Outdated Weather Forecasts Cost Electricity Consumers Hundreds of Millions Annually

Outdated weather forecasts are leading to significant financial losses for electricity consumers in Switzerland, amounting to hundreds of millions of francs each year. The national grid operator, Swissgrid, increasingly finds itself in the position of having to intervene at considerable expense to balance the substantial fluctuations in solar energy production. A critical issue at hand is that many electricity companies do not update their weather forecasts on a daily basis.

On April 22, 2024, Switzerland narrowly avoided a blackout, as reported by various news outlets. Following a period of unseasonably warm weather, an unexpected winter storm blanketed the region in snow, affecting solar panels and causing solar power production to plummet to nearly zero. The sudden drop in energy availability equated to a loss of power similar to that produced by the Leibstadt nuclear power plant, which generates 1400 MW.

While Swissgrid clarified that there was no immediate risk of blackout, the operator was compelled to take substantial measures to prevent a collapse of the electricity grid. Maintaining a delicate balance between power production and consumption is essential; when a deficit occurs, Swissgrid must procure so-called balancing energy on short notice, such as from hydroelectric power plants.

These interventions come at a high cost. On that particular day in April, Swissgrid paid over 2000 francs per megawatt-hour of electricity purchased, leading to a total expenditure of approximately 10 million francs--costs that ultimately fall to consumers. This incident was not an isolated occurrence; similar events took place during the summer and early months of the current year, primarily due to inaccuracies in weather forecasts from electricity providers.

For instance, on February 17, 2025, Swissgrid had to compensate for the output of a nuclear power plant due to an unexpected weather front. Earlier in the year, on January 6 and January 26, incorrect forecasts of sunny weather resulted in excess power being fed into the grid, necessitating the reduction of output from contracted power plants. The total costs associated with balancing energy reached approximately 370 million francs in 2024, a significant increase compared to previous years.

The increasing reliance on solar energy exacerbates the situation, as the installed capacity of solar power in Switzerland has surged from 6 to 8 gigawatts over the past year, with plans to reach 30 GW by 2040. This growth means that inaccurate forecasts can severely strain the electricity grid.

Bastian Schwark, head of market operations at Swissgrid, emphasized that while past efforts focused on preventing energy shortages during winter, the future challenge lies in stabilizing the grid amidst significant generation surpluses. Unlike hydroelectric power, solar energy is largely non-dispatchable, a situation made more complex by the proliferation of small-scale solar installations.

An analysis of previous incidents reveals a recurring pattern: significant imbalances often occur during holidays, weekends, and Mondays. This can be attributed to the fragmented nature of the Swiss electricity market, which comprises approximately 650 distribution network operators, many of which are smaller companies with limited resources. When weather forecasts are created on Fridays for the upcoming days, the likelihood of errors increases.

Swissgrid has responded by mandating that the so-called balance groups, which include distribution networks, traders, producers, and suppliers, utilize updated weather forecasts on a daily basis--including weekends. However, this requirement only applies to balance groups directly registered with Swissgrid, excluding many of the smaller distribution operators.

The Swiss Electricity Companies Association (VSE) has also stepped in, cautioning in a recent industry report that the ongoing expansion of solar power could worsen the current situation unless measures are taken to reform forecasting practices. The guidelines now require electricity suppliers to conduct weather forecasting year-round, necessitating appropriate resources.

However, the incentive for companies to hire staff to update forecasts on weekends remains low. If a forecast is incorrect, Swissgrid must procure expensive balancing energy, which is ultimately charged to consumers. Additionally, major electricity firms have profited significantly from the growing demand for balancing energy, particularly since the introduction of a new procurement platform, Picasso, in 2022, which has led to skyrocketing prices for this service.

In response to what have been termed "extreme profits" for electricity providers, the regulatory authority Elcom intervened in March by establishing price caps for secondary balancing energy, which must be available within five minutes. The price per megawatt-hour is now limited to 1000 euros until the end of the year.

In an effort to reduce the demand for balancing energy, Swissgrid will implement a new pricing model next year, designed to correct existing disincentives and reward energy suppliers for managing grid fluctuations. This approach is modeled after practices in Europe, where countries with a higher share of solar energy have demonstrated a reduced need for balancing energy.

Swissgrid believes that a power agreement with the EU could also enhance grid stability during critical situations by providing access to European balancing energy platforms.