E.ON Is Turning Its Business Around, Largely Thanks to DER

On November 11, 2020, E.ON presented its financial report for the first 9 months of 2020. In its press release, E.ON highlighted that its markets recovered faster than it had anticipated, and it expects to meet its pandemic-adjusted targets of €3.6 billion-€3.8 billion ($4.4 billion-$4.6 billion) for this financial year. However, something not highlighted in the press release but disclosed as part of the company’s November 2020 roadshow presentation is the impact that distributed energy resources (DER) or decentral energy (as named by E.ON) has had on the company’s revenue.

E.ON’s Decentral Energy Infrastructure unit profits (EBIT) are growing at a compound annual growth rate (CAGR) of approximately 25%. This unit includes its commercial and industrial B2B onsite energy generation solutions and its district heating and local energy solutions. E.ON’s Customer Solutions unit EBIT for 2020 is expected to be between €0.4 billion and €0.6 billion ($0.5 billion and $0.7 billion), 30% of which will come from decentralized energy infrastructure.

Earnings Growth From Reducing Carbon Emissions via Decentral Energy Infrastructure

(Source: E.ON)

Furthermore, the decentral energy infrastructure figure excludes any residential DER installations, as these are part of a different business unit (E.ON Retail). But it seems that E.ON’s residential DER business is also in fast growth mode. In a LinkedIn post, E.ON’s Senior VP for B2C and E-Mobility wrote,

The E.ON Future Energy Home business grows +30% Q3 year-to-date despite the coronavirus. We started to build the business 4 years ago from scratch with the vision to create a better tomorrow. We reached break even (organically) after 3 years in Q4 last year and expanded further in 2020…we are active in 12 countries in Europe, reach more than 1.1 million service customers, perform about 90 thousand large installations (e.g., PV or heating systems) per year and profitably grow to more than 600 million revenues.

While as of late 2020 only about 2% of E.ON’s retail customers have an integrated DER (iDER) solution, at the current growth rate, it will only take 15 years to convert all of its customer base.

DER-First Energy Businesses Are On the Rise

At Guidehouse, we have been talking about this decentralization trend over the last decade and have seen growing companies such as Sunrun and sonnen (and a large number of OEMs and local installers) successfully run DER-first energy businesses. Some smaller retailers such as Social Energy are fully committed to a DER-first strategy, and others such as OVO Energy and Octopus Energy are exploring this market, but many large energy companies’ DER-first drives have faltered. While the reasons for this vary from lack of focus to bad timing, something unique to E.ON is that it decided to divest from all of its large generating assets and commit its growth outside of its regulated grid operations to successfully serving its customers. This, of course, includes any DER solution that fits with its customers’ needs.