Swiss balancing market design

Commissioned by Swiss Federal Electricity Commission ElCom

Ingmar Schlecht

With Takon and ZEW

2025

Since the introduction of the PICASSO-compatible bidding process, Switzerland has seen a sharp increase in balancing prices. For the Swiss regulator ElCom, with Takon and ZEW, we analyzed the causes of the price rise, evaluated the current market design, and developed concrete proposals to improve the Swiss balancing market. This report was originally published in German.

The market design for system services in Switzerland is under pressure. Since the switch to the PICASSO-compatible bidding procedure in 2022, prices for aFRR have risen significantly, peaking in summer 2024. Part of this development can be explained by fundamentals: higher activation volumes due to the expansion of PV and increasing PV forecast uncertainties, which encounter a short Swiss balancing-energy merit order. However, against the backdrop of low market liquidity and the absence of price coupling with neighbouring markets, the persistently high prices raise questions about insufficient competition and potential market power abuse. In response to the observed price developments, several measures have already been implemented, including a price cap for mandatory aFRR bids, which is, however, limited until 28 December 2025.

The study Analysis and optimization of the balancing market design in Switzerland conducts a fundamental analysis of the existing markets for aFRR as well as mFRR and aims to identify necessary adjustments to the market design. At the core of the investigation lies the question of whether the current design is capable of generating competitive, cost-efficient, and undistorted market outcomes under the given framework conditions, or whether modifications are required.