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Sea Change

This September, SEPA will lead a group of executives from the U.S. energy industry to Germany on what we call a fact finding mission. The focus will be on the big picture of energy markets in transition and how to adapt to and thrive in a climate of rapid change.

Germany remains the pole star for solar and utility market transformation, ahead of most of the world in terms of innovative solar policies and solar adoption. We can continue to learn from the German experience, and its strongly orchestrated efforts to grow solar. But it is not just about solar; policies that include growing all renewables, at curbing carbon emissions and shutting down nuclear energy are creating a somewhat volatile energy market and concern about where this all will lead.

When SEPA hosted a mission to Germany in 2012, we focused on how renewable energy policies were even then transforming the greater energy landscape – and how utilities and solar stakeholders were faring. Meetings with German utilities and stakeholders were surprising – we found their attitudes remarkably relaxed considering the sweeping changes (including a nuclear phase-out accelerated post-Fukushima). Several shared that they were doing OK, would continue to be OK and, if things became too imbalanced, the government would step in and help. You don’t need to live near Capitol Hill to imagine the skeptical eyebrows rising from the U.S. delegation. What utopian paradise had we stumbled into? In hindsight, perhaps our friends should have been a bit more skeptical – sorry, no Schadenfreude here, we all want to see a vibrant solar and utility market.

Last year, I was surprised by the announcement (or threat, or warning) from E.ON, Germany’s largest utility that, if something wasn’t done to protect the interests of the electric utility sector, it might sail for more profitable waters – Turkey, for example. The challenges facing the electric utility sector in terms of operations and retaining profitability are real and although Germany and the U.S. are very different markets, we should all be paying attention to how this continues to play out. New business models may mean exploring new markets – or new business opportunities entirely – as many industries (including the solar industry) have found.

If you are familiar with SEPA, you know that we are very interested in the idea of the utility of the future. You may have even seen Julia Hamm’s presentation of “Tomorrow Power and Light.” RWE (the second largest utility in Germany) is looking toward the future and choosing a transformational path. RWE has lost one-third of its value over the last three years under the energy transition and has now made the decision to dive into what they believe will be highly profitable “prosumer” business model. The decline in revenue in the new market reality is the impetus that will transition RWE from a traditional utility to a service provider for renewable energy. As we learn details and see RWE move into this new space, I am sure there will be a number of lessons to be shared with their utility colleagues within Germany – and globally.