The German federal government’s decision for a nuclear withdrawal until 2022 and the resulting topic of “energy revolution” dominates the energy industry agenda in Germany, as was clear from my visit at the E-world energy & water trade fair held last week at Messe Essen on February 5-7. The fair had more than 600 exhibitors from the fields of the electricity, gas and water industries, energy technology and energy efficiency.
As I would have expected, energy trading, renewable energies and energy efficiency were all very visible themes at the fair, with many companies promoting their products and services in these areas. But some of my main takeaways from E-world include:Virtual Power Plants (VPPs) attracting lots of interest and activity:
CHP is on the upswing:
- I heard there were 9 companies at the fair promoting their VPP technology, and talked with several of them. Some companies are clearly at an earlier stage of development than others, but many (including Delta-ee) believe VPPs will play an increasingly important role in the new energy economy. Vattenfall’s VPP project is one of the most advanced. It is now moving into a second phase with the intention of including new technologies into the VPP such as cooling, hydrogen production, storage heaters and batteries. An announcement is planned this week regarding the addition of a 2MW battery to the VPP in Berlin. The company clearly has some ambitious aims for its VPP technology and project, not least giving it a route to grow nationwide in Germany away from its core Berlin and Hamburg markets. It has also launched its own “Virtual Heat & Power” VHP label as a new technical standard for heat pumps and CHP - follow this link VHP for more details. Whether the VHP label will be able to gain traction with manufacturers and be attractive for customers remains to be seen - especially given other labelling initiatives, such as the "Smart Grid Ready" label recently agreed by heat pump manufacturers (see this link Smart Grid Ready).
Data services and smart home is already a crowded space:
- The market trend in Germany is definitely positive and improving. The revisions to the CHP law last year have had a positive impact on the market – although it seems that some customers are still reluctant to invest even though the economics look increasingly attractive. Perhaps this reflects the weak economic outlook, or customer fears of new technology. Tax regulations are a concern for suppliers developing contracting and financing models. If the end-user owns the plant then EEG tax is not applied to his consumption. However, if the plant is owned by a third party (eg an ESCO), the end-user becomes liable to pay the EEG contribution. As the EEG contribution is now €5.3c/kWh this can have a significant negative impact on heat contracting business models. Lawyers specialising in this field, and with contract models that can avoid this issue, are very much in demand.
- There are lots of what look like “me too” vendors – variations on the same theme of home hub, sub-metering and website/smart phone interfaces. Many vendors are positioning themselves as software companies that are essentially service providers to a customer facing organisation – ie the energy supplier. I am mystified (along with many others I suspect) why some large energy suppliers are trying to develop their own proprietary smart home propositions. The utility propositions I saw appear over-engineered and expensive in comparison to smaller, nimble players that are innovating quickly. After all even a two year smart home contract for €25/month (and say €5/month thereafter) will be a tough sell for many customers – so making money is not going to be easy for anyone in this space, especially if you have a high cost base.
Delta-ee will be attending ISH in March and Hannover Messe in April and we’ll be sharing our thoughts in due course – and if you would like to meet up at either event please do get in touch.