Energy transition: Switzerland is falling behind

While the climate emergency is becoming more pressing by the day, our country is continuing its usual policy of (very) small steps at a slow pace. And while solar power is now the cheapest source of electricity, we continue to rely heavily on fossil fuels.

The war in Ukraine has had an accelerating effect on energy transition issues, and our daily newsfeed is now flooded with news about the energy crisis and the risk of shortages in the near future. While Europeans have had to find alternative sources of supply for natural gas (which represents nearly a quarter of the European energy mix) and other hydrocarbons, the logic of transforming our economies towards a more sustainable model has become obvious, even to the most reluctant minds.

The competition rages on

In fact, the validity of investing in renewable energies, as well as in business models aimed at reducing the carbon footprint of human activity, is no longer in question. Huge investment programs have been launched in Europe, Asia and finally in the United States, and competition for the development of the necessary know-how for the transition is raging between the different economic blocks. This enthusiasm is naturally welcome, as weather statistics keep confirming the most pessimistic assumptions of researchers and we have experienced the hottest years since temperature measurements began.

Renewable energies are competitive

What attracts less attention, however, is the considerable progress made in the field of renewable energies and the profound transformation of the electricity production model. Today, renewable energies already make up 35% of the European Union’s energy mix, and the sum of the investments expected in the development of clean energies makes it possible to achieve the decarbonization objectives promised by the member States. As the volumes produced increase, a virtuous circle is being put in place, further accelerating the transition, with a consequent deflationary effect on the economy, which is welcome at a time when fears of price increases are returning. As an example, the price of photovoltaic panels per watt generated has decreased by more than 99% since 1976, which not only makes solar energy competitive without any government subsidy, but also makes it one of the cheapest sources of electricity in the grid mix. The same phenomenon can be observed with wind energy, with the result that in 2021, more than 90% of new electricity production capacity was renewable! This trend is all the more pleasing since renewable energy is an infinite resource and the effects of economies of scale and technological developments will make these production methods even more competitive.

A similar evolution is to be expected in storage capacities, which are already seeing their cost per kWh drop sharply, which should largely alleviate the intermittency issues posed by the growth of renewable electricity capacities. The consequences are obvious: the long-term profitability of renewable installation projects is becoming far superior to that of older production methods and the transition will continue to accelerate, for the greater good of all.

Switzerland lagging behind

In Switzerland, the situation is unfortunately evolving much more slowly than in other Western economies. While the United States and Europe have made ambitious plans to accelerate and support the transition, nothing comparable is really planned in our country, which yet suffers from a very high level of foreign dependence for its energy supply. Whether in the area of insulation and heating of buildings, incentives for the installation of photovoltaic panels or the development of a credible network of charging stations for electric cars, Switzerland has fallen far behind in international comparison. The traditional mistrust of any industrial policy (reiterated again this year by our Minister of Economy at the Entretiens de Watteville), as well as numerous institutional limitations (mainly an acute “appealitis” from local residents and environmental organizations) seriously hamper our ability to make a rapid transition. Yet our authorities would be well advised to be a little more dirigiste. If we want to meet our climate goals and keep warming from exceeding acceptable limits, we no longer have the luxury of waiting for citizens and the economy to adapt naturally, gently nudged forward by soft incentives.

The private sector has a role to play

And to move up a gear, you need money, lots of money. However, Switzerland is also lagging behind in matters of financing and suffers from a negative prejudice towards public-private partnerships. These mechanisms, which are widely used by our neighbours, are still not well known in our country and arouse a certain amount of mistrust among the general public. Yet the ability to develop renewable infrastructures by leveraging the private sector would offer the dual advantage of multiplying our financing capacities and offering our pension assets a particularly stable return over the long term. This is all the more urgent as the Swiss financial centre has developed considerably in responsible investment and has the intellectual and financial means to support our transition. A change in our mentalities can only initiate a virtuous circle that would benefit the entire community.