Industry forecasts show that the Swiss energy system is expected to face a growing energy-supply gap in the decades to come. Given the dynamics of the country’s energy-producing industries, utilities and power providers will likely need to increase imports from other countries, such as France. While this may be easy in theory—Switzerland acts as a major hub of power flows—it will not be easy in practice. All matter of hurdles, from evolving regulations to changing energy sources, must first be overcome.
Switzerland currently relies on hydro and nuclear power to meet the bulk of its energy demand. However, it’s unlikely that a reduction in expected energy consumption and a buildup of domestic renewables would suffice to fill the energy-supply gap, which could potentially begin as early as 2030. The gap could be further widened by an accelerated decarbonization agenda, which would see higher shares of electric vehicles (EVs) on the road and increased production of hydrogen by electrolysis. Additional challenges include the growth of renewables, a higher share of intermittent electricity, a limitation on imports, and a potential peak demand-supply gap.
On January 27, 2021, the Federal Council adopted Switzerland’s long-term climate strategy 20501, an energy act made up of ten strategic principles to guide the country’s climate policy in the years to come2. The act focuses on the energy sector and outlines four potential pathways for Switzerland to meet its increasing power-supply needs while achieving net-zero carbon emissions by 2050 and maintaining high energy security3.
The following article outlines four potential pathways that could enable Switzerland to meet its increasing power-supply needs by focusing on the role of the electric grid, factoring in the economic and regulatory feasibility and the time required for implementation.
A snapshot of the Swiss power sector
The Swiss power sector—as well as the broader European energy system—features a relatively stable equilibrium, with loads having been mostly flat for the past ten years. While the energy production mix in Europe is slowly changing from fossil-fuel plants to renewable-power plants, the electricity mix in Switzerland has been nearly carbon-free for decades. In fact, more than 60 percent of Switzerland’s annual energy generation stems from hydropower, with the remaining share of the mix mostly generated by nuclear.
That said, the Swiss energy system is expected to change rapidly in the years to come. The country plans to phase out its remaining nuclear capacity by 2044. Further, Switzerland is a central European hub for power transmission and therefore highly interconnected with the electric grid. In 2019, the country imported, exported, and transitioned around 40 TWh of electricity, with up to 60 percent of total produced power exported in the summer and the same share imported in the winter4.
This high level of interconnection makes Switzerland dependent on power-market developments and regulations on a European level. On this point, the expected power-market evolution is likely to result in an increasing gap between supply and demand; electricity demand could increase by up to 30 percent by 2050 (46 percent if power demand for green hydrogen is included).
With the potential for increased reliance on hydropower somewhat limited, and the construction of nuclear power plants prohibited since 2016, it’s likely that additional capacity won’t close this gap—at least not in a trivial way. When the Swiss electorate voted in favor of Energy Strategy 2050, the correct approach to balancing supply and demand had not yet been determined5. Finding this correct approach is complicated by the ambitious Swiss decarbonization targets; the Swiss Federal Council targets net-zero emissions by 20506. While solar and wind can potentially help resolve this issue, imports are increasingly likely to play a key role.
However, an increase in imports comes with the following challenges:
- EU antitrust regulations prohibit the conclusion of long-term import contracts, which would be crucial to secure prices in the long run and thereby gain planning security. Switzerland is not the only country that faces an uncertain energy future. Other countries, such as Germany (which is phasing out nuclear and coal) and France (which has high dependence on nuclear), face similar challenges, potentially increasing the risk of price fluctuations in imports.
- Switzerland faces significant regulatory uncertainty. The level of imports necessary to meet demand will depend on access to the European electricity market and Switzerland’s inclusion in agreements on transmission across borders, such as those regarding maximum capacity. There is currently no overarching electricity agreement (or “Stromabkommen”) with the European Union that defines the integration of the Swiss power sector into the larger European energy system, and it is unclear whether such an agreement is even possible in the next three to five years.
- Large quantities of electricity, as opposed to resources such as oil and gas, have a limited degree of storage. Electricity is the most fundamental resource of a modern society, and countries that import electricity may face increasingly fragile energy security. Reliance on other countries exposes a country to factors such as short-term breakdown, strategic decisions around energy produced, and political interests.
- Significant investments into the grid are needed. National transmission system operator (TSO) Swissgrid’s Strategic Grid 2025 report shows that CHF 3 billion to 4 billion ($3.3 billion to $4.4 billion) is needed to modernize and upgrade the electric grid7. Two-thirds of the Swiss transmission grid is more than 40 years old. A countrywide upgrade from 220 to 380 kilovolt (kV) stations would help increase network efficiency and strengthen cross-border interconnections. And the construction of high-voltage power lines, especially if they are aboveground, will likely incur lengthy legal procedures.
