Emotional Discussion About Industrial Electricity: How Expensive Is Switzerland?

Are high electricity prices putting pressure on Swiss industry? In recent weeks, some industries, such as steel manufacturers, have raised concerns about a loss of competitiveness. The owner of Stahl Gerlafingen noted that electricity costs in Switzerland are roughly five times higher than in France.

Public data on electricity prices should be interpreted cautiously, because industrial groups can buy their electricity freely on the market. For example, companies that secured long-term contracts in 2021 benefited, as prices soared after Russia’s invasion of Ukraine. On the other hand, those who have purchased electricity on short notice paid far more.

Two main factors are driving up electricity costs: Firstly, the market price of electricity surged following the war in Ukraine. Secondly, grid costs have risen significantly over the past decade. For example, industrial companies that purchase 7.5 million kWh of electricity (data for which can be found on the Elcom website) currently pay a median of 6.75 cents per kWh, compared to just 4.38 cents in 2015. This is a 50 percent increase, driven partly by the introduction of a winter electricity reserve, which did not exist in 2015. This alone added 1.2 centimes per kWh, or half of the total increase.

France makes its nuclear power cheaper

Due to the peculiarities of the electricity market, the data presented here should be regarded as an estimate. For Switzerland, we analyzed data from companies consuming at least 20 million kWh annually – the equivalent of the electricity use of 5 000 households. This data, collected via surveys of electricity suppliers by the Federal Statistical Office, was compared to large-scale consumer data from Eurostat.

The international comparison from 2015 and 2024 allows four conclusions:

Switzerland’s Electricity is costly for large consumers. This has been the case ten years ago, but worsened over time. In 2015, industrial electricity prices were higher in Germany and Italy than in Switzerland. By 2024, Switzerland ranks second only to the Netherlands in high electricity prices. In percentage terms, electricity bills for large consumers in the Netherlands, Poland and Austria have risen even more sharply than in Switzerland.
The 16 cents per kWh price for Switzerland already accounts for a 2.3 cents grid surcharge reduction that promotes renewable energy. Electricity-intensive companies can receive a refund if they commit to energy efficiency measures. Those that do not must pay the full amount. Refundable taxes and levies are also deducted from the Eurostat data.
France had the lowest electricity prices for large consumers among the selected countries in 2015 and 2024. In 2024, Swiss industrial electricity costs are 2.3 times higher than in France, up from 1.5 times higher in 2015. This difference stems largely from French government mandates requiring EDF, the state-controlled energy provider, to sell a portion of its nuclear-generated electricity at 4.2 euro cents per kWh to wholesalers. Around half of France’s industrial electricity is sold under this price regime.
The increase of industrial electricity prices in Germany is moderate. This is partly due to the fact that Germany abolished the so-called EEG levy in 2023, which was used to finance subsidies for wind and solar power. In 2021, this still amounted to 6.5 cents per kWh. Secondly, Germany reduced its electricity tax for industrial users from 1.54 cents to 0.05 cents per kWh and introduced further relief measures for large consumers.

Some relief in sight

At least the worst seems to be over for Swiss industry. Electricity prices are expected to decrease in 2025 for two reasons:

The winter electricity reserve will cost the federal government significantly less than in the crisis winter of 2022/23 reducing grid costs by just under 1 centime per kWh starting in 2025. For a large consumer like the Gerlafingen steel plant, which uses 360 million kWh annually, this reduction equates to savings of around CHF 3.5 million.
Futures markets project electricity prices for 2025–2027 at 7–9 cents per kWh. At the beginning of 2023, the price expectation for 2025 and 2026 was still over 15 centimes However, prices of 4–5 cents per kWh, common before 2022, remain out of reach.

Government subsidies in neighboring European countries are likely to decrease as temporary EU state aid rules , which facilitated high subsidies, expired in June 2024. The pressure on member states to adjust their financial policies is therefore increasing. And in France, the government-mandated wholesale price for nuclear electricity will be increased from 4.2 to 7-euro cents per kWh in 2026.

Industrial policy through the back door

Switzerland is undoubtedly a challenging environment for energy-intensive industries currently, as the dubious second place in electricity prices shows. However, competition from Germany, Italy and Austria will once again be within reach as subsidies in those countries phase out and if Swiss grid costs stabilize after 2025. This is precisely where policy makers have a role to play (see box).

The Federal Council’s refusal to subsidize large electricity consumers is nevertheless correct for three reasons:

Firstly, state subsidies artificially enhance the competitiveness of energy-intensive companies, effectively introducing industrial policy through the back door.
Secondly, this wouldn’t eliminate costs; it would merely redistribute them on the taxpayer, either through subsidies or, in the case of France, through loss-making electricity companies. For example, the French electricity producer EDF suffered a loss of 18 billion euros in 2022, partly because it had to sell its electricity at state-regulated prices.
Thirdly, suppressing market signals discourages important adjustments: high electricity costs motivate domestic companies to improve energy efficiency. Even today, Swiss industry uses only half as much energy per unit of value added as Germany and only a third as much as France.

Box: Home-made high grid costs

Grid costs for large consumers in Switzerland have risen by 50 percent in the last decade. Policy makers must react to prevent further increases. One issue is the lack of transparency in subsidies for homeowners or commercial enterprises that produce electricity with their solar system, which they consume themselves. These “prosumers” are exempt from grid costs for this electricity. The rising number of solar installations shifts the cost burden to consumers without solar systems, leading to higher grid costs.

This type of self-consumption incentive violates the “polluter pays” principle. Solar panel owners rely on the grid just as much as other consumers during overcast winter days, requiring grid expansions to support their electricity needs just like for those who don’t produce their own electricity. However, this is not reflected in the current tariffs, which should better account for the fixed-cost nature of the grid.

Expanding the grid to always accommodate all solar energy produced in the summer is another costly endeavor. A slight improvement came with the public’s approval of the “Mantelerlass” policy, which allows power suppliers to cap the maximum feed-in capacity of solar installations at 70 percent. This measure results in only a 3 percent loss of solar power production, as solar systems rarely operate at full capacity, while saving billions in grid expansion costs.

Finally, the extraordinarily long planning and implementation phases for higher grid level projects are a major cost driver. The Chamoson-Chippis high-voltage line in the canton of Valais, for instance, took an astonishing 36 years from planning to operation. Such projects are critical to transport electricity from Alpine regions to consumers in the Swiss Plateau The longer they take, the more expensive they become.