The wholesale electricity market
Institutional Communication Service
25 May 2020
USI Institute for Economic Research (IRE, Faculty of Economics) covers various areas, including the study of the evolution of electricity prices in Ticino, Switzerland and the European Union. Alessandra Motz, PhD candidate at IRE, is responsible for energy market analysis for the Public Finance and Energy Observatory (O-FPE) and recently dealt with the report "The wholesale electricity market", which analyses the dynamics observed in this field during 2019 and early 2020. She offers us an interesting retrospective of what is happening in Europe with regard to energy policies and geopolitics, which also have a significant impact on the national market.
According to the report, 2019 turned out to be a difficult year for energy companies, with electricity prices in particular dropping by around 20% on average per year. What are the factors that have determined such trends? The deceleration of global economic growth and oversupply in the natural gas market are certainly two key factors in this downturn.
Switzerland is fully committed in meeting the development goals of the UN Agenda 2030. Such goals encourage the creation of an increasingly green, competitive and efficient economy, and Switzerland with its Energy Strategy 2050 has already taken important steps, such as the shutdown of the Mühleberg nuclear power plant in December 2019. At the same time, however, the institutional agreement with the European Union for full integration of the Swiss electricity market into the internal energy market is still pending.
The EU has also played a leading role in several important steps related to energy policies. Clean Energy Package, Green New Deal, renewal of contracts for the transit of Russian gas through Ukraine, and Brexit, which calls for the United Kingdom to participate in the internal energy market until the end of the year: these are just some of the important events explained in the report, in addition to the current pandemic that has led to containment measures with a strong impact on the economy.
The energy field is an interconnected market also affecting companies in Ticino, which have seen prices drop since the beginning of 2020 and expect a recovery in the second half of the year. "The drop in prices mainly affects electricity generation, which in the Canton is largely based on hydroelectricity, clean but not particularly economical. However, Ticino's power companies have a few strings to their bow: the ecological surplus value of production, the link with the territory and the constant investment in the development of technical and commercial know-how that is essential to deal with the transition" explains Alessandra Motz. "Companies in Canton Ticino are well prepared: Azienda Elettrica Ticinese, strong in hydroelectric production, clean but not particularly economic, will probably aim to overcome the moment of global crisis by leveraging commercial relationships with local players in the supply chain, the ecological surplus value of production and, for the medium term, the development of technical and commercial know-how strengthened also thanks to the collaboration with Azienda Elettrica di Massagno (AEM)", explains Alessandra Motz.
A summary of the report and the complete document are available at this link: www.ofpe.usi.ch/it/energia