European Utilities Fight Back Against Threats by Investing in Their Startup Competitors

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Electric companies in Europe are in trouble. Now they are doing something about it.

by Jason Deign
November 21, 2016

A small crowd engulfed Lars Falch as he stepped off the stage at European Utility Week in Barcelona this month. The throng was befitting of a minor celebrity. But the Dutchman did not even come from a well-known company.

Falch had captured the attention of his utility audience within minutes of outlining the details of his startup. Yet Powerpeers, the Amsterdam-based company that Falch founded, is at first glance exactly the kind of threat European utilities should fear.

Powerpeers promises to give customers the option of buying green energy from whomever and wherever they like, including the family with solar panels next door. Its website is decked out with a cheery sky-blue color palette and pictures of smiling customers.

So far, so familiar. European utilities have watched warily over the last couple of years as a growing army of potential competitors, all touting similar community-based energy schemes, has assembled at their gates.

Companies such as Fenecon, LichtBlick, Next Kraftwerke, SENEC and Sonnen are promising to help customers form renewable energy communities, trading electrons beyond the reach of traditional utilities.

In many cases, these challengers talk of using aggregated customer production or storage capacity to help utilities by providing ancillary services or lessening the amount of renewable energy stressing the grid.

But the bottom line is they are planning to rob the utilities of customers and revenue.

To date, the challengers’ impact on European energy markets is negligible. But there are now an estimated 1.4 million homes with solar power in Germany alone, underscoring the magnitude of the threat facing the traditional utility model in Europe.

At European Utility Week, it was clear that traditional power providers are taking the threat seriously. And Powerpeers represents the frontline of their defense. Beneath its startup skin, the Dutch firm is fully funded by Vattenfall, the Swedish government-owned power giant.

Falch said Vattenfall had been careful not to sully Powerpeers’ startup image with corporate baggage. Powerpeers has its own staff and premises, and competes openly with Nuon, Vattenfall’s utility brand in the Netherlands, Belgium and U.K.

“We are an asset-light utility company,” Falch said. “It’s like Airbnb for energy.”

Vattenfall is not the only European utility to have seen the future and planned accordingly.

In April, the German electric company Energie Baden-Württemberg (EnBW) took a share in Lumenaza, an energy cooperative that has eight projects in operation and another four slated for completion this year.

There are signs that other utilities could soon be poised to develop similar offerings — either through investments as in the case of EnBW, or as spin-offs as with Vattenfall.

AutoGrid Systems, which provides software for distributed generation aggregation, reports increasing interest from its utility customers.

The company sold its first system to the City of Palo Alto Utilities in California five years ago, and by this time last year had around 550 megawatts of capacity tied into its systems on either side of the Atlantic. In the last 12 months, though, that level has shot up to 2 gigawatts.

Most of this demand is likely due to utilities’ need to control increasing levels of distributed generation within their own portfolios, but AutoGrid’s software can be used just as easily to roll out residential aggregation services.

“We enable utilities to challenge the challengers,” said Abhishek Bahl, AutoGrid’s general manager for Europe. “We also talk to the challengers, but right now we are seeing more interest from the utilities.”

AutoGrid’s first European customer was E.ON, a company at the forefront of the utility transformation in Europe.

Düsseldorf-based E.ON has been an AutoGrid investor since 2013, while also backing a number of other distributed generation supply chain players, from fuel-cell startup Bloom Energy in 2013 to energy storage software leader Greensmith last year.

In March, it emerged that E.ON was planning to take on residential energy storage contenders such as Sonnen through a tie-up with Solarwatt. This puts it just a step away from being able to launch an energy-sharing community of its own.

For now, though, Vattenfall seems to have come up with the best fight-back plan of them all.

Powerpeers not only has all the standard peer-to-peer energy-sharing features you would expect from a community-based platform, but also cleverly plugs into communications platforms such as WhatsApp get its customers excited about the concept.

This gives Powerpeers a social dimension that sets it apart from traditional utilities and even most challenger brands.

Being able to know that you’re buying your energy from your neighbor’s solar panels, or even a wind turbine at a local farm, has a measurable impact on customer behavior. Early on, said Falch, “what we saw is that 20 to 25 percent of energy had a ‘social source.’”

And this is only half the story. Falch, who spent nearly seven years in the advertising world before joining Nuon as a new business development manager, is planning to give third parties access to a white-label version of the Powerpeers platform.

The white-label model will give customers the option to buy power from the local football club, a school, or even a clothing brand.

It’s hard to imagine a better way to get customers excited about a product as boring as energy. And if Vattenfall can do it, so can others.

“Disruption involves new entrants and incumbents, but it should not be assumed that new entrants are the disruptors and the incumbents are looking to maintain the status quo,” said Stephen Haw, partner at Baringa Partners, an independent business consultancy.

At the same time, he said, a lot will depend on whether utilities are able to adapt to new ways of thinking. “Innovation of the services offered to prosumers is a greater disrupter than innovation of technology,” he said.

And in Europe, there are still plenty of utilities that have not yet recognized the need for change.

In Spain, for example, leading utilities have attracted the ire of clean energy supporters for supporting government moves to stifle solar self-consumption.

Iberdrola started selling self-consumption kits last year in the face of a growing move toward community-based energy cooperatives. It remains to be seen whether the move will pay off once competition begins to intensify.

European utilities may be fighting back. But, warned Haw: “New market entrants will be the death of many incumbent participants.”

Source: Greentech Media.

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