or to use hydropower. Authorisations are limited in time and have to be renewed from time to time. In particular, concessions to use hydropower are limited and granted for a maximum of 80 years.

To obtain an amendment or relaxation of a term or condition of an authorisation, a request to the authority that granted the authorisation is typically required.

As a matter of principle, the right to expropriation may be granted to a project owner as part of the authorisation to construct the generation facility. According to the Federal Act on Expropriation (the “Expropriation Act”), the right to expropriate land or similar rights can be claimed for facilities that are in the interest of the Confederation or a large part thereof, as well as for other public interests acknowledged by federal law. Given that the supply of electricity is an eminent national interest, in principle it is possible to claim expropriation rights for the construction of generation facilities. This is expressly stipulated in some of the laws governing the construction of generation facilities, such as the Water Power Act. However, such a right may only be claimed if and to the extent that it is proportionate in view of the project at issue. Land owners have to be fully compensated for the expropriated rights.

The process for obtaining expropriation rights is mainly regulated in the Expropriation Act. It is initiated by the filing of the request to obtain the project authorisation. The project plans have to be published, and affected land owners need to be informed so that they can object or file claims for compensation. Objections and compensation claims are reviewed by a valuation committee, which will hold a hearing with the project owner and the land owner and try to negotiate an agreement between the parties. If no agreement can be reached, the decision as to whether or not to grant the expropriation right is usually within the power of the authority that is competent to grant the project authorisation, and the decision on the amount of the compensation is made by the competent valuation committee. Decisions are subject to court review upon appeal.

The most detailed regulations on the requirements for decommissioning a generation facility are stipulated in the Nuclear Power Act and apply to nuclear power plants only. To decommission a nuclear power plant, the owner of the plant must establish a decommissioning plan detailing the timeline, the steps to be undertaken, protection measures to be implemented, how nuclear waste will be disposed of, the cost of the project, and how sufficient funding is guaranteed by the owner. The decommissioning is ordered by DETEC, which may also determine which steps need prior sign-off by the supervisory authority (in particular, ENSI). The Nuclear Power Act further establishes a decommissioning fund that is to be funded by owners of nuclear facilities and that contributes to the costs of the decommissioning of nuclear power plants. Following the decision to phase out nuclear power by 2050, it is expected that all Swiss nuclear plants will be successively decommissioned as they reach the end of their life cycle. In December 2019, the first nuclear power plant (Mühleberg) was taken off the network; its decommissioning started in early 2020.

In principle, the Water Power Act provides for facilities to revert to the community that owns the land where a plant was erected upon the expiry of the concession. In view of this reversion right, the owner is required to maintain the plant in a good working condition until the end of the concession. The concession may also impose specific obligations regarding the decommissioning of the facility.

There are no specific provisions regarding the decommissioning of other generation facilities, but general principles of public law, including those applicable under the Environment Act, require the owner of a generation facility to ensure its safety; they also require that the facility is safely decommissioned at the end of its lifetime.

The key federal laws that govern the construction and operation of transmission lines and associated facilities are the following:

• The Electricity Act which, together with certain implementing ordinances, governs safety and other requirements that electric distribution facilities have to comply with, and the process for obtaining authorisations to construct electric distribution facilities, among other things. It also contains provisions regarding liability and expropriation rights.
• The Electricity Supply Act which governs, among other things, the strategic planning of distribution networks and obligations of the network operators, which will be further addressed below.

A federal sectoral plan is, in principle, required in order to construct transmission lines and associated facilities. At the same time, the Transmission Lines Sectoral Plan is the overarching federal planning and co-ordination instrument for the further development of high-voltage transmission lines. The Swiss Federal Office of Energy is, in co-operation with the Federal Office for Spatial Development (ARE), responsible for the administration of the sectoral plan. Decisions in the sectoral plan proceeding are binding on the authorities as well as the entity submitting the application. Moreover, the sectoral plan adopted by the Federal Council is not subject to legal review. The Transmission Lines Sectoral Plan is currently undergoing revision and a public consultation took place early 2022. As the conceptual part of the Transmission Lines Sectoral Plan dates back to 2001, and the legal basis in the field of electricity transmission lines has changed considerably since then, the Federal Council approved the total revision of the conceptual part of the Transmission Lines Sectoral Plan in June 2023.

