Quantifying the degree of fragmentation of policies targeting household solar PV in Switzerland

Abstract

To reach its climate targets and secure its energy supply, Switzerland needs to multiply the annual deployment of renewable energy technologies, especially solar PV (as also shown in the SWEET EDGE inter-model comparison). However, household solar PV deployment is lagging and needs to be accelerated significantly through a supportive policy environment. Yet, the fragmentation of Switzerland’s energy policy landscape is large, resulting in higher search/transaction costs, risks and inefficient allocation of capital, which may represent a significant barrier to accelerated solar PV deployment. In this Policy White paper, we analyze the extent to which policy in Switzerland relevant for household PV is fragmented geographically along cantons and municipalities, and functionally along a set of policy instruments. Our results show that cantons and municipalities have vastly different policies, including taxation rules, building codes, subsidies and many more. At the same time, more than 500 (largely) state-owned electricity utilities have implemented widely diverging solar feed-in-tariffs (5 to 22 Rp/kWh) and charge very different electricity prices (10 to 32 Rp/kWh). Overall, there is little evidence that cantons and municipalities push for highly ambitious policies, with only a few cantons using their leeway to provide stronger financial incentives to households/investors. Instead, the institutional structure seems to generate a tendency towards low-ambition compromise in the policy environment. Using a techno-economic model, we show that this policy fragmentation indeed creates a massive variance in the profitability – one of the key determinants of technology deployment – of rooftop solar PV installations. While rooftop household solar PV is highly profitable in some municipalities due to local subsidies, a favorable tax environment, or high tariffs, other municipalities have relatively unfavorable policy environments. Based on our analyses, we propose a strategy to reduce this policy fragmentation while increasing ambition. We argue in favor of a targeted harmonization of selected policy instruments to create stronger incentives for accelerated solar PV deployment and to reduce unnecessary barriers, such as harmonizing the taxation of profits from solar PV installations on the cantonal level. Through their ownership of electricity utilities, municipalities and cantons should also work toward reducing the stark geographical differences in feed-in tariffs and electricity prices, while allowing for local differences where appropriate. In sum, the White Paper argues that a targeted harmonization of the highly fragmented energy policy landscape, aiming at more ambitious minimal standards, is key for an accelerated deployment of solar PV, and thus for reaching the targets of Switzerland’s Energy Strategy 2050.