* Big utilities must link up with start-ups
* Future energy markets are carved up anew
* Small firms have new knowledge, need mass markets
* Big players risk being left behind
By Christoph Steitz and Vera Eckert
FRANKFURT, Jan 19 (Reuters) - After a year of major restructurings, Germany's big utility companies are under pressure to either buy up or cooperate with small and nimble players that are eating away at their core business, industry consultants and analysts say.
"No energy supplier can meet the upcoming challenges alone," said Jan-Philipp Sauthoff, partner and head of energy transactions at PwC in Germany, adding he expected "a wave of transactions and new cooperations".
Analysts at Goldman Sachs even anticipate "large, game-changing M&A moves" this year for German utilities.
However, Innogy, Germany's largest energy group by market value, has said it is only open to small selective deals, while Innogy's parent RWE said last week it had no plans to merge with Uniper, its rival conventional generating firm floated off by E.ON last year.
Analysts pointed to the similarity of their remaining businesses, which also includes energy trading, as a reason for why a tie-up would make sense for RWE and Uniper.
Reeling from years of falling wholesale power prices and a surge in solar and wind capacity, E.ON and RWE broke up their businesses in 2016, separating ailing thermal power generation and trading assets from promising distribution networks and subsidised renewables.
Meanwhile small but confident independents like solar power storage systems maker sonnen GmbH are making inroads into the German electricity market with business models which encourage consumers to tap their home-produced power, becoming "prosumers" who no longer need external supply.
In a sign that competition in the retail market is heating up, millions of households switch supplier each year to find better deals, with 42 percent of Germany's 40 million having done so between 2005 and third quarter 2016, PwC figures showed.
Utilities have therefore started to enter into small and selective partnerships to adapt to the industry's changes and harness specialist know-how, including E.ON, which last year struck a distribution deal with battery maker Solarwatt .
Innogy, which comprises the renewable and network assets of RWE, followed up by buying Belectric Solar & Battery to boost its position in energy storage and photovoltaics.
"If the big utilities don't count on partnerships, parties from outside the industry will come in and take away market share," said Metin Fidan, partner at Ernst & Young, pointing to email portal web.de and petrol station operator Shell, which both have started to sell retail electricity.
Renewables now supply nearly a third of electricity consumed in Germany and account for nearly half of the country's total installed generating capacity, according to most recent statistics from the German network watchdog.
Less than 10 percent of renewable installations are owned by big established utility companies, with the bulk held by individuals, project firms, investors, industry and farmers. (Editing by Greg Mahlich)