The construction of transmission lines also requires a federal planning authorisation, which can – as a rule – only be granted once the sectoral plan is established. Planning authorisations are granted by ESTI or, if objections cannot be resolved or if the federal offices involved have dissenting opinions that cannot be settled, the Federal Office of Energy. The planning authorisation encompasses all authorisations required on the federal level; no additional cantonal or local authorisations are required.

A sectoral plan and planning authorisation are required in order to construct a transmission line and associated facilities. The process to include a project in the sectoral plan includes two steps and is initiated by the project owner (usually Swissgrid) filing a request to the Swiss Federal Office of Energy, including proposals for planning territories. Prior to filing such a request, the project owner usually seeks a co-operation agreement with the affected cantons to support and co-ordinate the request. In a first step, a monitoring committee including members of federal and cantonal authorities, as well as environmental protection organisations, is set up. The monitoring committee issues a recommendation on the planning territory. Following review by the Swiss Federal Office of Energy and co-ordination with other authorities, a specific planning territory is defined by the Federal Council. In the second step, following a recommendation by the monitoring committee, public consultation and co-ordination with other authorities, a planning corridor within the planning territory is defined and included in the sectoral plan. The competent authority for taking decisions on the sectoral plan is the Federal Council. Its decisions cannot be appealed.

On this basis, the project owner can then prepare a specific project, for which a planning authorisation from ESTI will have to be obtained. This process is initiated by filing a request to ESTI, specifying the details of the project and providing all relevant planning documentation. For the construction of transmission lines, an environmental impact assessment usually has to be conducted prior to the filing of the request. ESTI will review the request and forward it to the cantons that are affected by the project (typically, the cantons where the project will be realised). The affected cantons have three months to comment; local public consultation is required during that time. Private persons who are specifically affected by the project (eg, because they own land in the perimeter of the project or because they may be affected by expropriation required to complete the project) may file objections or ask for compensation, and municipalities may file objections to safeguard their rights. At the same time, ESTI will consult with other federal departments and involve the competent valuation committee if expropriations are required. After public consultation, ESTI will attempt to resolve all objections and, if successful in doing so, will issue the authorisation. If objections cannot be resolved or if federal offices involved have dissenting opinions that cannot be aligned, ESTI will forward the matter to the Federal Office of Energy to render a decision. The purpose of this planning authorisation procedure is mainly to verify whether construction projects meet the applicable safety requirements and comply with environmental law, and whether legitimate private interests are duly respected. Planning authorisations are subject to court review upon appeal.

The duration of the entire process for obtaining an authorisation to construct a transmission line (including the process for inclusion of the project in the sectoral plan) may take more than ten years, and appeals may further extend the time taken.

The planning authorisation will typically state that construction work may only be initiated once the authorisation has become legally binding (ie, after the expiry of the deadline to file appeals), that it will expire if construction is not initiated within three years of the authorisation becoming legally binding, and that the facilities have to be constructed in accordance with the approved plans. It will also include conditions to be observed, particularly in relation to the implementation of measures to ensure safety, and the protection of nature and the environment. Where expropriations are needed, the relevant terms and conditions will be detailed in the planning authorisation.

The right to expropriation may be granted to the project owner as part of the grant of the planning authorisation to construct the transmission line. However, this right may only be claimed if and to the extent it is proportionate in view of the project at issue. Land owners have to be fully compensated for the expropriated rights.

The process for obtaining expropriation rights is mainly regulated by the Expropriation Act. The process is initiated by the filing of the request to obtain the planning authorisation, and it will be included in the respective process (the so-called combined expropriation procedure). Compensation claims are reviewed by a valuation committee, which will hold a hearing with the project owner and the land owner and try to negotiate an agreement between the parties. If no agreement can be reached, the competent valuation committee will decide on the amount of the compensation. Decisions are subject to court review upon appeal.

According to the Electricity Supply Act, Swissgrid has the monopoly right to operate the Swiss transmission network and to provide transmission services in Switzerland. Certain cross-border transmission lines may be exempted from this monopoly (so-called “merchant lines”).

The general principles regarding the provision of transmission services, charges and terms of service are regulated in the Electricity Supply Act and its implementing ordinances. Swissgrid is entitled to charge a fee for the use of the Swiss transmission network. Exemptions may be granted for the use of certain cross-border transmission lines for a limited period during which the right to use such lines lies with the private investor (so-called “merchant lines”). The fee is charged to distribution network operators and end-customers that are directly connected to the transmission network. In turn, the relevant distribution network operators will charge these fees to their customers, and the aggregate network charges are borne by the end-customer.

