Marcel Meinhardt Patrick Sattler October 18 2021 Swiss Federal Council adopts dispatch on Renewables Supply Act Lenz & Staehelin | Energy & Natural Resources - Switzerland Marcel Meinhardt, Patrick Sattler Energy & Natural Resources BackgroundKey aspects of Renewables Supply ActCommentThe Federal Council recently adopted the Federal Act for the Security of Electricity Supply through Renewable Energies (Renewables Supply Act). As requested by the consultation proceedings participants, the act combines a revised version of the Electricity Supply Act and a revised version of the Energy Act, aiming to strengthen the expansion of domestic renewables and secure Switzerland's supply.BackgroundEconomic and technological developments, as well as political decisions inside and outside Switzerland, are leading to fundamental changes in the energy market. To be prepared for these changes, the Federal Council has developed the Energy Strategy 2050, with the goal of enabling Switzerland to maintain its high supply standard and to reduce Switzerland's energy-related environmental impact. To this end, Swiss domestic production of renewable energies will be rapidly and consistently expanded, and the security of grid and the electricity supply will be strengthened through further specific measures. In the Renewables Supply Act, the Federal Council is proposing a legal framework that provides planning security and investment incentives for the expansion of renewable electricity production and its integration into the market.Key aspects of Renewables Supply ActBinding target valuesThe proposed legislation contains binding target values for 2035 and 2050 that specify the expansion of hydropower and other renewable energies and the reduction of energy consumption per capita. These binding target values will align the legislation with the goals of supply security and climate policy, thus providing for planning security and investment incentives.ToolsThe existing tools supporting renewables are limited until the end of 2022 and 2030. These will be extended to 2035 and designed in a more market-oriented way – namely:large photovoltaic plants will be procured by means of competitive tenders;more financial resources will be available for large hydropower plants; andthe feed-in tariff system will be replaced by direct investment contributions, in order to reduce the administrative burden associated with the feed-in tariffs and to increase the efficiency of the subsidies.The tools will continue to be financed via a grid surcharge, which will not be increased, but instead levied for a longer period.Electricity market liberalisationConsumers producing electricity themselves (prosumers), producers and electricity suppliers will receive more economic freedom. In particular, by opening up the electricity market, end consumers can freely choose their electricity supplier. This measure will strengthen decentralised production of renewables and support innovative business models (eg, energy communities) that are currently not permitted to operate in areas subject to monopoly legislation, such as the direct sale of locally produced electricity via "neighbourhood" platforms or the enabling of innovative offers in connection with e-mobility and building automation. This shall further integrate renewables into the market. However, in order to protect small end users (ie, households) from abusive practices, a basic-supply regime will continue, which will offer renewable energy.Longer term security of electricity supply in winterSwitzerland's current self-sufficiency will be maintained. To achieve this, additional capacity of climate-neutral electricity production will be added by 2040, in addition to the targeted increase in renewables, which can be reliably sourced in winter. The Federal Council intends to finance (primarily large-storage) power plants via a "winter surcharge", which is already included in the Electricity Supply Act as a precautionary measure against potential security deficits. As the processes for the planning, approval and construction of corresponding power plants take a long time, the Federal Council intends to prioritise the expansion of large-scale storage hydropower. In particular, projects meeting the suitability and contribution criteria set out in the Electricity Supply Act will receive financial support in the form of an investment contribution upon application. A pre-selection process involving several interested parties (eg, cantons, operators and environmental associations) will determine which projects are eligible. If it becomes apparent by 2030 that the expansion target cannot be achieved solely by focusing on large-scale hydropower, technology-neutral tenders will be held for additional capacities that have shorter lead times.Moreover, a strategic energy reserve will be established in order to provide additional assurance that sufficient energy is also available towards the end of winter seasons. Swissgrid will conduct a competitive tendering procedure for the procurement of the strategic energy reserve. Successful bidders will undertake to hold a certain minimum amount of energy in the storage facility for a specified period, or to refrain from using such amount.Datahub and data protectionStrong competition and innovative business models in the electricity market require an efficient exchange of and access to digital data and information. The Federal Council have proposed two revisions to the Electricity Supply Act in this regard; the act will:define the regulatory framework for the data exchange and protection. A national energy data infrastructure with a data hub will be established to support the various measures. This data hub ensures high-performance data exchanges and enables uniform data access, while guaranteeing data security and data protection.clarify certain aspects relating to metering. In particular, large end consumers, electricity producers and storage operators will be free to choose their metering service provider. In addition, the right to choose metering service provider will be granted to self-consuming market participants and certain end-user groups, irrespective of their annual electricity consumption, if they require access to their metering services for consumption-side flexibility or energy-saving measures.Ensuring short-term supply securitySince negotiations for an institutional agreement between Switzerland and the European Union have been discontinued, it is unlikely that the envisaged electricity agreement with the European Union will be concluded, at least in short term. The Federal Council has instructed several authorities and Swissgrid to analyse the short to medium-term effects on network security, supply security and any additional measures that may be required to ensure short-term supply security. It is expected that a corresponding report will be submitted to the Federal Council by the end of 2021.CommentThe Council of States will discuss the Renewables Supply Act proposed by the Federal Council in the latter months of 2021. However, the National Council's Environment, Spatial Planning and Energy Committee considers the Federal Council's proposal to be "illusory in terms of timing" and the committee is concerned about an emerging financing gap for certain renewable energies because the renewable-supportive tools currently in force will expire at the end of 2022. Therefore, the committee has prepared a separate proposal as an interim solution, which aims to replace the expiring feed-in tariff system with investment contributions for the respective technologies (which will expire at the end of 2030). This interim solution is currently being discussed in Parliament and the remaining differences between the Council of States and the National Council are being reconciled. In general, it seems that this interim solution will receive the necessary support for Parliament to adopt it. Consequently, renewables should receive another regulatory boost and they are likely be integrated into the energy market on a broader basis.For more information please contact Marcel Meinhardt or Patrick Sattler at Lenz & Staehelin by telephone (+41 58 450 80 00) or email ([email protected] or [email protected]). The Lenz & Staehelin website can be accessed at www.lenzstaehelin.com.