Energy prices have calmed down significantly recently. Companies can currently purchase around 30 centimeters of electricity per kilowatt hour (kWh) for next year – the cost of a kWh in August sometimes ranges from 70 to 80 centimeters. However, prices could rise significantly again during the winter and become a problem for companies. Swiss economy threatened by electric shock.
Many hotels, bakeries, sawmills, mountain railways and industrial companies will have to dig their pockets much deeper for electricity next year. And now they’re threatened by even more political woes: Many EU countries have prepared huge bailouts for their economies and private households – with several hundred billion euros piling up in their money pots. The Federal Council is currently leaving Switzerland out in the rain.
Stefan Brupbacher (54), director of Swissmem, the Swiss machinery, electrical and metal industry association, is worried. He sees “a central danger to the Swiss industrial position” in development abroad.
There are hundreds of billions abroad
Looking abroad, it shows: Germany, for example, has prepared a 200 billion franc package for gas and electricity price brakes. For example, small and medium-sized companies should pay no more than 13 cents per kilowatt-hour for 70 percent of their consumption in the previous year – the state will pay the rest. Each additional kWh must be purchased at the market price. The German federal cabinet still needs to approve the package on November 18.
France also limits electricity and gas price increases to a maximum of 15 percent from 2023 for small companies. For large companies, 25 percent of the consumption is covered with the electricity price starting from 32.5 cents per kWh. Many other countries, such as Italy and Great Britain, also allow their economies to benefit from billions of subsidies.
Brupbacher fears there could be “major distortions in competition”. “This would be the case if European industrial companies had to pay electricity prices much lower than Swiss companies because they were subsidized,” he says.
Electricity prices consume margins
This deterioration is exacerbated by rising electricity prices. If it goes above 40, 50 or even 60 centimeters per kWh, things will get tougher for many companies in Switzerland. “The increase in costs and the resulting strain on margins would be enormous,” says Brupbacher. This is especially true for companies whose electricity supply contract expires at the end of the year and has not yet been renewed due to high prices. “Some energy-intensive companies will hardly be able to handle these high electricity prices,” he adds.
Despite the current calming in prices, the uncertainties are still huge: bottlenecks in the winter or cyberattacks on power plants or power grids can quickly push prices back up.
Swissmem director doesn’t want a mountain of debt
Last week, the Federal Council rejected 13 measures to support the economy and private households, including capping electricity prices and returning to basic services for companies. Brupbacher understands this: “Most of the advances are the wrong medicine and should be understood especially in relation to the upcoming elections.” With the support of the economy during the pandemic, Switzerland has already accumulated mountains of debt. “The energy crisis needs to be handled more carefully and more targetedly,” says Swissmem director.
Existing tools, such as easy access to short-term work, will need to be used first. Also, solutions had to be found within the economy. Brupbacher holds Swiss energy producers and suppliers accountable. They largely belong to cantons and communes. “The main responsibility lies with the cantons as the main owners of power generation companies, not the federal government. It is therefore important to explore the scope this ownership structure offers,” he says.
But the Federal Council’s decisions were not final: if energy prices rise sharply again, it wants to reassess the situation for the economy and households.