* Switch from nuclear to renewable to cost 550 bln euros by
* Crisis forces companies to change business models
* Small firms more flexible to adjust to new environment
* Large utilities own just a fraction of renewable capacity
By Christoph Steitz
BERLIN, Aug 27 Germany's half-a-trillion-euro
energy overhaul is forcing sector players to turn around their
business models fast, giving smaller groups a head start on the
country's ponderous utilities.
Europe's largest economy has seen its energy sector slide
into crisis following its decision to abandon nuclear power by
2022, as a subsidised boom in solar power has dealt a heavy blow
to traditional utilities, forcing them to close plants
generating thousands of megawatts.
The transition, which is expected to cost 550 billion euros
($735 billion) by 2050, has prompted millions of households to
install solar panels on their roofs, fragmenting the country's
energy landscape and throwing into doubt the business models of
the large utilities, which are based on big plants and economies
That is leaving the field to smaller energy companies that
are agile enough to re-shape their business fast, offering
customers new relationships with suppliers and new ways to save
"Utilities are coming from a world of big cash flows and
high profits. But those days are over," said Kim Petrick,
partner at consulting firm Bain & Company. "Now it's all about
customer focus. And so far small companies are faster and more
successful than big utilities."
For decades, Germany's utilities have enjoyed the comfort of
a de-facto oligopoly, but the sudden shift to renewables has
caught them on the hop.
Renewable energy accounted for about 23 percent of Germany's
power generation in 2012, up from 15 percent in 2008, hurting
conventional power plants as power from solar and wind parks
takes priority over conventional energy sources when being fed
into the grid.
In terms of installed capacity, renewables account for 75
gigawatt (GW), or 42 percent of the German total. The big four
utilities in Germany, E.ON, RWE, EnBW
and Vattenfall, own just 12 percent of that.
"It's certainly more difficult to turn around the ship for
the big utilities. But it also requires the will to leave behind
old ways and be open for a new way of thinking," said Felix
Goedhart, chief executive of Capital Stage.
Under his leadership, the group turned from a small
investment holding company into a renewable energy utility, a
move triggered by the financial crisis.
BRAND NEW TOY
It took the group, which employs roughly 65 staff, about a
year to complete the transition, much faster than super-sized
utilities such as E.ON and RWE, whose combined workforce is
135,000, more than the entire German solar industry.
The effort has paid off.
Capital Stage earlier this month said its operating profit
more than doubled to 20 million euros in the first half of the
year, showing that there is serious business to be made from
Bain & Company estimates that profits from large
conventional power plants - also called centralised power - will
fall by a third to about 5 billion euros in Germany by 2020.
In turn, profits from decentralised power - small generation
units such as solar installations - could rise by up to 60
percent to 4 billion euros.
Apart from the numerous private households that own solar
panels as well as small utilities such as Capital Stage, other
mid-sized firms active in energy management and service are also
U.S.-based investor Kawa last month struck a deal to buy
most of the global sales operations of insolvent German solar
group Conergy, and a change in strategy could come
soon after ownership has changed.
"We would start to adopt the strategy which has been in
place very successfully in the U.S. whereby you can offer to the
rooftop owner: 'Let's put solar on your roof, you don't have to
pay for it, we'll pay for it. You enter into a lease with us or
a power purchase agreement and we'll offer electricity to you at
a discount to what you would get from the grid," said Andrew de
Pass, partner at Kawa.
Peer SMA Solar, Germany's top solar group and the
world's largest maker of solar inverters, is another example of
how companies are changing.
The group is increasingly working on gadgets to help manage
energy use and cut power bills for private households, slowly
turning from a pure maker of equipment into a technology
Germany's utilities, in turn, are facing the deepest
structural crisis in their history, with some alleging they
waited too long before embracing renewable energy as a business
"By taking away nuclear plants, utilities lost something
like their favourite toy. There has been much resistance, much
effort to block this, but in the end you need to look for a new
toy, or business," said Capital Stage's Goedhart.