Power Play

Its Industry in Transition, Energy Utility EON Plots Revolution From Within

  • Why it matters

    Why it matters

    German utilities are applying innovative approaches to energy, using companies such as SAP, Google and Samsung as role models.

  • Facts

    Facts

    • The German energy industry is shifting from from a centralized to a decentralized system of energy supply.
    • The German government’s decision to phase out nuclear power and promote renewable energy has energy suppliers scrambling.
    • German utility Eon has created an internal, entrepreneurial division to foster new business ideas.
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    Audio

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Volkswagen E Up Electric Car at a German dealership in 2013. Source DPA

 

The box that Artur Sychov has suspended from the ceiling looks unassuming.

It’s 1.20 meters (about 4 feet) long and roughly 30 centimeters deep and wide. Nevertheless, the box is just as clever as its inventor. It hangs above a parking space in an underground garage, where an ordinary fluorescent light was hanging just a few weeks ago. The new box includes a light, but it also has an additional feature, as Mr. Sychov demonstrates by unfolding a metal arm downward from inside the device.

“It’s a power outlet,” the 28-year-old explains. “If you drive an electric car, this is where you can recharge your battery.”

Electric car drivers currently have their choice of high-tech charging columns on the side of the road or complicated charging boxes for public and private parking garages. Mr. Sychov’s charging station, on the other hand, is easy to connect to the lighting system of any garage. The basic version is expected to retail for less than €1,000 ($1,340), and it’s capable of charging an electric car overnight.

In addition to being resourceful, Mr. Sychov is also quick. He founded his company, Easycharge.Me, only six months ago, and he expects to have the first small series of 100 charging devices ready for the sale by the end of the year. At that point, they’ll probably feature the logo of Germany’s largest energy conglomerate, Eon.

Right now the box isn’t just hanging in any garage, but in the underground garage at Eon headquarters. What’s more, the car attached to the charging box isn’t a small car but the Eon CEO’S Tesla. Until a year ago, Mr. Sychov worked for Eon as an electricity trader, but now he runs a startup company financed by his employer. The unusual, symbiotic relationship is an opportunity for Mr. Sychov. For Europe’s largest energy company, it’s symbolic.

The Ukrainian-born entrepreneur’s seemingly simple idea has potential, because it addresses one of the biggest problems of electromobility: the establishment of an uncomplicated, reasonably priced infrastructure for charging batteries. Until recently, however, a company like Eon would have paid little attention to the 28-year-old’s idea.

Like its competitors, RWE, Vattenfall and EnBW, Eon derives most of its profits from the operation of giant power plants that generate electricity for cities and industrial complexes. This has led the industry to structure itself around highly centralized units. But then came the nuclear disaster at Fukushima and the German government accelerated the advent of the Energiewende, a program of public subsidies to transition Germany from fossil to alternative fuels, and suddenly everyone was talking about a future-oriented, decentralized energy supply. The effect on companies such as Eon and RWE, Germany’s two largest energy companies, has been disastrous, as their profits have melted away. Eon’s market value has been cut in half, from about €100 billion in early 2011 to €52 billion today, and dividends are crumbling.

“We urgently need new business models and we are taking innovative approaches to achieve that goal.”

Rolf Fouchier, head of Eon sales in Germany

“We urgently need new business models,” says Rolf Fouchier, head of Eon sales in Germany. “And we are taking innovative approaches to achieve that goal.” Eon executives know that if they hope to survive they will have to adjust to new realities in the world of energy. This has prompted Eon to embark on its own, internal Energiewende.

One of the consequences is Artur Sychov and his startup, which he was able to establish with Eon’s support. Easycharge.Me is part of a project called Agile, for which CEO Johannes Teyssen has high hopes. It enables the company to attract fresh entrepreneurial spirit. For a little over a year, Eon has been acting as an incubator, promoting startups that the energy giant is betting will develop new business models. Mr. Sychov, a former electricity trader, is now the CEO of a startup and owns 35 percent of shares in the company, while his employer owns the rest.

The heart of Eon’s startup initiative is housed in an administrative building, about three kilometers (2 miles) from its Düsseldorf headquarters. The company has cleared half of a floor for its future-oriented employee-entrepreneurs.

Their job is to think outside the box. They are expected to take risks in the process, even if it sometimes means failing. Everything German business executives have heard about the formulas for success applied by Silicon Valley’s business revolutionaries is now supposed to be possible within the conservative structures of a major German corporation.

A revolution? Well, count us in.

 

EON CEO Johannes Teyssen at the company's April 30, 2014, annual shareholders meeting in Essen, Germany. Source DPA

 

Every Wednesday, the new CEOs get together in a light-filled, spacious room for pizza and to share their experiences. This is what Eon’s brave new world looks like.

