Opinion: The next chapter of 'Big Six' transformations
Published: 20 Mar 2018 By Dr. Nina Skorupska CBE, Chief Executive of the REA
Over the last 18 months we have grown used to seeing both loudly-announced and silent-side-shuffles of the organisational structures and priorities of so-called Big-Six energy companies active in the UK. It is a clear sign that perhaps the “old” pure vertically integrated utility model is now past its “sell-by” date. One after another they are reinventing themselves - whether it is to take the lead on delivering services to support a decentralised business model or to consolidate around what are deemed their core competencies, such as large scale generation and trading.
Reassuringly, there are no dissenting voices from the big six that the future must see them delivering low carbon energy solutions to homes and businesses alike but the role they will actually play, plus the speed that they will move to do so, is greatly influenced by their starting asset base.
So the latest announcement this week from the German giants RWE and E.ON describing their intention to radically reshuffle their assets and energy business priorities across the two organisations reinforces the view that a new era for how energy is delivered to consumers is with us.
The two giants have very different views of how they can deliver this and what is most important to them. The agreement behind the complex asset swap sees a major change to RWE’s subsidiary Innogy (home of npower, UK’s retail arm that is currently the focus of JV activity with SSE’s retail business). Innogy is to become part of E.ON, while RWE is to inherit E.ON’s renewables business as well as 17.6% of E.On’s share capital.
With this change, E.ON believes that all its energy can be directed to focus on its customer solutions and networks, placing “consumers at the heart of the energy transition”.
The transfer of E.ON’s renewables business to RWE moves RWE to being a power producer. Their large conventional (carbon intensive) generation fleet distributed across Europe will appear more balanced with their enlarged renewables portfolio, all supported in the markets by their trading business. Post transition, it will make RWE the third largest renewables firm in Europe with an installed capacity of wind, hydro and solar generation in excess of 8GW with a further 1.5GW of offshore wind either under construction or in advanced planning stages.
Both would argue they have important roles in managing the energy transition across Europe, with E.ON wishing to accelerate a consumer led future and RWE saying it will provide the security “blanket” with its flexible generation fleet supporting the growth of wind and solar power. There is no doubt that here in 2018 there is room for both but this may be a very different picture in 2030 and I believe we can expect many more “transformations” on the road to delivering a truly low carbon energy future.
Dr. Nina Skorupska CBE is the Chief Executive of the REA.