Looking ahead: Energy forecasts by 2050
Based on forecasts drawn from various scenarios (see sidebar, “Four scenarios for navigating the energy transition”), Switzerland could become a net energy importer by 2030 and gradually increase its imports thereafter—a significant change from the current status quo in which Switzerland is a small net exporter. This change will be primarily driven by an increase in power demand. Of note, both the reference case and the accelerated case are initially more than the “zero basis” scenario of the long-term climate strategy 2050. The reference case calls for a 16 percent increase by 2035. Over the long term, however, only the accelerated case is more than Swiss projections. Here, the reference case calls for an increase of 46 percent by 2050, and the close in the gap occurs around 2045 (Exhibit 1).
The growth in Swiss electricity demand is a result of increased electrification across sectors as well as the slowly emerging share of hydrogen in the energy mix (Exhibit 2). The largest portion of growth comes from the transport sector8, in which a strong uptake of EVs is driven by improved economics, favorable regulations, and technology readiness9. By 2035, 50 percent of vehicles sales in all segments except trucks are expected to be electric. After 2035, however, the truck segment is forecasted to see a large uptake of EVs, especially for long-haul trucks powered by hydrogen fuel cells. In addition, electrification in buildings (such as uptake of heat pumps) will be offset by efficiency gains, and industry will see electrification only as it relates to small- and medium-heat processes in industries such as manufacturing (consumer goods) and agriculture (drying or processing crops).
The largest capacity addition will likely come from solar photovoltaics (PV), which could add approximately 14 gigawatts (GW) of additional capacity by 2050. This is due both to solar PV’s lower levelized cost of electricity (LCOE) compared with wind and the potential offered by Switzerland’s topography (Exhibit 3). While the current societal and political consensus presents regulatory challenges to the large-scale construction of utility-scale solar PV and wind turbines, there remains significant potential for rooftop solar PV.
Even with the anticipated net capacity additions, Switzerland will face a gap between demand and supply (Exhibit 4). This gap could become apparent as early as 2030 with the decrease of nuclear power and continue to increase as demand rises faster than electricity generation from new power sources.
All this said, becoming a net importer raises several questions for utilities and power providers and operators, such as what amount of capacity is feasible, both in terms of availability in the EU market and grid capacity. Determining this requires an understanding of the long-term plans of neighboring countries, as well as the EU in general. The economic implications must also be taken into consideration, such as the direct cost of power and the potential for job creation. There is also the question of security of supply and the associated challenges, both in terms of political implications in the broader EU context and the local determination across cantons (the states of the Swiss confederation).
Finally, an increased dependency on imports will in turn cause the generation model on a broader European level to become increasingly focused on specific countries, resulting in higher cross-border transmission flows (Exhibit 5). Both exports and imports are increasing in magnitude for most countries compared with 2020 as both intra- and interday fluctuations are balanced out.
Four potential pathways for the Swiss power sector
A core concept of Switzerland’s long-term climate strategy for 2050 is that an increase in energy efficiency will enable the country to cope with an increasing domestic-supply shortage, underscoring the need to determine whether current plans and expectations are sufficient to meet the energy demand going forward. In prior instances, when countries faced similar situations (or even under unique circumstances, such as the one experienced in Texas during the 2021 winter storm10) the effects were focused on the short term, such as load shedding or a spike in power prices. However, as industries are allocated peak demand slots, the impact can be consequential on a country’s long-term economic stability.
With this in mind, the following four potential pathways can enable an emission-free Swiss power supply able to meet increasing future demand:
There are two fundamental elements to this pathway: ensuring the operational capacity of the electric grid and structuring a framework of operation for stakeholders.
To ensure the operational capacity to the grid, it will be crucial to accelerate the legal procedures to upgrade and renew the transmission and distribution grid to ensure grid stability. Those may be beyond what is currently considered in capital expansion plans and beyond that which is considered in the European Network for Transmission System Operators Electricity’s (ENTSO-E) ten-year network development plan. Next, to cope with a higher import ratio, the grid must also be updated to meet new requirements introduced by an increasing share of renewable and decentralized power generation.
In addition to the operational expansion required, there is a need for a structured framework for the key stakeholders to consider as they operate. Invariably, as countries consider the long-term plans around power supply and demand, a common solution is to become a larger importer. The primary challenge then becomes how to orchestrate the pathway to ensure that the solution is ultimately one that allows for increased imports.
Build out domestic power supply based on renewables
As expanding nuclear power is prohibited by Energy Strategy 2050, increasing Switzerland’s power supply based on renewables is the only feasible option to close the gap and stay on track for successful decarbonization. Doing so can be achieved by adding hydropower or other renewables such as solar, wind, and biomass—which have some limited but tangible potential if regulation adjusts accordingly.
Even though hydropower makes up approximately 60 percent of the power supply in Switzerland, the potential to add further capacity is limited. In 2019, the Federal Department of the Environment, Transport, Energy, and Communications (DETEC)11 estimated an additional potential for hydro energy of up to 1,560 gigawatt hours per annum (GWh/a) by 2050 through further constructions (excluding 770 GWh/a from new glacial lakes). Balancing the utilization of hydro power with the protection of waters is one relevant factor that limits the extension of hydropower. Furthermore, this estimate depends on the economic conditions (power price, subsidies, and concession fees such as the “Wasserzins”) because new hydro plants must depict a viable business opportunity. In any case, hydro expansion will not be sufficient to close the gap.
