As the price of the fossil fuels used to generate electricity increases, so does the price of electricity. According to the Association of Swiss Electricity Companies (AES), record market prices mean that a majority of electricity suppliers will have to charge their customers higher prices in 2023.
A survey by the association in early May 2022 showed that half of the electricity supply companies in Switzerland plan to increase electricity prices by 20% or more in 2023.
A price increase from 21 centimes per kilowatt hour in 2022 to around 25 centimes per kilowatt hour in 2023 would mean an additional financial burden of around 180 francs for a five-room household with an annual consumption of 4500 kilowatt hours.
Final price increases are dampened by including costs outside of power generation. 49% of the electricity costs consumed by the end consumer are network costs. Taxes account for another 18%, leaving only 33% for actual electricity. This means that a 100% increase in the cost of electricity would result in a 33% increase in the final price.
In addition, price increases will not be uniform. Providers who buy electricity from the markets will face larger increases, while those who produce their own electricity will have less pressure to adjust prices. The term of the supply contracts will also have an impact. Those who contract prices years in advance have more leeway. However, four out of five companies surveyed said they source most of their electricity from the markets, with around half buying under contracts two to three years in advance.
Switzerland produces too little electricity to be self-sufficient. It is a major importer in winter. According to Teddy Püttgen, electricity expert at EPFL, the Leibstadt nuclear power plant, which opened in 1984, was the last major addition to Swiss generation capacity. Since then, Switzerland has done little to expand production. Püttgen said Switzerland has done virtually nothing on wind energy. Solar power has increased, but the gains don’t cover the capacity lost when the Mühleberg reactor shut down in 2019. At the same time, more electric cars and heat pumps are being added to the system, increasing demand and widening the gap between Switzerland’s electricity consumption and the electricity it produces. The population of Switzerland has also increased.
For more stories like this about Switzerland, follow us on Facebook and Twitter.