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Appendix 1

ABOUT THE AUTHORS

The Energy Regulation

and Markets Review

Law Business Research

Third Edition

Editor

David L Schwartz

The Energy Regulation and Markets Review

The Energy Regulation and Markets Review

Reproduced with permission from Law Business Research Ltd.This article was first published in The Energy Regulation and Markets Review

Edition 3(published in June 2014 – editor David Schwartz).

For further information please emailNick.Barette@lbresearch.com

The Energy Regulation

and Markets Review

Third Edition

EditorDavid L Schwartz

Law Business Research Ltd

PUBLISHER Gideon Roberton

BUSINESS DEVELOPMENT MANAGERS Adam Sargent, Nick Barette

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Published in the United Kingdom by Law Business Research Ltd, London

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www.TheLawReviews.co.ukNo photocopying: copyright licences do not apply.

The information provided in this publication is general and may not apply in a specific situation, nor does it necessarily represent the views of authors’ firms or their clients.

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advised that this is a developing area.Enquiries concerning reproduction should be sent to Law Business Research, at the

address above. Enquiries concerning editorial content should be directed to the Publisher – gideon.roberton@lbresearch.com

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iii

Editor’s Preface ..................................................................................................viiDavid L Schwartz

Chapter 1 OVERVIEW OF CENTRAL AND WEST AFRICA ................1Pascal Agboyibor, Bruno Gay and Gabin Gabas

Chapter 2 ANGOLA .................................................................................19Catarina Levy Osório and Helena Prata

Chapter 3 AUSTRALIA .............................................................................35Mark Carkeet, Andrew Brookes and Darshini Nanthakumar

Chapter 4 BRAZIL ....................................................................................55Guilherme Guerra D’Arriaga Schmidt

Chapter 5 CANADA .................................................................................68Patrick Duffy, Brad Grant, Erik Richer La Flèche and Glenn Zacher

Chapter 6 COLOMBIA.............................................................................85Patricia Arrázola-Bustillo and Fabio Ardila

Chapter 7 CYPRUS ...................................................................................97Michael Damianos and Electra Theodorou

Chapter 8 DENMARK ............................................................................107Nicolaj Kleist and Morten Ruben Brage

Chapter 9 ECUADOR ............................................................................118Jorge Paz Durini, Daniel Robalino, Leyre Suárez and Rafael Valdivieso

CONTENTS

iv

Contents

Chapter 10 EGYPT ...................................................................................127Bassam Moussa and Mariam Fahmy

Chapter 11 FRANCE ................................................................................137Fabrice Fages and Myria Saarinen

Chapter 12 GERMANY ............................................................................150Kai Pritzsche, Sebastian Pooschke, Henry Hoda

Chapter 13 GHANA ..................................................................................162Emmanuel Sekor and Enyonam Dedey-Oke

Chapter 14 INDIA ....................................................................................175Akshay Jaitly, Sitesh Mukherjee, Neeraj Menon and Rashi Ahooja

Chapter 15 INDONESIA ..........................................................................188Mochamad Kasmali

Chapter 16 ITALY .....................................................................................203Simone Monesi, Piero Viganò and Giovanni Penzo

Chapter 17 JAPAN ....................................................................................220Reiji Takahashi, Atsutoshi Maeda, Shun Hirota, Yuko Suzuki and Masato Sugihiro

Chapter 18 KENYA ...................................................................................233Albert Mumma

Chapter 19 KOREA ...................................................................................248Wonil Kim and Kwang-Wook Lee

Chapter 20 MALAYSIA .............................................................................264Lukman Sheriff Alias

Chapter 21 MEXICO ................................................................................273Gonzalo A Vargas

v

Contents

Chapter 22 MOZAMBIQUE ....................................................................285Fabrícia de Almeida Henriques and Paula Duarte Rocha

Chapter 23 NAMIBIA ...............................................................................296Axel Stritter

Chapter 24 NETHERLANDS ..................................................................315Louis Bouchez and Maurits Bos

Chapter 25 NEW ZEALAND ...................................................................325Mei Fern Johnson and Nicola Purvis

Chapter 26 NIGERIA ................................................................................338Ken Etim and Ayodele Oni

Chapter 27 NORWAY ...............................................................................352Per Conradi Andersen and Christian Poulsson

Chapter 28 PHILIPPINES ........................................................................362Monalisa C Dimalanta and Najha Katrina J Estrella