The transmission charge that Swissgrid may impose for the use of the Swiss transmission network has to be cost-based (taking into account the cost of constructing, operating and maintaining the transmission network) and cover the usage of the network and the provision of services. The usage fee is composed of a working tariff per kWh, a power tariff per MW and a fixed basic tariff per output point. A fee for general ancillary services as well as individual ancillary services (covering active power losses and reactive energy) may also be charged.

The transmission charges of Swissgrid are subject to review by ElCom in case of disputes or ex officio. Since transmission charges were introduced in Switzerland in 2009, ElCom has already made use of its power to review transmission charges ex officio in order to reduce the tariffs originally requested by Swissgrid.

As the national TSO, Swissgrid is required to provide transmission services and network access on a non-discriminatory basis to the market players. Network access can be denied if the safe and stable operation of the transmission network would be impaired. Disputes regarding network access can be reviewed by ElCom.

Exceptions to the open access principle (TPA Rule) may apply in respect of certain cross-border transmission lines, for which capacity may be granted to third parties based on prioritised long-term capacity agreements. Moreover, exemptions from the TPA Rule may be granted in relation to the so-called merchant lines discussed in 5.6 Transmission Charges and Terms of Service.

The key federal laws governing the construction and operation of electricity distribution facilities are as follows:

• The Electricity Act, which, together with certain implementing ordinances, governs safety and other requirements that electric distribution facilities have to comply with, and the process for obtaining authorisations to construct electric distribution facilities, among other things. It also contains provisions regarding liability and expropriation rights.
• The Electricity Supply Act, which governs, among other things, the strategic planning of distribution networks and obligations of the network operators, which will be further addressed below.

The type of authorisation required to construct an electricity distribution facility depends on the type of facility that is to be constructed. In general, the construction of high-voltage distribution facilities as well as certain low-voltage distribution facilities requires a federal planning authorisation. Planning authorisations are granted by ESTI or, if objections cannot be resolved or if federal offices involved have dissenting opinions that cannot be settled, by the Federal Office of Energy. The planning authorisation encompasses all authorisations required on the federal level; no additional cantonal or local authorisations are required.

If no planning authorisation is required, as is the case for certain exempted low-voltage facilities, a local construction authorisation may be needed, which is to be obtained from the local government.

In order to obtain a planning authorisation, a request has to be submitted to ESTI, specifying the details of the project and providing all relevant planning documentation. If an environmental impact assessment must be conducted (which may be the case if the project could have a substantial impact on the environment), this has to be done prior to the filing of the request. ESTI will review the request and forward it to the cantons that are affected by the project (typically, these are the cantons where the project is to be realised). The affected cantons have three months to comment, and local public consultation is required during that time. Private persons that are specifically affected by the project (eg, because they own land within the perimeter of the project or because they may be affected by expropriation required to complete the project) may file objections or ask for compensation, and local municipalities may file objections to safeguard their rights. At the same time, ESTI will consult with other involved federal departments, and involve the competent valuation committee if expropriations are required. After public consultation, ESTI will attempt to resolve all objections and, if successful in doing so, will issue the authorisation. If objections cannot be resolved or if federal offices involved have dissenting opinions that cannot be settled, ESTI will forward the matter to the Federal Office of Energy to render a decision. The purpose of this planning authorisation procedure is mainly to verify whether construction projects meet the applicable safety requirements and comply with environmental law, and whether legitimate private interests are duly respected. Planning authorisations are subject to court review upon appeal.

The planning authorisation procedure shall not exceed two years, but the process may take longer if appeals are to be resolved.

The planning authorisation will typically state that construction work may only be initiated once the authorisation has become legally binding (ie, after the expiry of the deadline to file appeals), that it will expire if construction is not initiated within three years of the authorisation becoming legally binding, and that the facilities have to be constructed in accordance with the approved plans. It will also include conditions to be observed, particularly in relation to the implementation of measures to ensure safety, and the protection of nature and the environment. Where expropriations are needed, the relevant terms and conditions will be detailed in the planning authorisation.

The right to expropriation may be granted to the project owner as part of the grant of the planning authorisation to construct the distribution facility. However, this right may only be claimed if and to the extent that it is proportionate in view of the project at issue. Land owners have to be fully compensated.