A six-member project team supports 15 internal startups. Some of the projects they’re working on include innovative ways of providing electricity, new customer solutions involving storage technologies for renewable energy and ways to sell liquefied natural gas in the shipping sector and in road transport. All 15 of the startup CEOs are Eon employees who had a promising idea and have now been allowed to develop their plans, as startup entrepreneurs, until they are ready to be marketed.

“Agile enables us to create new a entrepreneurial spirit within our company,” says Thorsten Marquardt, managing director of the Agile project. The 43-year-old is as familiar with the company’s problems as its visions. He has been working for Eon since 1999, in electricity trading, sales and strategy departments. Three years ago, he was assigned to work on the Desertec renewable energy consortium. In May 2013, Eon CEO Teyssen chose Mr. Marquardt to head the company’s own future-oriented project.

“Agile certainly won’t solve all of our problems,” says Mr. Marquardt. But Eon, he explains, aims to take advantage of any reasonable idea – and in some cases the ideas are very promising. Individual efforts, says Mr. Marquardt, have the potential to contribute sums in the single to double-digit millions to Eon’s bottom line. “But there is one thing we are creating more than anything else: a mood of change.”

The heart of Eon's startup initiative is housed in an administrative building, about three kilometers (2 miles) from its Düsseldorf headquarters. The company has cleared half of a floor for its future-oriented employee-entrepreneurs.

A look into the past shows just how urgently the company needs change. Until the Energiewende, large nuclear, coal and natural gas power plants were generating returns in the high double digits. The sales departments managed their monopolies on territories. [I’m not sure what this means. Is the author saying that sales departments had nothing better to do than manage their monopolies?] There was no competition and little pricing pressure.

As a result, electric utilities became “suppliers.” Their sales teams devised ways to deliver electricity and natural gas to consumers that maximized returns. But was this what consumers needed or wanted, and were they satisfied?

Questions like this were unimportant in the world of the quasi energy monopoly.

But now Eon CEO Teyssen has finally declared war on this attitude. “The entire company,” he said at the 2014 company meeting, “has to focus on the customer.”

The same principle applies to the other “suppliers” like RWE and EnBW. They are in similar situations and face the same challenges. Like Mr. Teyssen, RWE CEO Peter Terium is trying to crack open a sedate corporate culture. In an effort to boost creativity, the Dutch native has had employees spend months at companies like SAP, Google and Samsung to observe their approaches.

What do these companies do differently? Why are they so creative? What can RWE learn from them? When Mr. Terium convened a meeting of his 300 top executives at the Düsseldorf Hilton in early July, the RWE envoys talked about their experiences and even brought along a few representatives of the companies they had visited.

After listening to 20 different accounts, the RWE managers started brainstorming. What about joint ventures with the car-sharing companies, they speculated? And could RWE sell its services through something akin to Tupperware parties?

The envoys are jokingly referred to within RWE as “squirrels,” but it’s also an apt moniker, because RWE knows how laborious the search for new business models can be.

Agile leader Mr. Marquardt is acutely aware of that, and says: “All ideas from the energy sector are welcome.” The Eon employees have already submitted more than 200 proposals to Agile, and 50 employees were asked to present their ideas. Anyone who submits an interesting proposal, even if it’s just in the form of a one-line email message, has the opportunity to explain it to a forum of five or six top executives. The employee is then given half an hour to present the idea. If he manages to convince only one of the executives, he is named the CEO of his own startup – and has gained a sponsor who supports him as a sparring partner during the project.

The new entrepreneur receives a budget from Eon, along with support from the six-member Agile team on legal issues, in developing business plans and in marketing. But despite this support, the employee-entrepreneur is really working independently.

“We seek employees with passion,” Mr. Marquardt explains. While it’s important to come up with the right ideas, finding the right people to implement them is equally crucial, he adds.

One of them is Mr. Sychov, the inventor of the ceiling-mounted charging box. And then there is Daniel Becker, a business economist who, until recently, was doing wind farm profitability projections for Eon’s renewable energy subsidiary. Now the 34-year-old, as the CEO of Eon Off-Grid-Solutions GmbH, wants to help his employer enter new territory: Africa.

Under Mr. Becker’s plan, by the end of the year the first overseas container with the red Eon logo will be standing in an African country (the country has already been selected but its identity is still a secret). Filled with solar technology, a generator and a storage unit, and capable of generating 40 kilowatts, it will supply enough electricity to power a village of 100 huts, a large farm or a mining operation.

Mr. Becker’s work, with its focus on Africa instead of Europe, generating 40 kilowatts with a solar container instead of 1,000 megawatts in a nuclear power plant, and powering 100 huts instead of a large German city, comes with a healthy dose of third-world development initiative. “Of course it enables us to improve people’s living conditions,” says Mr. Becker. “But it’s only sustainable if it’s profitable – and I’m convinced that it is.”

Translated from the German by Christopher Sultan

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