Chapter 29 POLAND ...............................................................................377Krzysztof Cichocki and Tomasz Młodawski

Chapter 30 PORTUGAL ...........................................................................390Nuno Galvão Teles and Ricardo Andrade Amaro

Chapter 31 ROMANIA .............................................................................403Lucian Caruceriu and Anca Mitocaru

Chapter 32 SPAIN .....................................................................................415Antonio Morales

Chapter 33 SWEDEN ...............................................................................428Hans Andréasson, Martin Gynnerstedt and Malin Håkansson

Contents

vi

Chapter 34 SWITZERLAND ...................................................................440Georges P Racine

Chapter 35 TURKEY ................................................................................452Okan Demirkan, Zeynep Buharalı and Burak Eryiğit

Chapter 36 UKRAINE ..............................................................................468Wolfram Rehbock and Maryna Ilchuk

Chapter 37 UNITED ARAB EMIRATES .................................................486Masood Afridi and Haroon Baryalay

Chapter 38 UNITED KINGDOM ...........................................................507Elisabeth Blunsdon

Chapter 39 UNITED STATES .................................................................524Michael J Gergen, Natasha Gianvecchio, Kenneth M Simon and David L Schwartz

Chapter 40 UZBEKISTAN .......................................................................541Eldor Mannopov, Shuhrat Yunusov, Anna Snejkova and Ulugbek Abdullaev

Appendix 1 ABOUT THE AUTHORS .....................................................551

Appendix 2 CONTRIBUTING LAW FIRMS’ CONTACT DETAILS .. 577

440

Chapter 34

SWITZERLAND

Georges P Racine1

I OVERVIEW

The Swiss energy sector has its own distinctiveness. Switzerland has been referred to as the ‘Water Tower’ of Europe; indeed, hydropower accounts for about 54 per cent of electricity production in the country, while nuclear power accounts for about 39 per cent. Other conventional thermal and ‘new’ renewable energies, including solar, wood, biomass, wind, geothermal and ambient heat, account for about 5 per cent.2

Despite the country’s high dependence on nuclear energy, the Federal Council has decided to gradually phase out nuclear power. The safe operational lifespan of the existing nuclear power plants is expected to be about 50 years. On this basis, the last of Switzerland’s nuclear power plants will be taken offline in 2034.

The Swiss electricity market has also been described as highly fragmented due to the number of market participants. Such a high number is peculiar considering the size and population of the country.

Electricity represents approximately 24.1 per cent of Swiss energy consumption, while oil and gas represent about 53.3 per cent and 12.9 per cent respectively. Coal, wood, industrial waste and other renewable energies constitute the remaining 9.7 per cent.3

As a landlocked mountainous country and non-EU member, which is located at the heart of Europe, Switzerland must implement its energy policy wisely. At the same

1 Georges P Racine is a partner at Lalive and a director of Lalive in Qatar LLC. The author would like to thank Leonor Díaz de Córdova for her assistance in researching materials for this chapter.

2 www.bfe.admin.ch/themen/00526/00541/00542/00631/index.html?lang=fr&dossier_id00867.

3 www.bfe.admin.ch/themen/00526/00541/00542/00631/index.html?lang=fr&dossier_id00867.

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time, certain decisions may naturally impose themselves despite any political opposition and the tendency towards renewable forms of energy.

Switzerland produces neither oil nor gas. Despite the fact that there are indications that the exploitation of shale gas could be possible in certain parts of the country, this chapter on Switzerland focuses on the electricity industry.

II REGULATION

i Policy

The Swiss Federal Constitution, the Energy Act, the CO2 Act, the Nuclear Energy Act and the Electricity Supply Act are all integral parts of the instruments defining a sustainable and modern Swiss energy policy. In addition to legal instruments, the energy policies of the federal government and the cantons are also based on the presentation of energy perspectives as well as on strategies, implementation programmes and the evaluation of energy-related measures at the municipal, cantonal and federal levels.

Energy policy was only anchored in the Swiss Federal Constitution in 1990, when provisions were added stipulating that the federal government and the cantons are obliged to use their competences to ensure an adequate, broad-based, secure, economical and ecological energy supply, and the economical and efficient use of energy. This comprehensive list of requirements places high demands on energy policy at the federal and cantonal levels, and simultaneously demonstrates how difficult it is to find suitable solutions.

