- More than half of the energy utilities in Switzerland expect positive business performance for the current year – despite COVID-19.
- More than three quarters of the energy companies surveyed assessed the course of business in the last year 2020 as “good” to “very good”.
- Digitalization is considered a top issue among energy companies. As a result of more work being done at home, IT security has moved up to second place.
- The most important technologies for decarbonization in the municipalities are considered by energy utilities to be heat pumps, waste heat utilization, and solar thermal energy.
EY’s Municipal Utility Study 2021 in Switzerland shows that the impact of the COVID-19 pandemic is also reflected in the assessments of Swiss energy utilities: The latest survey makes it clear that Swiss energy utilities performed much better financially than expected in 2020, a year marked by the pandemic. The energy companies remain cautiously optimistic in their forecasts for the current year.
The changed world of work has also left its mark: The increased use of IT devices at home has given additional impetus to the security aspect of IT systems. While digitalization still ranks first among the top topics for Swiss utilities, the topic of IT security and cyber risks is now in second place.
Course of business in 2020 better than expected
The general business situation of energy utilities in Switzerland remains good. This is also due to the fact that electricity suppliers with tied customers are still able to sell a considerable part of the electricity in the monopoly. 76% of the companies surveyed for the Municipal Utility Study 2021 assess their own business performance for 2020 as “very good” or “good”. Compared with the expectations expressed in the Municipal Utility Study 2020, these figures look even more positive: In last year’s survey, only 59% of the energy utilities were of the opinion that they would achieve “good” to “very good” business performance in 2020. “The difference of 17% between the forecast and the current assessment of business performance for 2020 shows that the companies have emerged from the Covid-19 pandemic better than they themselves expected,” said Benjamin Teufel, Sector Leader Energy & Resources for Switzerland at EY.
A similar picture emerges among those energy utilities that assess their own business performance as “fairly bad” or “bad”: In the current study, only 6% of respondents still assess 2020 in this way. In last year’s survey, as many as 14% of the companies still expected poor business performance for 2020 – this cautious forecast is also due to the COVID-19 pandemic. The following can be said: The course of business of energy utilities during the first COVID-19 year, 2020, was significantly better than expected. Nevertheless, the energy companies remain cautious with their forecasts for the current year.
Cautious forecast for the current year
Energy companies remain cautious with their forecasts for their own business performance in the current year 2021: At 58%, more than half of the energy utilities nevertheless expect “good” to “very good” business performance. Only 8% of the companies expect business to be “fairly bad” to “bad” in 2021. For historical reasons, the electricity industry in Switzerland is characterized by a large number of municipal and local electricity distribution companies. “Swiss energy suppliers continue to benefit from the monopoly structures in the market. However, it is foreseeable that the associated secure business model will change in the future,” said Benjamin Teufel. In this context, it will be interesting to see whether, especially in the Swiss gas market, the reality due to declining gas consumption means that regulatory plans come to nothing.
Covid (almost) without consequences for cooperation with municipalities
In particular, the energy companies were asked about the impact of the COVID-19 pandemic on cooperation with municipalities. The assessments of the energy utilities are in line with the business success of 2020: A full 70% of the companies surveyed state that the pandemic had “no/hardly any consequences” for this cooperation. 22% of the energy utilities even mention positive side effects such as a digitalization boost and strengthened trust in the operational performance of local companies in times of crisis. Only 4% of them mention negative effects such as more difficult communication or the postponement of individual plans and projects.
High quality and intensification of cooperation
The basic question about the quality of cooperation with the municipalities and the public sector was answered by a majority of 70% with “good” to “very good”. The remaining 30% of Swiss energy companies rate the quality as “average”. None of the 50 energy utilities surveyed rated cooperation as “fairly bad” or even “bad”.
60% of the energy companies expect to provide more services to municipalities in the future. 34% expect the level of services to remain unchanged and only 6% expect to provide fewer services to municipalities. This is reflected in the expected growth in revenue in cooperation with organizations of municipalities and cities: 44% of respondents expect to achieve “5 to below 25%” of their revenue with organizations of municipalities and cities in five years’ time. This would mean a significant increase of 10%. Currently, only 34% of energy utilities generate “5 to under 25%” of their revenue in this way.
Top topics of digitalization and IT security
Digitalization and IT security remain among the most important topics for Swiss energy companies. A full 86% and 82% respectively are of the opinion that the energy utilities will be strongly concerned with these two topics now and in the coming years. As the most important topic, digitalization has increased by another two percentage points on the previous year. “The significant 19% increase in the topic of IT security should be seen in the context of the COVID-19 pandemic: The increased use of IT devices at home has given additional impetus to the security aspect of IT systems,” said Benjamin Teufel.
Digitalization is not only seen as the most important topic by Swiss energy utilities, but is now also viewed positively by 74%: 34% of respondents see “significant opportunities” in the digital transformation. This is an increase of 10% on the previous year. Furthermore, 40% of the energy utilities believe that digitalization opens up “slight opportunities”. Digital progress is perceived as a “significant” (2%) or “slight” (12%) threat by a total of 14% of the companies.
Smart solutions and concepts
The high expectations in the area of “smart metering/smart grids/grid integration” should also be seen in connection with the digital transformation. The area assessed as relevant by 82% of the energy utilities is an expression of new business models and offers that have only been opened up by the technological possibilities of digitalization.
Despite the high opinion of the energy utilities towards smart technologies, the Smart City development concept (the networking of different areas and players of a city in order to reduce energy consumption, for example) does not currently enjoy great importance: Only 2% of respondents currently rated the concept with a “high importance”, while an overwhelming majority of 68% assessed the importance as “low” (40%) or even as “non-existent” (28%). Looking into the future, however, a clear shift is emerging: 66% of energy companies think that in five years’ time Smart City will be of “average” (40%), “high” (24%), or even “very high” (2%) importance.
Decarbonization and hydrogen
The Swiss energy utilities were also asked for their opinion on the importance of the “heat transition”. When asked which technology options were particularly relevant for decarbonization in the municipalities currently and in five years’ time, the answer “heat pumps” ranked first with 68% – followed by waste heat utilization (58%), solar thermal energy (48%), and green heat generation (46%).
According to the Swiss energy companies, the use of hydrogen plays a subordinate role in the decarbonization of heat generation: Only 30% think this will be particularly relevant in the next five years. This assessment is also reflected in another question: For the first time, respondents were asked whether hydrogen was one of the relevant topics that Swiss energy companies would increasingly address in the years ahead. “Surprisingly, only 18% of the respondents thought they would deal more intensively with this energy carrier in the future. This assessment is astonishing and contrary to the current efforts of the large energy companies and of politicians,” said Benjamin Teufel. According to their own statement, hydrogen will not be an issue for a full 74% of the energy companies in the next two to three years.
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