As the prices of the fossil fuels used to produce electricity across Europe rise so must the price of electricity. According to the Association of Swiss Electricity Companies (AES), record market prices mean that a majority of electrical supply companies will have to charge their customers higher prices in 2023.
A survey run by the Association at the beginning of May 2022 found that half of electricity supply companies in Switzerland plan to increase electricity prices by 20% or more in 2023.
A price rise 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 CHF 180 for a five-room household with an annual consumption of 4,500 kilowatt hours.
End price rises are muted by the inclusion of costs unrelated to electricity production. 49% of the cost of electricity consumed by the end user is made up of network costs. Taxes make up a further 18%, leaving only 33% for the actual electricity, according to AES. This means a 100% rise in the cost of electricity would lead to a 33% rise in the end price.
In addition, price rises will not be uniform, wrote AES. Suppliers that buy electricity in the markets will face steeper rises while those that produce their own (without using fossil fuel) will be under less pressure to adjust prices. The duration of supply contracts will have an impact too. Those that have contracts locking in prices years in advance will have more leeway. However, four out of five companies surveyed said they get most of their electricity from the markets with around half buying under contracts two to three years in advance.
Switzerland does not produce enough electricity to be self sufficient. It is a significant importer in winter. According to Teddy Püttgen, an electricity expert at EPFL, the last large addition to Switzerland’s generation capacity was the Leibstadt nuclear power station opened in 1984 – RTS interview. Since then Switzerland has done little to expand production. Püttgen said Switzerland has done practically nothing regarding wind generation. Solar has increased but the gains do not cover the capacity lost when the Mühleberg reactor was decommissioned 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 the electricity Switzerland consumes and the electricity it produces. Switzerland’s population has increased too.