We may be about to witness one of the most profound transitions ever to occur in the utility industry. Challenged by the surge in distributed renewables and a strong decline in revenues, one of Europe’s largest largest utilities, RWE, is reportedly planning to completely transform itself from a traditional electricity provider into a renewable energy service provider. The utility’s new philosophy: either adapt — or wither away and die.
This is an important development, reported by Stephen Lacey:
“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.”
To explain it, CEO Johannes Teyssen said the following:
“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.”