The process for obtaining expropriation rights is mainly regulated in the Expropriation Act. The process is initiated by the filing of the request to obtain the planning authorisation, and it will be included in the respective process (the so-called combined expropriation procedure). Compensation claims are reviewed by a valuation committee, which will hold a hearing with the project owner and the land owner and try to negotiate an agreement between the parties. If no agreement can be reached, the competent valuation committee will decide on the amount of the compensation. Decisions are subject to court review upon appeal.

The Electricity Supply Act stipulates that cantons determine – in a non-discriminatory and transparent manner – which distribution network operators are active in their jurisdiction, and which geographic area of the canton each of these operators covers. The relevant laws implementing this federal requirement are cantonal laws, which may differ from canton to canton. Despite there being a trend of local network operators co-operating and merging with others, many municipalities still maintain their own local distribution network operator; these are typically local utilities that own local networks and supply electricity, water and gas. The relevant local network operator is responsible for the construction and operation of the local distribution network. As a result, there is only one distribution network infrastructure in place.

Nevertheless, the market has been partially liberalised, and local distribution network operators only have a limited monopoly right in respect of end-customers consuming less than 100 MWh per year. These end-customers can only procure electricity from the local distribution network operator, not from a third party. Thus, local network operators have a de facto monopoly in electricity delivery to “small” end-customers and, in turn, are obliged to supply the requested quantity of electricity. Attempts to liberalise the market for end-costumers have, so far, failed.

The market for end-customers consuming at least 100 MWh per year was liberalised a few years ago. Such “large” end-customers may freely choose from whom they procure electricity. To enable competition, local network operators are obliged to transmit electricity supplied by third-party suppliers through their network, and to grant non-discriminatory access to their network for such purpose. Exceptions may apply – for instance – if the distribution network operator can demonstrate that the safe operation of the network is at stake. In consideration for the transmission, the distribution network operator may charge a reasonable, cost-based fee to the end-customer. Disputes concerning these transmission rights and the fee payable in consideration are decided by ElCom.

On the federal level, rules governing the provision of electricity distribution service are included in the Energy Act and the Electricity Supply Act. The most important requirements are set out below.

Distribution network operators have to ensure that they supply the requested quantity of electricity at reasonable prices to end-customers located within their area of operation at all times, as well as to end-customers that procure electricity from a third-party supplier.

Distribution network operators have to comply with declaration obligations that require them to declare quantity, place of production and sources of energy of the electricity supplied to customers, so they have to obtain certificates of origin for the electricity they procure and need to validate such certificates as they supply electricity to customers. As far as alternative sources of energy are concerned, hydropower and other renewable must be declared separately, with further sub-categories of solar, wind, biomass, and geothermal power. This requires utilities to account for the origin of the electricity they procure and supply to customers. The relevant provisions are enforced by Pronovo, the subsidiary of Swissgrid to which certain powers under the Energy Act are delegated.

Distribution network operators have to accept and adequately compensate electricity that is fed into their network and generated from renewable energy sources or from wholly or partially fossil fuel-fired combined heat and power plants, provided that the relevant generation facility does not exceed an output of 3 MW or an annual production (net of electricity consumed at the generation facility) of 5,000 MWh. The compensation and further details are to be agreed in a contract between the generator and the network operator. If an agreement cannot be reached, the default provision of the Federal Act on Energy stipulates that the compensation for electricity from renewable energy sources is to be determined based on the cost the operator would have had to pay for the procurement of equivalent electricity, and for electricity generated by fuel-fired combined heat and power plants based on the market price at the time when the electricity is fed into the network. Disputes are decided by ElCom.

Distribution network operators may charge a cost-based fee for network use, which covers costs for the construction, operation and maintenance of their own network as well as the fee they have to pay to other network operators through whom they procure electricity. At the very end, the cumulative network usage fees will be charged to and borne by the end-customer.

Further relevant provisions may be included in cantonal law and local regulations governing the operation of local utilities. In particular, in accordance with such local regulations, distribution network operators may charge a one-time upfront fee to the end-consumer for establishing the network connection.

The distribution system charges are cost-based (taking into account the cost of constructing, operating and maintaining the transmission network) and cover the cost of the usage of the network and the provision of ancillary services. Fees charged to the end-customer need to reflect the actual cost caused by the relevant end-customer. Disputes on distribution charges are subject to review by ElCom.

The terms of service of local utilities are usually determined by local regulation, as those utilities are typically owned by the local government. Terms of service applicable among the various distribution network operators are to be agreed between them, taking into account that each of them is obliged to grant non-discriminatory access to third parties.