Swiss traders await EU energy treaty details this spring, expect long implementation

Swiss energy traders await details on the EU-Switzerland energy treaty this spring, but implementing the "milestone agreement" will be a long process expected to last beyond the 2027 parliamentary elections, Swiss stakeholders told Platts in February.

In December 2024, the European Commission and the Swiss government concluded negotiations on a package including an electricity agreement, which would allow Switzerland to become part of the EU internal electricity market.

This integration is expected to create new opportunities for cross-border electricity trading, enhance supply security, and incentivize the expansion of renewable energies.

"There is political commitment. However, the process of getting to the implementation stage is very long in Switzerland, and I am still divided about whether the Swiss people will vote for the energy treaty as it is linked to many other dossiers," said Axpo's head of trading and sales Domenico de Luca in an interview at the E-World trade fair in Germany on Feb. 12.

"Axpo and most Swiss utilities are supportive of the treaty, but within the energy dossier the complete liberalization of the Swiss electricity and gas markets face some resistance in Switzerland," de Luca said.

The Swiss Federal Council (government) plans to start consultations on the treaty and detail possible implementation routes this summer with more treaty details to emerge during the legislative process before the Swiss parliament gets involved in 2026, according to Axpo's Head of EU Energy Policy Eberhard Roehm-Malcotti.

This may include one or more referenda, with the 2027 Swiss parliamentary elections another important date for consideration and the package unlikely to be implemented before 2028.

In parallel, the agreement must also be ratified by the EU. This could even include approval by individual member states, which could be another potential hurdle for implementation with any breakdown of the process also a risk for the current status quo.

"The current situation is not that bad, but it can become much worse for Switzerland if there is no agreement with the EU at all. That scenario poses a big risk for Switzerland," de Luca said, pointing out that Switzerland is far less self-sufficient in energy terms than Norway, where implementation of EU energy regulation played a part in the recent collapse of the coalition in Oslo.

Flexibility in energy sourcing is crucial for Switzerland, de Luca said.

Overall, progress over the past year is positive, according to Axpo, as well as Swiss utility association VSE, which fully endorses progress on the treaty needed for Switzerland.

Switzerland has 41 interconnectors with European neighbors and remains a key transit hub, with grid operator Swissgrid the key stakeholder in this process.

In 2024, Switzerland net exported almost 25 TWh to Italy, while net importing some 12 TWh from France. Flows on the German border are bi-directional and depend on seasonal and other factors.

Swiss year-ahead power settled Feb. 26 around Eur83/MWh, a wide premium over France, but a slight discount to Germany. Compared to Italy, which settled around Eur103/MWh, it will remain at a significant discount, EEX data shows.

The draft agreement does not impose new requirements regarding water fees or the granting of concessions for hydropower plants, allowing existing practices to continue, while Switzerland does not commit to adopting EU environmental law but guarantees a high level of environmental protection in the electricity sector, according to a fact sheet from the government, with little detail in the public domain as yet.

The agreement also does not interfere with cantonal competencies regarding electricity and energy consumption, such as heating or efficiency measures in buildings, and allows for a transitional period of seven years with financial compensation for Swiss contract holders for the phasing out of long-term contracts, the Swiss government said.