Since 1990, all cantons have drawn up their own energy legislation and regulations, and with the enactment of the Federal Energy Act and the Federal Energy Ordinance on 1 January 1999, the Federal Council fulfilled the mandate it had received following the approval by the electorate of the energy provisions in 1990.

The energy perspectives as drawn up by the Federal Council have served as a basis for all political decisions in the energy field and have been reviewed and updated regularly since the establishment of the General Energy Plan in the mid-1970s.

‘The Energy Perspectives 2050’ have been updated after choosing between three options for the provision of electricity. In 2011, the Federal Council decided to follow option 2 (no replacement of existing nuclear power plants at the end of their safe operational lifespan).

Non-replacement of older nuclear power plants restricts the options for future electricity production. After the safe operating period expires nuclear power plants will not be replaced and will be decommissioned (Beznau I: 2019; Beznau II and Mühleberg: 2022; Gösgen: 2029; Leibstadt: 2034). The shortfall is expected to be covered with an optimised mixture of hydropower, new renewable energies, cogeneration facilities, gas combined cycle and electricity imports. Hydropower becomes very significant and will have to be expanded correspondingly.

As thermal generation using fossil fuels will increase, additional emissions of 1.09 to 11.92 million tonnes of carbon dioxide are anticipated by 2050, depending on the proportion of cogeneration and gas combined cycle. The government is hopeful that carbon dioxide emissions from the energy sector will be reduced by 14.4 million tonnes compared with 2009 by pursuing measures in today’s energy policy until 2050,

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which means that overall emissions will not increase despite increased generation using fossil fuels. Electricity grids will have to be extended and rebuilt and transformation of distribution grids to smart grids will become compulsory. Optimal connection to the European grid will have to be guaranteed.

According to initial calculations, the cost to the economy for modernising and constructing power plants and measures to reduce electricity demand amount to about 0.4 to 0.7 per cent of gross domestic product.

In order to cover the shortfall in the electricity supply caused by the decision not to replace the nuclear power plants, Switzerland’s energy strategy has to be revised. The Federal Council has therefore set the following priorities:a Reduction in energy consumption: the new energy outlook shows that the

demand for energy could rise to around 90 billion kWh a year by 2050 if tighter measures are not put in place (2010: around 60 billion kWh). The main reasons for this are population growth, increasing duplication of household appliances, new appliances and applications, greater living space per person, but also the increasing electrification of transport. The Federal Council therefore intends to encourage the economical use of energy in general, and of electricity in particular. Enhanced efficiency measures include minimum requirements for appliances (best practice, energy label) and other regulations, bonus-malus mechanisms (efficiency bonus), measures to raise public awareness (strengthening of SwissEnergy) and measures regarding the production of heat.

b Broadening of electricity supply: hydropower and new renewable energies should be bolstered in particular. Their share in the current energy mix needs to be expanded significantly. That is the main aim of cost-covering remuneration for feed-in to the electricity grid. However, in order to meet demand there also needs to be an expansion of fossil fuel-based electricity production with cogeneration (combined heat and power) (firstly) and gas-fired combined-cycle power plants (secondly). The Federal Council is retaining its climate policy objectives. The increasing share of irregular power production (wind, solar) requires a restructuring of the pool of power plants to ensure the necessary storage and reserve capacities. Furthermore, the conflict of interests between efforts to protect the climate, waterways and countryside and spatial planning has to be resolved constructively.

c Maintaining electricity imports: imports will continue to be necessary to ensure security of supply and to cover temporary fluctuations; however, the Federal Council is of the opinion that Switzerland should continue to remain as independent as possible in terms of electricity production.

d Expansion of electricity transmission grid: the rapid expansion of the electricity transmission grid and the transformation of transmission networks into smart grids is essential for future domestic production infrastructures and electricity imports. These ‘intelligent’ grids allow direct interaction between consumers, the network and power producers and offer great potential with regard to optimising the electricity system, delivering energy savings and consequently bringing down costs. Switzerland’s power grid should be optimally integrated into the European grid and the future European ‘supergrid’.

