What the miraculous transformation of a German utility giant means for India
ridge to India’s Tobias Engelmeier examines the decision of German utilitity E.On to embrace renewables and sell off its fossil and nuclear assets and explores the lessons the move may hold for Indian utilities.
E.On is Germany’s largest power utility. The company operates a vast fleet of nuclear, gas and coal-fired power plants and also runs some wind parks. When Germany started its renewable energy transformation, they ignored it and just carried on with business as usual. As the country’s solar and wind capacities grew and grew, however, the traditional utility business stopped being “as usual” and E.On’s market valuation tanked. Now, in a move that is both daring and desperate, the company has decided to take the radical step of shrinking to half its size, divesting all fossil and nuclear assets and focusing on renewables. Will this be the future of Indian utilities too?
- E.On, like the other large German utilities, fatally slept through Germany’s tectonic energy changes
- It is the first large utility anywhere to completely transition its business model to renewables
- E.On’s move is at once a validation and a critique of Germany’s energy politics
- Indian utilities should take note: there are important lessons for them
The announcement shocked the market: At the end of another loss making year, Germany’s largest utility has decided that the old game is up and has flung itself headlong into a new game. For a typically risk-averse utility this is the final card to play. The term that comes to mind is “creative destruction.” The economist Joseph Schumpeter applied it to the market’s capacity to overturn the status quo and thereby produce innovation.