By Stephen Lacey
Executives from E.ON, Germany’s biggest utility, announced plans today to leave the centralized power business in order to focus exclusively on distributed energy and “empowering customers.”
In a strategy approved by the utility’s advisory board yesterday, E.ON is preparing to split into two separate companies sometime next year. The new (as-yet-unnamed) company will take on the company’s coal, gas and nuclear assets, as well as its trading business and hydropower plants.
Once the spinoff is complete in 2016, E.ON will focus exclusively on renewable energy, energy efficiency, digitizing the distribution network and enabling customer-sited energy sources like storage paired with solar. The reformed utility will be active in Europe, North America and Turkey.
“We’ve now come to the conclusion that it will become increasingly difficult for a company with a broad portfolio to be successful and to grow in both the new and the conventional energy world,” said Johannes Teyssen, E.ON’s CEO and board chairman, during a press conference this morning.
E.ON’s dramatic move comes one year after Germany’s second-biggest utility, RWE, announced plans to completely transform its power delivery business in favor of a “prosumer” business model.
The new spinoff company will own significant upstream oil, gas and coal operations around the world, as well as 51,000 megawatts of fossil fuel power plants in Europe and Russia. The transformed E.ON will have 33 million customers, more than 600,000 kilometers of distribution wires and 15,000 megawatts of renewables.
In his presentation to investors and reporters this morning, Teyssen described how the “new energy world” is forcing E.ON to change:
Until not too long ago, the structure of the energy business was relatively straightforward and linear. The value chain extended from the drill hole, gas field, and power station to transmission lines, the wholesale market, and end customers. The entire business was understood and managed from the perspective of big production facilities. This is the conventional energy world familiar to all of us. It consists of big assets, integrated systems, bulk trading, and large sales volume. Its technologies are mature and proven.
This world still exists and will remain indispensable. In the last few years, however, a new world has grown up alongside it, a world characterized above all by technological innovation and individualized customer expectations. The increasing technological maturity and cost-efficiency and thus the growth of renewables constitute a key driver of this trend. More money is invested in renewables than in any other generation technology. Far from diminishing, this trend will actually increase.
At the same time, the costs of some renewables technologies — such as onshore wind farms — have sunk to parity with, or below, those of conventional generation technologies. We expect that other renewables technologies could become economic in the foreseeable future.
Renewables aren’t just revolutionizing power generation. Together with other technological innovations, they’re changing the role of customers, who can already use solar panels to produce a portion of their energy. As energy storage devices become more prevalent, customers will be able to make themselves largely independent of the conventional power and gas supply network.
The proportion of customers that want to play a more active role in designing their energy supply is growing steadily. Above all, they want clean, sustainable energy that they can use efficiently and in a way that conserves resources.
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