Analysis: How energy efficiency firms are eating utilities' lunch

Sun Jun 2, 2013 12:37pm EDT
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By Geert De Clercq and Vera Eckert

PARIS/FRANKFURT (Reuters) - With better insulation, triple glazing and frugal boilers, new houses can cut energy use by up to 90 percent, which is good news for consumers but bad for utilities that vie with energy services firms for their efficiency euros.

An unstoppable efficiency drive spurred by EU regulations and national targets poses a dilemma for utilities.

Do they look for a profitable way to help consumers save energy or try to defend their traditional business model?

Products that reduce heating bills and therefore utilities' profits include heat pumps and condensing boilers from firms such as Germany's Vaillant or Viessmann, super-insulating materials from Belgium's Recticel or Ireland's Kingspan, and heat-retaining triple glazing from France's Saint-Gobain.

Bain & Company estimates that German households spend about 5 to 7 percent of their income - about 2,500 euros ($3,250) per year in today's money - on energy.

It's a percentage little changed since the 1970s but how the money is spent is changing, as consumers look to lower their gas or power bills through one-off investments in efficiency and small-scale, independent power generation such as solar panels.

"Total household energy spending has not changed. It just goes to different suppliers," Bain consultant Berthold Hannes said.

Bain estimates that in Germany, the big four utilities will lose about a third of their annual operating profits from generation, or about 2.5 billion euros, by 2020, due to the shift in spending.   Continued...

An employee shows a traditional light bulb (R) and two low-energy consumption bulbs at the Osram factory in Molsheim, eastern France December 11, 2008. REUTERS/Vincent Kessler