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e Strengthening energy research: the restructuring of the energy system needs to be supported by the strengthening of energy research. To that end, the energy research portfolio in the ETH4 Domain and at the universities of applied sciences should be reviewed and cooperation between universities, business and centres of technological expertise encouraged. A plan of action on ‘Coordinated Energy Research Switzerland’ with relevant roadmaps should be drawn up for efficiency enhancing technologies, power grids and the storage and distribution of electricity. The necessary federal funding for pilot schemes and demonstration facilities should also be provided. These efforts are to be coordinated with measures contained in the Cleantech Masterplan.

f Confederation, cantons, cities and communes set the example: the Confederation, the cantons, cities and communes will lead by example. They should meet their own electricity and heating needs through renewable sources of energy and apply the principle of best practice in all fields. The private sector should also play its part in taking measures to reduce commercial energy consumption and strengthen Switzerland’s position as a location for business by coming up with innovative, energy-saving products. The energy industry should seize the opportunity to play an active part in reshaping the national energy system and make the necessary investments.

g Beacon projects guide the way: pilot and demonstration projects developed by various industries and groups should provide valuable experience for Switzerland’s future in terms of energy. The fields of smart buildings, smart cities, smart grids and district heating networks are key in achieving an optimisation of the energy system, and thus contributing to a reduction in energy consumption, emissions and costs.

h Encouraging international cooperation: international cooperation in the field of energy should be further intensified. Efforts should be made to conclude an agreement on electricity with the European Union. In addition, contacts with neighbouring countries should be intensified. Furthermore, Switzerland will actively participate in the international debate on the future role and direction of the International Atomic Energy Agency and take part in the relevant political and technical conferences.

ii Regulatory framework

Articles 76 and 89 to 91 of the Swiss Federal Constitution address energy matters and bind the Confederation and the cantons to provide a satisfactory, diversified, secure, economic and environmentally compatible energy supply.

According to the Constitution, the Confederation is in charge of determining the principles of the use of domestic and renewable energies, as well as legislating in certain specific areas such as nuclear energy, hydropower generation and transmission and delivery of electricity. Legislation concerning all other areas is to be provided by the cantons. Consequently, energy can vary considerably among cantons.

4 The Swiss Federal Institute of Technology.

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At the federal level, the principal pieces of legislation are:a Energy: the Energy Act 1998;b Hydropower: the Hydropower Act 1916 and the Water Protection Act 1991;c Electricity: the Electricity Act on Electric Facilities for Low and High Voltage

1902 and the Electricity Supply Act 2007;d Nuclear: the Nuclear Energy Act 2003, the Federal Inspectorate Nuclear Security

Act 2007 and the Liability in Nuclear Matters Act 1983;e CO2: the CO2 Emission Reduction Act 1999; andf Pipelines: the Pipelines Act 1963.

The Federal Electricity Supply Act, which was adopted by Parliament in 2007, provides for an opening of the market in two stages starting on 1 January 2009. In the first five years (2009 to 2013), only end-consumers with an annual consumption of more than 100,000kWh per site were granted free access to the market. Households and other small-scale end consumers were also supposed to be able to freely choose their electricity supplier as of 1 January 2014, but that full market liberalisation has been delayed. The high-voltage network must be operated by the national transmission system operator (Swissgrid) with a majority Swiss holding.

The main objective of market liberalisation – the creation of a competitive and secure electricity supply with transparent pricing – has not been achieved to date. A lack of market transparency, non-competitive behaviour by the involved players and the continued threat of sharply rising electricity tariffs, endangering the international competitive capacity of energy-intensive companies, indicate that a thorough analysis of the applicable legislation is called for (Swiss legislators did not expect European electricity prices to increase to a level that would make it more attractive to remain captive than to purchase electricity at market prices). A revision of the Act was initiated at the end of 2009. It is expected that the EU Third Energy Package will be factored into the revision. The introduction of incentive regulation is also being considered. The initial aim of having the revised Act enter into force in 2014 to coincide with the second stage of market liberalisation has been postponed.

Since the end of 2007, negotiations between the EU and Switzerland to enter into a comprehensive long-term energy treaty have been ongoing. The primary aim of such an accord (obtaining this agreement is considered one of the top priorities for Switzerland) would be the mutual access to the free energy market. The legal developments within the EU will be taken into consideration, namely the Third Energy Package, in relation to which Switzerland is aspiring to become a member of newly established organisations such as the European Network of Transmission System Operators for Electricity (ENTSO-E), the European Network of Transmission System Operators for Gas (ENTSO-G) and the Agency for the Cooperation of Energy Regulators (ACER). In addition, safety standards will be harmonised and there will be negotiations regarding mutual recognition of guarantees of origin for electricity from renewable sources and of carbon dioxide emission rights. Switzerland would have to commit to binding national targets in relation to the share of renewable energy.5

5 www.admin.ch/ch/f/rs/73.html; Legal Framework v2.docx.

