E.ON CEO: Future energy world is based on renewables and customer solutions

Energy Post

In the first in-depth interview given by Johannes Teyssen, CEO of Eon, after the company announced its radical new strategy in December last year, Teyssen says that “the energy world of the future” and “the classical energy world” have “drifted so far apart that they require different entrepreneurial approaches”.

He notes that the company’s new strategy is not based on German or even European politics, but “on more fundamental, global trends”. The interview was conducted by Alex Forbes and published by World Energy Focus, the free global monthly magazine of the World Energy Council (WEC), on 5 March. Teyssen is former European Chairman of the WEC.

In the interview for World Energy Focus, Teyssen explains why the company has decided to split off its conventional generation business and focus henceforth only on renewables, distribution and customer solutions.

“The energy world is diverging”, he says. “On the one hand, the energy world of the future – characterised by renewables, intelligent networks and tailor-made customer-oriented energy solutions – is taking shape rapidly. On the other hand, the classical energy world – of the backbone systems characterised by high-volume production and trading structures for electricity, gas and other commodities – remains irreplaceable for the public good. Our analysis shows the two worlds have drifted so far apart – due to different applied technologies, investment cycles and costs of capital – that they require different entrepreneurial approaches. We want to regain the entrepreneurial initiative in both areas. By doing so, we believe we’ll create value for shareholders.”

According to Teyssen, “the primary objective in the conventional energy world is supply security; the key success factors are big, efficient assets at favourable locations with a low cost base. The new energy world is characterised by speed, agility, innovation and digitalisation; this means being alert to anything that could be of benefit to the customer, and being able to bring it to the market faster than anyone else.”

Big Data

Teyssen notes that “there are three important observations to make about the changing energy world. First, Germany’s Energiewende is not a purely political phenomenon. The Renewable Energy Law has been a powerful tool for expanding renewables, but change is being driven by new forces: by advances in technology and by the needs and desires of customers. E-mobility is a big driver of this trend. Increasing digitalisation is another important catalyst of change. Big Data is becoming a value driver in the energy industry just as it is in other industries. This will revolutionise the energy supply system. Besides, customers have taken their place in the driving seat of the Energiewende. With solar panels on the roof, a micro CHP plant in the cellar, an electric car in the drive and an intelligent consumption control system, everyone can create their own Energiewende, either as a single household or by getting together with neighbours. Policymakers need to adjust to this reality.”

“Second, renewables won’t simply replace conventional energy sources. Keeping conventional power stations connected to the grid, while at the same time further expanding renewables, requires a new market design – unless we want to walk with open eyes into a situation where the secure energy supply of a leading industrialised country is put at risk. Germany and Central Europe need intelligently designed capacity markets to ensure supply security, and this requires a fair market and fair prices.”

“Third, we cannot assume that the fossil fuel era is past. Forecasters were certain that oil, natural gas, and coal would become scarcer and pricier, but oil is getting cheaper by the day and the price of coal has fallen dramatically. For any time span relevant to our decision-making today, fossil fuels won’t be scarce. With oil so cheap worldwide, some people say that Europe can no longer afford to transform its energy system because then we’ll no longer be competitive. That’s short-sighted. No one can reliably predict what oil prices will be in the future. More generally, the path to the energy future is complex and multifaceted. Conventional and new energy structures will co-exist for a long time to come.”

Fundamental trends

Asked about EU energy policy, Teyssen notes that Eon’s restructuring is not happening only in response to EU or German policies. “We are creating two companies able to respond faster to changes in the political and regulatory framework – and to changes in the general market environment”, he says. “Our strategy is not just an answer to the specific and sometimes questionable facts of European or German energy politics but rather builds on more fundamental and thus global trends.”

Teyssen says Eon is already “increasing its investment budget” for its new businesses in 2015, including solar and wind, and in smart grids in the EU and Turkey.

In the interview Teyssen also responds in detail to accusations that the “New Company”, which will hold all of Eon’s conventional generation assets, will be like a “bad bank”, that will have to be saved by the government at some point or other. In addition, he comments on the role of natural gas in the future energy system.

Source: Energy Post. Reproduced with permission.