Massive increase in electricity prices – what to do?

Voices are being raised calling for state support measures, which, however, still harbor considerable risks. Price signals are fundamental to the functioning of a free market and (apart from the basic service) must be perceived. The experiences of the oil crisis of the last century have also shown that interventions can have long-term negative effects. Climate policy must also be taken into account: high prices, for example, promote improvements in energy efficiency. Tempering high energy prices can be politically attractive, but it is difficult.

In this situation, business proposes seven balanced measures to deal with the most serious consequences of the energy crisis on the one hand and avoid negative effects on the other. However, the situation is constantly changing and the risk situation can change quickly (e.g. in the event of a possible “subsidy war”, analogous to a currency war). A continuous reassessment and flexible adjustment of the measures are required.

preparation for deficiency

1) Appeal to the public owners in the electricity sector: sufficiently consider the public interest. A large part of the electricity market in Switzerland is in public hands – from production to distribution. The explosion in consumer prices in the electricity sector harbors considerable risks for the national economy. The economy calls on public owners to take public interests into account holistically and, for example, to reconsider performance expectations of networks.

2) Solidarity action: political actors, society and business must come together to deal with the potential shortage. The federal government’s current campaign is thus fully supported by business. This is an exceptional situation in which everyone has to pull together. This is not the time for maximalist demands or ideologies.

Measures in case of shortage

3) Access to partial unemployment for companies, analogous to COVID. We already have to reckon with the fact that some companies will stop production due to sharply rising energy prices. Access to proven economic policy measures such as short-time work is essential to ensure the survival of previously healthy companies (such as with COVID).

4) Transitional loans analogous to COVID loans. For companies facing liquidity problems due to rising energy prices, access to cash relief in the form of bridging loans is essential (like with COVID). Sunken payments don’t make any macro sense today.

5) Proactively monitor the international situation. The economy requires restraint in the face of state intervention. However, the measures taken abroad have important consequences for Switzerland as an industrial location. The economy would like the Confederation to proactively monitor the measures taken abroad and their impact on Switzerland as an industrial location and, if necessary, to take measures with great restraint – such as the monetary policy of the SNB.

6) Assisting individuals with difficulties. Increases in energy prices are painful for many households, but bearable. In fact, for an average household, energy costs only account for around 5% of expenditure. However, in certain severe cases, the additional costs will drive households into energy poverty. In such cases, the social market economy requires that the affected households be supported within the framework of social assistance. However, a blanket subsidization of energy prices should be rejected.

Measures in case of bottlenecks

7) Create framework conditions and flexibility to minimize the impact of a shortage situation. In the event of a shortage, everything must be done to ensure that the consequences for companies are kept to a minimum. Flexibility and the incentive to help yourself are essential for this. In particular, this means removing regulatory barriers (for example, allowing multi-site solutions on the platform, which the economy has set up to minimize the damage of a possible contingent), building a reserve of virtual energy and giving priority to market-based instruments when the crisis hits.

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