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The negotiations between the EU and Switzerland, which were at an advance stage, came to a halt immediately following the adoption by the Swiss People (9 February 2014) of the so-called Swiss popular initiative ‘Against Mass Immigration’.

iii Institutional framework

The Swiss energy institutional framework comprises a number of federal offices, regulatory authorities and specialised agencies. The Federal Office of Energy (FOE) is the office responsible for all questions relating to energy supply and energy use. It sits under the Federal Department of the Environment, Transport, Energy and Communications (DETEC), which is responsible for ensuring sustainable development and the provision of basic public services in the interests of society, the environment and the economy.

The FOE pursues the following objectives:a it creates the necessary conditions for ensuring a sufficient, well diversified and

secure energy supply that is both economical and ecologically sustainable;b it imposes high safety standards in the areas of production, transportation and

distribution of energy;c it sets out to promote efficient energy use, increase the proportion of renewable

energy in the overall energy mix and reduce the level of carbon dioxide emissions; and

d it promotes and coordinates energy research and supports the development of new markets for the sustainable supply and use of energy.

A number of commissions support the FOE, including the Energy Research Commission (CORE), the Commission for Radioactive Waste Disposal (CRW), the Administrative Commission of the Decommissioning Fund and the Disposal Fund for Nuclear Installations (ACDFDFNI), the Nuclear Safety Commission (NSC) and the Commission for Connection Conditions for Renewables Energies (CCRE).

The CORE assists with the formulation of guidelines governing energy research and the implementation of research findings. Its members represent the industrial sector, the energy industry, universities and various energy agencies and research institutions in Switzerland.

The CRW is an independent body that is responsible for advising the FOE and the Federal Nuclear Safety Inspectorate (ENSI) (see below) on geological aspects of nuclear waste disposal.

The two funds administered by the ACDFDFNI were established for the purpose of securing the necessary financing for the disposal of radioactive waste and spent-fuel elements, and the decommissioning of nuclear installations after their shutdown.

As an advisory body for the Federal Council, DETEC and ENSI, the NSC examines fundamental issues relating to nuclear safety and may submit comments for the attention of the Federal Council and DETEC regarding reports by ENSI on nuclear safety. It took over the duties of the former Federal Commission for the Safety of Nuclear Facilities on 1 January 2008.

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The CCRE advises cantonal authorities and the FOE on the formulation of recommendations and enforcement tools for the implementation of connection conditions for independent producers.6

The Federal Office for the Environment (FOEN), which also sits under DETEC, plays an important role alongside the FOE. It is responsible for ensuring that natural resources are used sustainably, that the public is protected against natural hazards, and that the environment is protected from unacceptable adverse impacts.

In accordance with DETEC’s sustainability strategy, the FOEN pursues the following goals:a long-term preservation and sustainable use of natural resources (land, water,

forests, air, climate, biological and landscape diversity) and elimination of existing damage;

b protection of the public against excessive pollution (noise, harmful organisms and substances, non-ionising radiation, wastes, contaminated land and major incidents); and

c protection of people and significant assets against hydrological and geological hazards (flooding, earthquakes, avalanches, landslides, erosion and rock falls).

In order to achieve these goals, the FOEN has been assigned the following responsibilities: a environmental monitoring, to provide a sound basis for the management of

resources;b preparation of decisions, to secure a comprehensive and coherent policy of

sustainable management of natural resources and prevention of natural hazards; and

c implementing the legal foundations, supporting enforcement partners and providing information on the state of the environment and on the appropriate use and protection of natural resources.7

The Federal Electricity Commission (ElCom) is the independent regulatory authority for the electricity sector. It is responsible for monitoring compliance with the Federal Electricity Act and the Federal Energy Act, taking all necessary related decisions and pronouncing rulings where required.

When the new Electricity Supply Act entered into force on 1 January 2008, ElCom was formally entrusted with the task of supervising the liberalisation of Switzerland’s electricity market. As an independent regulatory authority at the federal level, ElCom is responsible for securing the smooth transition from a monopoly situation in the electricity supply sector to an electricity market based on the principles of competition. ElCom’s duty is to ensure that the liberalisation of the market does not result in excessive tariff increases and that the network infrastructure is properly maintained and expanded in order to guarantee an adequate supply of electricity.

6 www.uvek.admin.ch/index.html?lang=en; www.bfe.admin.ch/index.html?lang=en.7 www.bafu.admin.ch/?lang=en.