There is also limited potential for adding other renewable energies, such as solar PV, wind, and biomass. Overall, other than hydro, only 4 percent of current power production stems from new renewables. In 2019, solar PV (particularly rooftop solar) had the largest share in this category (53.0 percent) followed by power from waste (28.0 percent), biogas (9.0 percent), wood (7.5 percent), and wind (3.5 percent).
Looking at the technical potential for wind and solar PV in Switzerland (approximately 59 and 78 TWh, respectively), adding capacity seems like a feasible option. However, the topology and legal and societal circumstances reduce this potential significantly. While the midland is densely populated, the rough terrain and shadowing through the mountains hinder construction of wind turbines and larger photovoltaic units. There are also strong objections against building units in mostly unaltered nature, where tourism is the major income source—a concern that is shared among many other EU nations. These obstacles are already reflected in today’s level of new renewable buildout, where Switzerland is behind European peers. In fact, wind and solar PV made up only 3 percent of power production in 2017, while they made up an average of 18 percent in the EU-27 plus the United Kingdom.
Last, Switzerland would also benefit from continuously scanning and understanding opportunities that may come from technology advancements over the next several decades. Although cost curves are well understood, the potential of heretofore unseen technologies is not; such technologies could lead to further opportunities to close the power gap.
Reduce expected energy consumption
This lever supports Swiss self-sufficiency, which the country has explicitly stated as a political goal. But its impact is very limited as our estimates show an increase of up to 30 percent by 2050 (without green hydrogen), mainly due to an increase in the electrification of transport across vehicle classes and higher industrial demand for power. While this lever is common across a multitude of countries in the European Union, the ultimate resolution around it will largely depend on consumer demand, centrally driven incentives, and mandated rules and regulation. One example of such regulations is the increasingly relevant access restrictions for internal-combustion-engine (ICE) vehicles in cities—from 2017 to 2020, 2.5 times more people were affected by restrictions stemming from 2030 targets.
Build out the grid
To accommodate these increased import and export volumes, further build-out of grid connections to neighboring countries may be needed (approximately 6 GW in total by 2050). Given the ENTSO-E plan postulates a build-out of an additional 2.6 GW for connections that include Switzerland by 2030, this seems realistic but requires continuous investment and assessment.
There are further elements of this idea, such as interconnecting all transmission connections, which would require a disproportional amount of investment. Although such an approach might further support Switzerland’s ability to further balance power across all its neighboring countries, it would still not resolve the fundamental power-generation issue.
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Today, in the face of increased social and regulatory pressures, an accelerated decarbonization agenda is all but required for both countries and power providers. Although Switzerland will need to overcome unique challenges in closing its impending energy-supply gap, the country will also be presented with unique opportunities. There’s no time to waste. Making the right moves based on the needs of the energy system is the best bet for protecting the country’s long-term economic stability.
Tamara Grünewald is a consultant in the Zurich office, where Alexander Klei is a partner and Marco Ziegler is a senior partner; Diego Hernandez Diaz is an associate partner in the Geneva office; and Stefanie Stemmer is a consultant in the Düsseldorf office.
The authors wish to thank Nikolay Avkhimovich, Cristina Blajin, Thomas Geissman, Jesse Noffsinger, Joscha Schabram, and Philip Witte for their contributions to this article.
1 Referred to as “Langfristige Klimastrategie 2050” outside the United States.
2 For more on the Swiss long-term climate strategy 2050, see “Langfristige Klimastrategie 2050,” Schweizerische Eidgenossenschaft, January 27, 2021, bafu.admin.ch.
3 For more, see “Energy perspectives 2050+,” Schweizerische Eidgenossenschaft, March 30, 2021, bfe.admin.ch.
4 Net import occurred eg, in the night of December 30, 2019. And net export occurred eg, on the evening of August 1, 2019.
5 "Energy Strategy 2050," Schweizerische Eidgenossenschaft, November 11, 2020, bfe.admin.ch.
6 Andrea Burkhardt, "Federal Council aims for a climate-neutral Switzerland by 2050," Schweizerische Eidgenossenschaft, August 28, 2019, admin.ch.
7 Grid 2025, Swissgrid, April 2, 2015, swissgrid.ch.
8 Includes road, marine, aviation, and rail transport.
9 For more on EV adoption, see Thomas Gersdorf, Russell Hensley, Patrick Hertzke, and Patrick Schaufuss, “Electric mobility after the crisis: Why an auto slowdown won’t hurt EV demand,” September 16, 2020, McKinsey.com.
10 Adam Barth, Jesse Noffsinger, and Humayun Tai, “The Texas power crisis,: Shining a light on the generation outages,” McKinsey Power & Gas Blog, March 11, 2021, McKinsey.com.
11 “Wasserkraftpotenzial der Schweiz,” Schweizerische Eidgenossenschaft, August 2019, pubdb.bfe.admin.ch.