Sep 3, 2014

Top 5 Reasons to Watch the German Energy Market This Week

3 min
5. As renewables rise, prices continue to fall. This is a boon to consumers, but to the detriment to the utilities.

5. As renewables rise, prices continue to fall.
This is a boon to consumers, but to the detriment to the utilities.
“In the second quarter, Germany's wholesale power prices fell 5.8 percent from year-ago levels, hitting their lowest point in more than seven years,” reports Roger S. Conrad for Seeking Alpha. “Meanwhile, renewable energy's share of the generation market climbed to a record 29 percent, inducing RWE to terminate 500 megawatts (MW) in sales contracts and announce the shutdown of another gigawatt (GW) of capacity.” Conrad explains that the jump in renewable is cutting into traditional energy markets, causing utilities to lose profits.  

4. Solar is taking off with or without the utilities.
The top three utilities in Germany—E.ON, RWE, and EnBW—own a measly 0.003% of German solar capacity. However, the renewable energy source has taken off in Germany, leaving the utilities in the dust.
“A slew of smaller, green-energy providers have built wind and solar capacity, benefiting from state subsidies under Germany's plan to phase out nuclear power by 2022,” Christoph Steitz writes for Reuters. “Germany now has nearly 37 gigawatts of installed solar capacity, meeting 28.5 percent of its domestic power demand in the first half of 2014, according to energy industry lobby BDEW.”

3. E.ON and REW are looking to make up ground.
As coal takes a nosedive in Germany, the country’s biggest utilities look to renewable to make up lost ground.
“By 2017, analysts expect a push by top utilities E.ON and RWE into renewable energy to bring their slide in market share and in profits to a halt,” Steitz writes. “Solar leasing may play a role in such a turnaround and will be a development to watch.”
Germany currently has 37 GW of installed solar and meets 28.5 percent of the country’s renewable energy needs.

2. Germany needs to do more regarding climate change.
As the push for a green energy revolution continues in Germany, some are concerned about the resurgence of coal. Writing for the National Interest, Peter Mellgard warns of this the energy revolution “turning black.”
“Coal is enjoying a revival,” he says. “In late July, the Environment Ministry admitted Germany was unlikely to reach its 2020 emissions target. And, meanwhile, centuries-old medieval villages are being destroyed to open up new areas to mine and burn one of the dirtiest fossil fuels known to man for decades to come.”
Green parliamentarian Bärbel Höhn says more work is needed for Germany to reach its goals.
“Angela Merkel used to be the climate queen of Europe,” Höhn told Deutsche Welle. “But since Germany held the EU Presidency, not enough has happened.  Germany has achieved a lot in the areas of climate protection. But we have stopped leading by example in the last few years. The same can be said of the EU too.”

1. The utilities are starting to take action.
RWE lost 5% of its German clients and E.ON lost 12% over the past 3 years, so they’ve got to make a move sooner rather than later.
"We're now in the process of understanding how it works when it's not simply about building a power plant and selling electricity and gas. That's simply not in our DNA," Thomas Unnerstall, board member at N-ERGIE, Germany's eighth-largest utility by sales, told Reuters. "This (solar leasing) is one way of doing that."

Share article

Jul 26, 2021

Ofwat allows retailers to raise prices from April

Dominic Ellis
3 min
Ofwat confirms levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue

Retailers can recover a portion of excess bad debt by temporarily increasing prices from April 2022, according to an Ofwat statement.

The regulator confirmed its view that levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue, thereby allowing "a temporary increase" in the maximum prices. Adjustments to price caps will apply for a minimum of two years to reduce the step changes in price that customers might experience.

Measures introduced since March 2020 to contain the spread of Covid-19 could lead to retailers facing higher levels of customer bad debt. Retailers’ abilities to respond to this are expected to be constrained by Ofwat strengthening protections for non-household customers during Covid-19 and the presence of price caps.  

In April last year, Ofwat committed to provide additional regulatory protection if bad debt costs across the market exceeded 2% of non-household revenue. 

Georgina Mills, Business Retail Market Director at Ofwat said: “These decisions aim to protect the interests of non-household customers in the short and longer term, including from the risk of systemic Retailer failure as the business retail market continues to feel the impacts of COVID-19. By implementing market-wide adjustments to price caps, we aim to minimise any additional costs for customers in the shorter term by promoting efficiency and supporting competition.”  

There are also three areas where Ofwat has not reached definitive conclusions and is seeking further evidence and views from stakeholders:   

  1. Pooling excess bad debt costs – Ofwat proposes that the recovery of excess bad debt costs is pooled across all non-household customers, via a uniform uplift to price caps. 
  2. Keeping open the option of not pursuing a true up – For example if outturn bad debt costs are not materially higher than the 2% threshold. 
  3. Undertaking the true up – If a 'true up' is required, Ofwat has set out how it expects this to work in practice. 

Further consultation on the proposed adjustments to REC price caps can be expected by December.

Anita Dougall, CEO and Founding Partner at Sagacity, said Ofwat’s decision comes hot on the heels of Ofgem’s price cap rise in April.

"While it’s great that regulators are helping the industry deal with bad debt in the wake of the pandemic, raising prices only treats the symptoms. Instead, water companies should head upstream, using customer data to identify and rectify the causes of bad debt, stop it at source and help prevent it from occurring in the first place," she said.

"While recouping costs is a must, water companies shouldn’t just rely on the regulator. Data can help companies segment customers, identify and assist customers that are struggling financially, avoiding penalising the entire customer in tackling the cause of the issue."

United Utilities picks up pipeline award

A race-against-time plumbing job to connect four huge water pipes into the large Haweswater Aqueduct in Cumbria saw United Utilities awarded Utility Project of the Year by Pipeline Industries Guild.

The Hallbank project, near Kendal, was completed within a tight eight-day deadline, in a storm and during the second COVID lockdown last November – and with three hours to spare. Principal construction manager John Dawson said the project helped boost the resilience of water supplies across the North West.

“I think what made us stand out was the scale, the use of future technology and the fact that we were really just one team, working collaboratively for a common goal," he said.

Camus Energy secures $16m funding

Camus Energy, which provides advanced grid management technology, has secured $16 million in a Series A round, led by Park West Asset Management and joined by Congruent VenturesWave Capital and other investors, including an investor-owned utility. Camus will leverage the operating capital to expand its grid management software platform to meet growing demand from utilities across North America.

As local utilities look to save money and increase their use of clean energy by tapping into low-cost and low-carbon local resources, Camus' grid management platform provides connectivity between the utility's operations team, its grid-connected equipment and customer devices.

Share article