decentralized power

Upstarts Upset the Energy Market

Windkraft in der Eifel
Power players are roughing it out for dominance of the energy sector. Source: DPA

In June 2011, Chancellor Angela Merkel’s decision to phase out nuclear power turned the German energy market upside down. The market had long dominated by four major players – E.ON, RWE, Vattenfall and EnBW – but smaller businesses have shaken up the renewables market ever since.

Those changes can be seen throughout the countryside from roofs shiny with solar panels to towering wind turbines as energy production becomes more decentralized.

The shift has forced big players to adapt. E.ON and RWE’s spinoffs Uniper and Innogy add two new players in the rapidly expanding field of digital energy.

One such disruptor is Lichtblick, among Germany’s first green-energy electricity providers, launched 19 years ago and now, with 650,000 customers, a pioneer distributor of green energy. Its chief executive, Heiko von Tschischwitz, says the energy market is on the cusp of a revolution thanks to digitization. “The formal liberalization that we experienced in 1998 was nothing compared to what’s coming,” he said. “The era of simple energy provision is over.”

Lichtblick itself has to fight to stay ahead of the curve. Mr. von Tschischwitz is trying to work out how to connect solar roofs, mini cogeneration units, battery storage systems and electric cars to virtual power plants and energy storage systems – and also enable people to view how much power they use.

Energy providers indeed face a “digital shock,” said Jens Strüker, an academic specializing in energy management at the Fresenius University of Applied Sciences. “If the big energy providers don’t react now, they’ll be crowded out of the market,” he said.

All face the same challenge: to manage electricity generation and consumption and offer customers new services in a world in which nearly all electronic devices are connected to the internet, Mr. Strüker said. Soon, the power grid will connect to data networks and intelligent electricity meters will help to regulate consumption and production. With smart home technology, consumers will be able to regulate their energy consumption by remotely controlling outlets, thermostats and security systems, increasing energy efficiency. The dream is for entire cities with grids that intelligently manage electricity flow to match supply to demand.

These digital changes are driving Germany’s energy revolution as energy is no longer produced in giant, central power plants but locally and decentrally, through citizens’ rooftop solar panels feeding into the grid. But in this transition, data is key to balancing energy supply and demand.

The market is growing ever more crowded with smaller and larger providers, such as Siemens, General Electric and Bosch, alongside startups, green energy producers and tech giants like Google. All want a piece of the industry giants’ pie.

But E.ON and RWE are adapting. E.ON announced a partnership with Google to provide customers with an online solar calculator. Their Sunroof tool calculates the amount of energy a solar panel can generate based on variables like roof pitch and weather patterns. RWE’s subsidiary Innogy dubs itself a data management company, facing a transition similar to the telecoms sector. Innogy boss Peter Terium commented, “How much does a kilobyte or megabyte cost today? Nothing. Companies sell bandwidth. A similar approach is coming to the energy sector. By itself, a single kilowatt hour is worth almost nothing.”

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