Change is underway on the European power market. In future, there will only be one common internal electricity market for all of Europe. Although Switzerland is not part of the EU, this project will have an impact on the supply of electricity. Its central position, its numerous cross-border lines and its enormous water reserves make the country a natural and important electricity hub within Europe.
Swiss electricity traders are taking advantage of the favourable framework conditions and are trading more and more with their international partners. Nevertheless, structural bottlenecks and limited capacities across borders are hampering trade.
For Switzerland to continue to benefit from its role as an international electricity hub in future, it needs to be connected to the European internal electricity market. Swissgrid is therefore involved in a number of international committees to actively promote Switzerland's interests.
Swissgrid is also committed to increased competition in the Swiss electricity market. For instance, it supports a transparent market for control energy. The introduction of control pooling and the liberalisation of the market for international participants have already led to a significant reduction in costs for ancillary services.
If the Swiss grid has too much or too little electricity, electricity traders sell excess energy or purchase the energy they need from abroad. This electricity also flows through the Swiss grid. The capacities in the transmission grid are limited, however, and this is why it is not possible to simply allow any amount of electricity to flow between the individual countries. Swissgrid sells its limited cross-border capacities through auctions.
These days, most European countries use auctions to manage their congestion. Binding auction rules guarantee that capacities are allocated transparently and under the same terms for all parties.
The currently applicable version of the auction rules is published on the JAO S.A. website.
Switzerland as an electricity hub
Over 900 companies generate and distribute electricity. Be they small suppliers or international corporations, they all help to supply electricity to over eight million citizens in Switzerland and to industry and trade.
Switzerland, located in the centre of Europe, is an important electricity hub and is closely integrated in the continental grid. To successfully implement the Swiss federal government's Energy Strategy 2050, Switzerland must continue to be firmly embedded in the European power market.
Switzerland and the European Union (EU) must therefore clearly regulate Switzerland's participation in the European power market. This is the only way to continue developing the cross-border exchange of electricity and contribute to ensuring the security of supply.
In an electricity grid, the goal is to ensure that production and consumption are always in equilibrium. This equilibrium is ensured by using control energy.
Swissgrid retrieves control energy from energy producers as required. Usually, this energy comes in the form of electricity packages of about 5 megawatts (MW).
Not just large, but also medium-sized and smaller electricity producers, such as water supply facilities, wastewater treatment plants or consumers, can deliver control power to Swissgrid. However, they are often not in a position to provide the necessary package size of 5 MW on their own.
That is why electricity producers can combine to form control pools and jointly participate in the market for control energy.
Energy knows no borders, and electricity is traded internationally. Yet the transmission grids between countries only have limited capacities. This means that energy traders first have to purchase the required capacities from the grid operators at auction, and only then can they proceed with international transactions.
Up to now, the markets for trading energy and purchasing transport capacities at auction have been separate. Market coupling is expected to merge these two markets, which will also lead to price benefits.
Market coupling allows the markets to adjust to the physical characteristics of the electricity flows. After all, the neighbouring grids are already physically connected to one another. This means that the electricity will always take the shortest path from the producer to the consumer – across market borders.
Congestion in the grid
These days, electricity is traded across national borders. However, the required transfer capacities can exceed the cross-border capacities. This results in congestion.
In order to avoid congestion, the cross-border capacities available in Switzerland and most European countries are awarded in auctions. These auctions are Swissgrid's most important congestion management instrument. The same conditions apply for all grid operators.