Glossary
Merit order
Also known as: Merit-Order, Merit-Order-Prinzip, Merit order principle, Dispatch order of power plants
The merit order is the dispatch sequence of power plants on the electricity market, ranked by marginal cost from the lowest to the highest. On the power exchange, the most expensive plant that still has to be switched on to cover demand sets the price for every supplier in that hour. In many hours that plant burns gas, which is why the gas price shapes electricity prices in Europe and therefore in Switzerland as well.
The merit order explains why the electricity price hangs on crises that have little to do with electricity. Hydropower, nuclear, wind and solar produce at marginal costs close to zero and stand at the front of the sequence. Gas and coal plants stand at the end. As soon as demand is high enough that a gas plant has to run, its fuel price sets the price for every kilowatt-hour traded, including the ones from the reservoir (source: VSE, electricity market and trading).
For Switzerland, the principle bites mainly in winter. Around 60 percent of the country’s electricity comes from hydropower and just under 30 percent from nuclear (BFE 2024), yet in the winter half-year Switzerland imports electricity from the EU and adopts the price formation there. The rise in the energy component for commercial customers from 7.29 Rp./kWh (2022) to 12.26 Rp./kWh (2023), according to ElCom, is the trace the gas price crisis left in Swiss electricity bills.
For PV system operators, the conclusion is this: the purchase price depends on markets the business cannot influence; the share of self-produced electricity is the lever against that dependency. How prices have developed since 2021 and what the hourly spot price means for feed-in from 2027 is covered in the article Electricity market 2026 and dynamic tariffs.