Will the energy transition increase energy prices?

Yes, most likely, especially for electricity. The energy transition should lead to an increase in energy prices for two main reasons: the growing proportion of renewable agents in the energy mix, and the expected increase in the price of carbon (CO₂ emissions) which will make fossil agents more expensive. This being the case, it is by no means certain that this increase will be greater than that which could be observed in the absence of an energy transition. Moreover, the expected fall in demand for petroleum products could result in a fall in their price.

On average, the production costs of renewable energies remain higher than those of fossil fuels (petroleum products, natural gas, coal) [→ Q64]. At present, renewable energies are spreading mainly thanks to subsidies, in particular the feed-in tariff remuneration system (RPC) [→ Q79], or to regulations, such as the obligation, in some cantons, to cover a certain percentage of domestic hot water production by renewable sources for new buildings.

Consequently, as the share of renewables in our energy mix increases, the average cost per kWh will rise, particularly for electricity and fuels, and to a lesser extent for combustibles. Technological progress and the commercial maturity of renewable energies should bring their prices down, but this will probably not be enough to offset the rise in the average price of energy.

At the same time, in the coming decades we are likely to see increasing taxation of fossil fuels, including through higher prices for CO₂ emissions [→ Q83]. This taxation is already applied to fossil fuels (natural gas, fuel oil) and may well increase. It could be extended to fossil fuels (petrol, diesel) in the future environmental tax that will soon be introduced, depending on the target values that Switzerland sets in terms of reducing CO₂ emissions. At the same time, the price of Carbon Emission Certificates in the European Trading System (ETS) should rise significantly [→ Q90]. This will, among other things, significantly increase the price of electricity produced from coal and natural gas on European power exchanges. The European Green Deal, newly proposed by the European Commission in 2019, aims at a 50-55% reduction in greenhouse gas emissions by 2030. The long-term ambition is for Europe to become the first climate-neutral continent.

In addition, electricity transmission prices will also increase as the costs of the investments required to make the grid compatible with the needs of our future energy system [→ Q67] and [→ Q68] will be reflected in the price per kWh of electricity paid by the consumer.

What about a possible full liberalisation of the electricity market in Switzerland? At first glance, it is unlikely to make much difference to the current situation. Large consumers (industry) are already benefiting from the free market and have been able to enjoy significant reductions in their electricity bills. As far as the impact on small consumers (households and small and medium-sized companies) is concerned, the liberalisation that has already been in force for several years in various European countries has shown that it has not led to a reduction in average electricity prices - quite the contrary.

A priori, energy prices will therefore increase, potentially significantly, particularly for electricity. At the same time, however, our consumption is expected to decrease as a result of the steady improvement in energy efficiency. The International Energy Agency has raised the possibility that the drop in demand for petroleum products could lead to a drop in its price, according to the principle of supply and demand. The final impact on the energy bill of companies and households therefore remains difficult to predict. The “polluter pays” principle will nevertheless be increasingly applied, which should penalise those who continue to consume fossil fuels.

Finally, the cost of producing electricity from renewable sources, particularly photovoltaic, will continue to fall and will be increasingly below the electricity prices paid by households. This will encourage end consumers to install solar panels on their roofs to produce and consume their own electricity in order to reduce their energy bills.

This being the case, these arguments should be put into perspective by asking how energy prices would evolve without an energy transition. Our nuclear power plants would in any case, sooner or later, be replaced by other power plants whose production cost could also prove to be higher than the current one. Experiences in several countries suggest, among other things, that the electricity produced by new nuclear power plants would be much more expensive than today.