SWITZERLAND: An introduction to Energy

Introducion 

Switzerland's energy sector stands at a pivotal crossroads as it implements its ambitious Energy Strategy 2050 framework, which aims to achieve net-zero emissions by 2050. Taking advantage of its Alpine geography, the country has long used hydraulic power, coupled with nuclear plants, as the backbone of its electricity production. It is now set to massively increase its solar power capacity, while making use of the other available forms of green energy and improving the energy efficiency of its economy.

Switzerland's binding commitment to achieving net-zero emissions by 2050 requires fundamental transformations across its energy landscape. The strategy mandates an increase in renewable electricity production from 46.5 TWh to 83.8 TWh, representing a near doubling of capacity. Simultaneously, per capita energy consumption must decrease by 53% compared to 2000 levels. These targets take on particular significance given Switzerland's parallel commitment to phasing out nuclear power by 2034, which currently provides about 30% of domestic electricity. With the country's considerable hydropower resources already largely exploited, the burden of this transition falls primarily on solar energy, supported by emerging contributions from wind, biomass and geothermal sources.

Regulatory Framework 

Switzerland's energy transition is built on a robust legislative framework designed to balance security, sustainability and market efficiency. The cornerstone Energy Act establishes binding targets for 2035, mandating hydropower expansion, renewable electricity production increases and comprehensive building renovations while implementing cross-sectoral CO₂ reduction measures. Its companion legislation, the Electricity Supply Act, focuses on developing the grid as well as maintaining its stability, while gradually liberalising the electricity market.

A significant development came in June 2024 with the adoption of the Mantelerlass (Umbrella Decree) through popular referendum. This comprehensive amendment package streamlines regulations across multiple energy statutes to accelerate renewable deployment and enhance grid resilience. This did not halt the legislative process, as several implementing ordinances have come into effect and more are to come. They mainly concern self-consumption collectives, financial tools for promoting renewable energies, and the minimum amount of indigenous electricity that must be sold to end consumers.

Under the federal nature of Switzerland, the cantons still retain many legislative powers, which is particularly relevant in relation to the construction of all but the most significant infrastructure projects, as well as constructive norms.

Infrastructure Development 

The Swiss parliament's 2022 Solarexpress programme exemplifies the country's innovative approach to renewable expansion. By targeting vast high-altitude photovoltaic installations in the Alps, the initiative capitalises on enhanced solar yield at elevation while minimising land use conflicts. The programme combines financial incentives with accelerated permitting processes, although local opposition rooted in landscape protection concerns continues to delay projects.

High-altitude large parks are far from being the only way Switzerland intends to increase its solar production. The country sees its biggest potential on its roofs. New buildings of more than 300m2 thus must have solar power installations on their roofs or walls. Several cantons have created or intend to create similar obligations for smaller or already existing buildings.

Hydropower remains the backbone of Switzerland's electricity system, contributing approximately 60% of generation. However, climate change impacts – particularly glacial retreat altering water flow patterns – combined with market pressures from low electricity prices and inflexible water fee structures threaten the sector's stability. In response, Switzerland is pursuing both expansion and modernisation, including 16 prioritised Alpine projects and the development of a 6 GW pumped-storage network by 2050 to balance intermittent renewable generation.

Wind power potential in Switzerland remains largely untapped, with development lagging far behind European neighbours despite abundant wind resources. This underdevelopment stems from strict noise regulations, visual impact concerns, and the veto power of local authorities and populations blocking numerous projects. The wind is nevertheless identified as a crucial energy source, and recent federal initiatives aim to break the deadlock by mapping wind priority zones and distributing financial incentives for host communities.

Switzerland is conscious that renewable energies must be profitable to attract investments. Thus, the local grid operators have an obligation to give priority to and buy all the electricity output of solar and wind-based installations. A wide range of subsidies also exist and are distributed by the Confederation as well as the cantons and municipalities.

Grid modernisation represents another critical frontier, as the decentralised nature of solar and wind power increases the burden on the existing infrastructure. Significant investments are thus being made to create new infrastructure, linking new projects to population centres, but also to make the grid more efficient and resilient, notably with new technologies.

Heating makes up 20% of Swiss energy consumption. Most Swiss cantons now require new buildings – and often renovated ones – to meet strict insulation standards and use renewable heating systems like heat pumps instead of fossil fuels. Some (like Geneva and Vaud) have gone further, mandating complete phase-outs of oil and gas heating in existing buildings.

The Nuclear Question 

Switzerland's energy transition includes the scheduled phase-out of its remaining nuclear plants by 2035, confirming a moratorium on new reactors in place since 1990. This policy received popular endorsement in the 2017 referendum but faces renewed scrutiny amid European energy security concerns following the Ukraine conflict. The phase-out principle is not set in stone, as a new referendum on the policy is to be scheduled soon.

The Electricity Market 

At the wholesale level, Switzerland operates a liberalised electricity market closely tied to European price trends, albeit without full integration into the EU internal market. The country's pivotal role as a hydroelectric trading hub and its central geographic position make it a key player in regional electricity flows, while ongoing negotiations seek to establish a bilateral agreement with the EU to secure stable market access and harmonise regulations.

For consumers, the market remains partially liberalised: industrial and commercial users can freely choose suppliers, while households and small businesses remain captive to their local utility's basic service – although full market opening is under discussion. This dual system creates price disparities, with competitive market consumers benefiting from cheaper EU-sourced power during surplus periods, while captive customers face regulated tariffs that better reflect Swiss production costs. Any future EU agreement could accelerate full liberalisation, potentially reshaping residential pricing structures. For this very reason, this future agreement is set to be controversial and its acceptance by the people is not a given.

Conclusion and Outlook 

Switzerland's energy transition presents a compelling case study in balancing ambitious climate targets with geographical, political and market realities. The country's direct democracy system ensures thorough debate of energy policies but can also slow implementation through local opposition and frequent referenda. While the Alpine environment offers exceptional renewable potential, it also demands innovative solutions tailored to mountain ecosystems and communities.

The coming decade will prove decisive as Switzerland navigates between competing priorities: expanding renewable generation while preserving natural landscapes, maintaining energy security while integrating with European markets, and pursuing technological innovation while ensuring affordability.

To take advantage of those opportunities, it is often important for investors – especially in infrastructure projects – to engage with local communities and authorities, while clearing relevant legal risks in advance. Such planning is often the surest way to avoid or mitigate long administrative proceedings and potential litigation.