BDEW and Ernst & Young present 10th municipal utility study:
Municipal utilities rely upon renewable energies and decentralised generation
Only two thirds of the respondents consider future prospects to be good or very good / financing of capital expenditure increasingly gains in importance
Berlin, 18 June 2012 – The managers of municipal utilities and regional energy suppliers consider that the energy system transformation provides opportunities but also risks. They regard themselves as designers of the energy turnaround and expect that the decentralisation of electricity generation will contribute to increase the importance of their companies in the market. Nevertheless, only two thirds of municipal utilities (67 percent) in Germany consider their future market opportunities to be good or very good. As largest impediments to the implementation of the energy system’s transformation municipal utilities named above all the unclear, unreliable political framework conditions (44 percent), the lack in public acceptance of the necessary measures (36 percent) and the slow pace in the extension of lines. (36 percent).
These are the first results of the 10th municipal utility study carried out by the audit and consultancy firm Ernst & Young in cooperation with the German Association of Energy and Water Industries (Bundesverband der Energie- und Wasserwirtschaft - BDEW). 100 managing directors of municipal utilities and regional supply companies were interviewed between March and April 2012.
The utilities clearly prioritise the development of renewable energies (80 percent) and the extension of decentralised generation, for instance by block-type heat and power stations or micro CHP plants (74 percent) for the transformation of the energy system. Renewable energies are most frequently named (26 percent) by the respondents when asked about the topic that has gained in importance compared to the previous year (19 percent). Until 2020, municipal utilities and regional energy suppliers throughout Germany will invest in the development of renewable energies alone approximately 16 billion Euros. Priorities are on onshore wind power plants, hydro power, photovoltaic and biogas (in this order of priority). The interest in offshore wind power plants is decreasing due to the difficulties in terms of grid connection and the hitherto unsolved questions of liability risks.
According to the study, focus of the planned investments is on network development. Many of the respondents however complained about innovation and investment hindering regulation in the field of networks. 77 percent of the respondents are of the opinion that the current regulatory policy does not set the right incentives for the necessary capital expenditure in networks.
The financing of investments is increasingly gaining in importance with regard to a successful implementation of the energy system transformation: It is considered to be the greatest difficulty encountered (30 percent) in developing renewable energies after network integration (41 percent) and the lack in public acceptance (39 percent). One third of municipal utilities and regional suppliers (36 percent) expect that financing possibilities will continue to deteriorate.
According to the survey, almost 52 percent of the utilities assume to be able to pay their investments from liquid means and cash flow. Six percent have taken an increase of equity capital into consideration. 42 percent have envisaged borrowing capital from outside sources, two thirds of them wish to have only one lender, where possible. Only three percent of the energy supply companies can imagine cooperation with companies outside the industry, such as financial investors, to be useful. The benefit of shareholding programmes for citizens as financing instrument is obviously still underestimated (5 percent). Already one fourth of the companies have launched such programmes. Another nine percent are preparing shareholding programmes for citizens, 23 percent of the utilities plan to adopt such programmes in the future.
In its search for new business models, the sector by its majority (77 percent) relies upon cooperation strategies. Just like in the years before, horizontal cooperation, i.e. cooperation with partners of the same supply level, is clearly preferred (71 percent). However, vertical cooperation, too (i.e. with upstream companies) has gained in appreciation (20 percent). Utilities consider the benefit of cooperative models to be mainly in potential synergies (58 percent), in the access to expertise and qualified personnel (47 percent) and in the procurement of lacking financial means (33 percent).
Almost two thirds of the persons interviewed considered the most important factor for successful cooperation to be „partnership at eye level“, followed by the existence of „similar structures“. 56 percent of the utilities want to extend their business by customer acquisition outside their own network area, 52 percent by an extension of their network area through acquisition of concessions and 45 by acquisition of participations.
Ernst & Young
Dag-Stefan Rittmeister (study and results)
Head of the Press and Public Relations Department
phone: (0711) 988 11 59 80
Bundesverband der Energie- und Wasserwirtschaft (BDEW)
Frank Brachvogel (sector assessment)
phone: (030) 300 199-1160