E.ON splits brand to focus on renewables & energy efficiency

December 19th, 2014 by

Is E.ON’s move market repositioning or an indication of a more fundamental response to growing pressure on the fossil fuel sector?

German energy utility E.ON has announced that it will split its brand. Exploration and production will be combined into a new independent company along with conventional generation, and global trading. The original E.ON brand will focus on renewables, distribution networks and energy efficiency.

The timing of E.ON’s announcement is intriguing. Fossil fuel companies are being buffeted on all sides by the plummeting oil price, growing recognition (amongst analysts) that the ‘carbon bubble’ means the major portion of existing reserves will need to remain in the ground to meet UN climate targets, calls from influential bodies such as the World Bank, UN, IEA and Bank of England to shift investment from fossil fuels to clean energy technologies, a global disinvestment campaign calling for the same, growing instability in many of gas and oil producing areas and falling costs of renewable energy.

E.ON Splits band to focus on renewables & energy efficiency

Conventional generation including coal will split from the E.ON brand

Giants such as Shell and BP seem to be closing their eyes and hoping that the good old days will return. E.ON’s approach appears to be more strategic. Werner Wenning, Supervisory Board Chairman is reported to have said ‘We are convinced that it is necessary to respond to dramatically altered global energy markets, technical innovation, and more diverse customer expectations with a bold new beginning. E.ON’s existing business model can no longer properly address these new challenges’.

At the very least the move allows E.ON to insulate its brand from rolling bad news linked to fossil fuels, but it will also make it easier to reduce its exposure to the sector in the future. The company has already said that is reviewing its exploration and production businesses in the North Sea, and will dispose of its Spanish assets and may further divest its Italian assets.

Ofgem Chairman David Gray, welcomed the news as being ‘good for consumers’, and said that it could prompt more utilities to move away from vertically integrated models.

It will be interesting to see which if any of the other big energy utilities follow E.ON’s lead.

Further information

Reuters: German utility E.ON to split in two in major overhaul, click here.

The Wall Street Journal: E.ON to split into two companies, click here.

Nature – the carbon bubble. The geographical distribution of fossil fuels unused when limiting global warming to 2 °C, click here.

Written by

Environmental consultant, facilitator, founder & Director of Climate Works Ltd.