Digital laggards Get with the times or perish, German energy firms told

E.ON, Innogy and other power companies are slow to adapt their business models to digital innovation. In the meantime, US tech giants like Google or Apple are making inroads in their home turf.
Quelle: dpa
The Cloud can be green, too.
(Source: dpa)

Germany is at the forefront of the energy revolution. But leading voices in the business world fear the industry is complacent and, specifically, is failing to upgrade for digital transformation.

In the next ten to 15 years, the rules governing the global energy sector will be “completely rewritten,” warned Frank Thelen, founder of the venture capital firm Freigeist Capital.

Speaking at an annual energy conference organized by Handelsblatt in Berlin this week, Mr. Thelen said that technologies such as blockchain or quantum computers, as well as the use of big data, will turn the industry upside down. New competitors such as Google, Apple or Amazon are slowly gaining a foothold in Germany's energy market with smart home solutions, he said. This jeopardizes the business model of established providers like E.ON or Innogy.

And there's more to come, with Tesla waiting in the wings. The e-car pioneer is not only revolutionizing mobility but is creating brand new business models in the electricity sector with its batteries and solar systems.

Until now, Mr. Thelen said, Germany has been sleepwalking through digital disruption. Major innovations, from cloud computing to battery technology, have come from overseas. This has to change, Mr. Thelen said. “You have to think ahead, become a leader instead of simply managing. Otherwise, your companies will die.”

Here, you might get a million for your idea. In Silicon Valley, you get 10 million. Frank Thelen, CEO, Freigeist Capital

A few innovative German start-ups are jumping on the digital bandwagon, though they face a major hurdle: a lack of venture capital invested in the country. “If you compare Germany and the US, our venture capital is virtually non-existent,” Mr. Thelen said. “Here, you might get a million for your idea. In Silicon Valley, you get ten million.”

Despite this, companies are cautiously incorporating digital solutions. Sonnen, a Bavarian firm, makes battery storage devices and connects them with thousands of eco-plants. From Mr. Thelen's perspective, this is a good example of what other German energy companies could do.

Alongside digital transformation, Germany's energy sector is undergoing huge changes, not least due to the switch to clean energy sources. Already, more and more end consumers are generating their own electricity with the help of solar panels.

But the transition poses many challenges and on an enormous scale. Consumption is higher in Germany’s south, where most industrial customers are. But as nuclear power plants are shut down, electricity is increasingly being produced in the rural, windy north. While large and reliable power plants are taken off the grid, the yield of solar and wind farms fluctuates greatly due to the weather.

Freigeist Capital boss Frank Thelen.

Similarly, the e-car boom, when it finally comes, is also expected to cause surges in demand. If all drivers charge their cars at the same time after work, that would lead to peaks that are difficult to cope with.

Data analytics could help as a few promising projects show.

Tennet, a grid operator from the Netherlands, created a pilot project where Tesla drivers tell the network operator – via an app – when they need their car and when they want to charge it. That would help to make the grid more flexible. The company also partnered up with VW. Volkswagen drivers help Tennet collect weather data: Sun, light and rain sensors provide data in real time so Tennet can better predict Germany's solar power performance.

Matching data analytics and artificial intelligence will help power companies significantly, according to the head of Microsoft Germany, Sabine Bendiek. This will mean, for example, that operators of offshore wind farms can control and plan the maintenance of plants. She also sees prospects for better customer service.

The good news doesn't stop at the companies: Berlin-based Fresh Energy offers to analyse how electricity customers consume energy. Depending on how long they use their appliances at home, they can use an app to save power and costs – up to 12 percent, according to the company – while becoming more eco-friendly.

That combination of saving cash and going green can only win more fans here in Germany at least.

Franz Hubik covers renewable energy, Jürgen Flauger covers the energy market and Kathrin Witsch is an editor for Handelsblatt in Düsseldorf. Stephanie Ott works for Handelsblatt Global in New York. To contact the authors: [email protected], [email protected], [email protected] and [email protected]