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ElCom has been entrusted with extensive judicial powers so that it can effectively perform its various duties. It monitors compliance with the provisions of the Electricity Supply Act and the Energy Act, and can pronounce legally binding decisions and rulings as necessary.

The specific duties of ElCom are to:a verify the electricity tariffs of customers who do not have free access to the

network, as well as remuneration paid for the input of electricity into the grid. It is authorised to prohibit unjustified increases in electricity prices, or may order the reduction of excessively high tariffs. It may take action on the basis of complaints or in its official capacity;

b mediate and pronounce rulings on disputes relating to free access to the electricity network. Since 1 January 2009, large-scale consumers can freely choose their electricity supplier. Full market liberalisation, which will allow households and other small-scale end consumers to freely choose their electricity supplier, has been delayed;

c rule on disputes relating to cost-covering remuneration of input of electricity that is to be paid to producers of electricity from renewable energy sources with effect from 2009;

d monitor the situation with respect to supply security and the condition of the electricity networks;

e in the case of shortfalls in cross-border transmission lines, to regulate the allocation of network capacities and coordinate its activities with the European electricity market regulators; and

f ensure that the transmission network is handed over to the national system operator (Swissgrid) according to schedule.

There are no specific regulatory authorities for oil and gas as Switzerland does not produce any.8

Two other key institutional players (specialist agencies) are the Federal Pipeline Inspectorate (FPI) and ENSI.

The FPI supervises the planning, construction and operation of pipelines for the transmission of gas and liquid fuels that are subject to the Pipelines Act. The FPI aims to put the protection of human life and the environment above profitability.9

ENSI is the national regulatory body with responsibility for the nuclear safety and security of Swiss nuclear facilities. It is the successor body to HSK from whom it took over on 1 January 2009. Whereas HSK was part of the FOE, ENSI is an independent body constituted under public law. By passing the Federal Act on ENSI on 22 June 2007, the two parliamentary chambers in Switzerland resolved to turn HSK into an agency of federal government constituted under public law and so complied with the requirements of the Nuclear Energy Act and the International Convention on Nuclear Safety that regulators should be independent bodies.

8 www.elcom.admin.ch/index.html?lang=en.9 www.uvek.admin.ch/org/00469/02946/02960/index.html?lang=fr.

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ENSI is supervised by an independent board who is elected by the Federal Council and reports directly to it. It is responsible for the supervision of nuclear facilities. Its regulatory remit covers the entire life of a facility, from initial planning, through operation to final decommissioning including the disposal of radioactive waste. Its remit also includes the safety of staff and the public and their protection from radiation, sabotage and terrorism. ENSI is also involved in the transport of radioactive materials to and from nuclear facilities and in the continuing geo-scientific investigations to identify a suitable location for the deep geological disposal of radioactive waste.10

III ENERGY MARKETS

i Partial liberalisation

The Swiss electricity market has been partially liberalised since 1 January 2009. Only larger consumers with an annual consumption of more than 100MWh, representing more or less 50 per cent of the electricity demand in Switzerland, have so far benefited from the market opening.

The separation of the transmission network is one of the key criteria in the liberalisation of Switzerland’s electricity market. This concerns the network of high-voltage transmission lines for transporting electricity over great distances. The aim here is that ownership and operation of this network (monopoly) are to be separated from other business activities such as electricity production and trading (market).

In practical terms, this means that companies which had held stakes in the transmission network until now were required to assign these to the national transmission system operator (Swissgrid). This process took place in three stages:a separation of the accounts of the network owner or operator from other activities;b legal separation, for example outsourcing of the network to a separate subsidiary;

andc transfer of network ownership to Swissgrid, which is also responsible for its

operation, maintenance, upgrade and expansion.

Swissgrid is the national grid company, and in its capacity as transmission system operator it operates under the supervision of Elcom. As a member of ENTSO-E, it is also responsible for coordination and grid usage in the cross-border exchange of electricity in Europe.

After originally being owned by Swiss electricity companies Alpiq AG, Alpiq Suisse AG, Axpo Power AG, Axpo Trading AG, BKW FMB Energie AG, Centralschweizerische Kraftwerke AG, Elektrizitätswerk der Stadt Zürich and Repower AG, Swissgrid is now owned by several Swiss electricity companies. The companies are directly or indirectly majority-owned by the cantons and the municipalities.11

The Swiss energy market comprises several hundreds of players, including a small number of major consortia with vertically integrated operations, and about 80 power

10 www.bfe.admin.ch/radioaktiveabfaelle/01275/01292/index.html?lang=en.11 www.swissgrid.ch/swissgrid/en/home.html.

