UBS study “New energy for Switzerland”: Shift in electricity generation and the total energy mix
- Greenhouse gas emissions in Switzerland are already very low. According to international agreements concluded at the UN climate conference, these should be reduced a further 20% by 2020 and 50% by 2030, from 1990 levels.
- By mid-century, renewable sources should generate 90% of Swiss power. The current share is almost 60%.
- Hydroelectric power will remain the core of the energy mix, although new renewable energy sources, led by solar at 16%, should show the strongest growth to 2050.
- The electricity generation mix in Switzerland offers minimal savings potential in terms of CO₂ emissions. However, with the increasing electrification of the transport system and the use of advanced construction and heating technology, crude oil consumption can be reduced and emissions targets met.
Zurich, 2 March 2016 – The Swiss energy revolution is being determined by domestic and international energy and, in particular, climate policy, as well as by market forces and technological advances. Both in absolute and per capita terms, greenhouse gas emissions in Switzerland are already very low and should be reduced further, given the commitments made by the Swiss government through CO2 legislation and as part of the global agreement of the 21st UN climate conference. UBS Chief Investment Office Wealth Management (UBS CIO WM) has analyzed data from associations and the authorities to investigate the Swiss power mix of the future, as well as the potential to reduce greenhouse gases in the overall energy mix by the middle of this century.
Hydroelectric power as the basis, strong growth in solar energy
By 2050, hydroelectric power, new renewable energies (above all solar power) and gas power stations will all gain in importance at the expense of nuclear energy (see chart). “In 2050, around 90% of power in Switzerland is likely to be generated from renewable sources,” says Carsten Schlufter, UBS CIO WM's energy specialist. The current share is just under 60%, while nuclear power contributes nearly 40% to the electricity production mix.
Hydroelectric power will play a key role. Its development began around 100 years ago, and today it accounts for more than half of Swiss electricity production. In future, this share could rise to around two-thirds. However, domestic hydroelectricity providers are currently grappling with low electricity generation costs and a lack of profitability, which make expansion difficult.
Solar power in Switzerland is likely to show the strongest growth among all energy sources. As the price of solar modules is expected to continue declining, the technology is growing more competitive, and its share of 1.5–2% in 2015 is set to increase to 16% by 2050. Other renewable energy sources, such as wind, biomass and geothermal energy, can complement the power generation mix, and new gas power stations will further increase energy security.
Swiss nuclear power stations should be removed from the grid after they reach the end of their operating lives. At present, new nuclear power station construction is unpopular. Furthermore, the costs would be very high, not least due to higher security requirements, making present investments unprofitable.
New drive, construction and heating technologies enable CO₂ savings
Over the next few decades, the Swiss power mix will thus transform significantly. At the same time, in its current form it barely offers any potential for reducing greenhouse gas emissions.
The potential for reducing greenhouse gas emissions lies primarily in lowering crude oil consumption in the areas of transport and buildings, as well as in industry. Unlike with the electricity generation mix, fossil fuels, above all crude oil and natural gas, contribute almost 50% to the overall Swiss energy mix; globally, this figure is around 80%. “By the end of the next decade, this share is likely to be significantly less,” explains Carsten Schlufter. The decline would then progress significantly faster in Switzerland than globally, albeit from a lower level.
In the view of the UBS CIO WM, the main reason for this shift can be found in the changes in drive technology (fully electric, hybrids, plug-in hybrids, fuel cells). The question then is not if, but how quickly transport will be electrified. Alexander Stiehler, analyst at UBS CIO WM, explains: “The electrification of the transport system and the gradual disappearance of oil heating would reduce crude oil consumption significantly and change the overall energy mix.” As a side effect, this would reduce dependence on energy imports.
Depending on the penetration of alternative vehicle drive systems and the expected economic and demographic growth, the demand for power will continue rising moderately, despite continual efficiency gains. This means that energy and power costs are likely to increase for end consumers.
“Switzerland is currently harmonizing energy security, affordable energy prices, environmental aspects and sustainability, which are sometimes seen as conflicting goals, quite well,” says UBS Chief Economist Switzerland, Daniel Kalt. Nevertheless, Switzerland is facing real upheaval in the energy sector, and in the years to come, key strategic decisions will have to be made that will determine whether Switzerland will maintain its position as a role model when it comes to energy policy.
Study “New energy for Switzerland” (available in German and French):
UBS publications and projections for Switzerland:
UBS Switzerland AG
Daniel Kalt, UBS Chief Economist Switzerland
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Sibille Duss, UBS Chief Investment Office WM
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Carsten Schlufter, UBS Chief Investment Office WM
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Alexander Stiehler, UBS Chief Investment Office WM
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