This has been a hard blow to RWE and EON, the two biggest German utility companies, which have shown accumulated loses near 30 billion on their last three financial reports.
By Elio Burguera / March 17, 2017 @ecburguera
Throughout the last century and until recent times, the idea of a centralized complex grid to massively supply low cost energy to the industrial economy took hold. During that time, major investments have been made to develop a costly and complex power grid to fulfill that need. It was meant to serve a huge number of scattered users, located far away from large centralized generation plants.
Nowadays, we are amid a transition to clean energies, supported by the exponential cost improvements of solar generation, storage and other clean energy sources, combined with new innovative business models. Micro grids, leaders in this process, portend the substitution of the power grid as we know it today. This transition has been slow for the last 10 years, but now it’s coming faster, turning into a disruption of the ancient concepts that ruled power distribution for a long time.
Germany has been a pioneer in this process but now they are experiencing major changes of their energy utilities current business model, as we can see on the previous chart that shows oscillating reductions between 2011 and 2013, for an abrupt fall on the next three years. Quite similar as Tony Seba* predicted in his 2014 best-selling book – The clean Disruption –
RWE declared a loss of 7.5 billion euros last year. His chief executive, Rolf Martin Schmitz attributed this loss to “extraordinary depreciation” on existing power plants, due to the new realities of increasingly abundant and cheaper renewable power supplies.
On the other side, EON unveiled a loss of 16 billion euros ($17 billion) in 2016, more than double the near 7 billion euros loss in 2015. “The impact on our balance sheet marks a turning point and clears EON’s way into the new energy world,” chief executive Johannes Teyssen stated.
Bad as it looks, both CEOs announce major ongoing restructuration, aimed at switching from fossil fuels to clean renewable energy for a bright future for their companies. This optimistic views make evident that a disruption has started, and for sure, unstoppable despite all attempts to stop it .
It’s a good news to the world.