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producers, who differ considerably in terms of size and operations. The vast majority of market players are publicly owned regional and local utilities that distribute electricity to their local municipalities. Only some of these regional and local distributors can produce electricity. The largest utilities are responsible for approximately 80 per cent of the power production and 90 per cent of the energy supplied in the country.

The liberalisation of the Swiss electricity market and integration with the European market is expected to lead to a rapprochement of the Swiss electricity players.

ii Electricity trading

Cross-border trading of electricity is important for Switzerland due to its location in the heart of Europe.

As there is no power exchange in Switzerland, Swiss trading companies trade on the Powernext in Paris, the Energy Exchange in Austria (EXAA) and the Leipzig-based European Energy Exchange (EEX).

The Dow Jones Swiss Electricity Price Index (SWEP), which was initiated by Aare-Tessin AG für Elektrizität (ATEL) and Elektrizitäts-Gesellschaft Laufenburg AG (EGL), and launched in cooperation with Dow Jones in March 1998, provides price indications for over-the-counter electricity trading in Switzerland for next-day delivery. The SWEP is the volume-weighted average of the profile adjusted price for hour 12 of all transactions having an impact on hour 11am to 12pm, also taking into account the Index for the past 20 days.12

On 30 October 2013, Elcom gave its green light to an accord between Swissgrid and the European power exchange EPEX Spot. This accord paves the way to the introduction of market coupling at the Swiss border, which is expected to make power trading more efficient. As a power exchange, EPEX Spot is already overseeing short-term electricity wholesale trade in Switzerland.

IV RENEWABLE ENERGY AND CONSERVATION

i Development of renewable energy

Historically, Switzerland’s longest-serving and most important source of renewable energy has been hydropower, but the ‘new’ renewables including solar, wood, biomass, wind, geothermal and ambient heat also play an increasingly important role in today’s Swiss energy mix. The long-term potential of domestic renewable energy indicate that, for all forms, the prospects for electricity and heat are sound; however, it is also clear that, primarily for economic reasons, it will only be possible to fully utilise the major potential of photovoltaic or geothermal energy in approximately 30 years’ time. Other renewables such as wood and biomass, ambient heat, electricity from small-scale hydropower plants – and, to a modest extent, wind – are available now and in some cases are also already economically attractive.

With the introduction of remuneration at cost for input into the grid, one of the goals of Switzerland’s energy policy is to increase the proportion of electricity produced

12 www.djindexes.com/mdsidx/?event=ene.

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from renewable energy by 5,400GWh (or 10 per cent of the country’s present-day electricity consumption) by 2030. At 2007, approximately 55.6 per cent of Switzerland’s overall electricity production came from renewable sources, with hydropower by far the biggest contributor (96.5 per cent). About 380 electricity supply companies now offer certified electricity products from renewable energy, which meet 4.5 per cent of Switzerland’s electricity demand.

‘New’ forms of renewable energy currently contribute around 5 per cent towards Switzerland’s electricity production today. Of the latter, about 1.65 per cent comes from waste, followed by solar energy (about 0.49 per cent), biomass (about 0.48 per cent)), biogas (about 0.20 per cent) and wind energy (about 0.13 per cent).13

Since 1 January 2009, operators of new facilities producing electricity from renewable energy – small-scale hydropower plants with a capacity up to 10MW, and facilities using solar energy, geothermal energy, wind energy, biomass and waste from biomass – have received an additional combined total of approximately 320 million Swiss francs per annum. The aim here is to promote the use of environmental technologies for the production of electricity. Remuneration for the input of electricity into the grid is financed through a surcharge of €0.006 per kilowatt hour (currently €0.0045 per kWh) on the electricity tariff.

Swissgrid is part of this initiative, which promotes effective integration of 100 per cent of electricity produced from renewable energy sources. It advocates national and EU authorities to strive for an efficient, sustainable, clean and socially accepted development of the European network infrastructure for both decentralised and large-scale renewable energies.

The Swiss government is looking into tax reforms to encourage ‘green’ activities such as energy conservation and anti-pollution measures. The hope is that such tax reforms could help reduce energy consumption and eliminate Switzerland’s dependence on nuclear energy by 2050. The goal is not to increase tax volume; rather, the idea is to reform the tax system without creating a tax burden on businesses or households.

On 14 March 2014, the National Council allowed the Federal Council to increase the green tax to 1.5 c./kWh. The necessary amendments to the Energy Act and to its Ordinance came into force on 1 January and 1 April 2014 respectively. Green parties and organisations, the centre-left Social Democrats and the centre-right Christian Democrats generally welcomed moves to reform the tax system to benefit the environment, although some found the plans too tame. But the centre-right radicals said the government lacked a clear energy strategy, and the right-wing People’s Party said ecotaxes would overburden energy-intensive industries.

ii Energy efficiency and conservation

Energy efficiency and conservation is at the forefront of the Energy Strategy 2050. Switzerland has to confront in the coming years not only the problem of excessive greenhouse gas emissions, but also a shortage of available energy.

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Improving energy efficiency is the main tool to reduce energy consumption without loss of benefits. Greater energy efficiency helps to achieve a desired value (e.g., generation of light, providing heat, driving a motor) with less energy expenditure. Increasing the energy efficiency brings three main benefits: increased economic efficiency, reduce energy shortages and reduce the energy consumption linked to greenhouse gas emissions. Reducing energy consumption through increased energy efficiency will allow only that it will be realistic in the future to cover a substantial portion of the Swiss energy consumption through renewable energy.

In this sense, the FOE supports the development, dissemination and application of technologies to improve energy efficiency and measures to counteract the lack of information in households and industry on energy efficiency. In addition, the FOE will contribute to the promotion of energy production from renewable resources so that the remaining requirements can largely be met on renewable energy in the future.

V OUTLOOK

The three oldest Swiss nuclear power plants were to be retired around 2020 after some 50 years of operation. Before the Fukushima disaster, three permit applications for new (i.e., replacement) nuclear power plants had been filed. Legislation mandates parliamentary approval for new nuclear power plant permits. Any parliamentary decision may be challenged in a referendum. On 13 February 2011, in a consultative ballot, the people of the Canton of Bern had approved a new nuclear power plant to replace the ageing Mühleberg nuclear power plant with a 51.2 per cent majority.

After the Fukushima disaster, however, the application procedures for the three new nuclear power plants were suspended. Polls indicated that more than 80 per cent of the population had turned against nuclear, thereby thwarting any new nuclear power plant project. Two months later, the Federal Council made public its decision to phase out nuclear power and not replace the existing nuclear power plants.

Since then, the Federal Council and the electricity market participants have been at odds over how best to achieve the ambitious goals of the Energy Strategy 2050. The markets players’ primary concern is that the proposed measures are not sufficient to guarantee security of supply in the future.

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ABOUT THE AUTHORS

GEORGES P RACINELalive and Lalive in Qatar LLCGeorges Racine is a partner of Lalive. He is a dual-qualified civil and common law lawyer with intimate knowledge of Switzerland, developing countries and emerging markets. He has wide-ranging experience in corporate, commercial and international business law, with particular emphasis on projects (energy, infrastructure, telecoms and transport), construction, licensing and concessions, privatisations, mergers and acquisitions, joint ventures, public-private partnerships (PPPs), foreign investment and public procurement. Mr Racine has acted as lead counsel in international projects and transactions in over 25 countries worldwide. He was a member of the expert group that advised the Secretariat of the United Nations Commission on International Trade Law (UNCITRAL) on its draft Legislative Guide on Privately Financed Infrastructure Projects. He has written several articles on energy, infrastructure, telecommunications, PPPs and other subjects for international publications and attended several international conferences as a speaker. He has also acted for several international investment banks, international financial institutions (e.g., World Bank, IFC, EBRD), foreign governments, regulatory authorities, sponsors, developers, independent power producers, utilities, trading firms, contractors, service providers, suppliers, investors and consulting, engineering and accounting firms.

LALIVELalive35 Rue de la MairiePO Box 65691211 Geneva 6SwitzerlandTel: +41 58 105 20 59Fax: +41 58 105 20 60gracine@lalive.ch

About the Authors

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Stampfenbachplatz 4Postfach 2128042 ZurichSwitzerlandTel: +41 58 105 21 00Fax: +41 58 105 21 19www.lalive.ch

Lalive in Qatar LLCQFC Tower 1PO Box 23495Doha QatarTel: +974 4496 7247Fax: +974 4496 7244gracine@lalive.chwww.laliveinqatar.com