Developing the UKs Distributed Energy Market: E'ON Activities

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Developing the UKs Distributed Energy Market
E.ON Activities

• Samantha Baylis, Head of Sustainable Energy
  Solutions
• 13 February 2008

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E.ON operates as an integrated player with strong
positions across the traditional value chain in
the UK
Generation
Distribution (Central Networks)
Retail (E.ON Energy)
Energy Services

• Generating 10 of the UKs power requirements
  (incl. 14 industrial CHP sites)
• Consultancy providing specialist engineering and
  technical services
• Trading power, coal, gas, oil and carbon

• Central Networks brings power to 4.9 million
  customers
• Maintenance of 133,000 km of underground and
  overhead cables and almost 97,000 substations

• Gas, electricity and Home Energy Services to over
  6 million homes and small and medium businesses
• 13,000 industrial and commercial customers

• Metering Services, Home Installation and New
  Connections
• Our aim is to simplify business for major
  clients power and gas needs through our one stop
  shop approach

E.ON employs more than 18 000 people in the UK
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The DE Revolution - Achieving the right balance
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Market uncertainty leads to significant risk
exposure

• What if we underestimate
• Transaction costs
• Customer demand and hassle factors
• Our capabilities and competitive advantage

• Or if we overestimate
• Niche market enthusiasm
• Technology cost improvements, quality and
  reliability
• Community culture for CHP

Distributed energy as percent of total UK power
market (TWh )

• Traditional demand for power and gas is much more
  predictable

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Situation now mainly large-scale CHP
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Growth and mass market opportunity?
Government support
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Emergence
Time
2007
2016
2030
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But uncertainty also bears opportunity

• Potential competitive advantages from
• Broader value chain
• Brand value around low-carbon engagement
• Changing customer relationships cross-selling,
  retention acquisition
• Build on brand and become a trusted technology
  integrator
• Leverage existing customer service capability to
  reduce hassle factors
• Economies of scale in purchasing

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But uncertainty also bears opportunity

• Potential competitive advantages from
• Broader value chain
• Brand value around low-carbon engagement
• Changing customer relationships cross-selling,
  retention acquisition
• Build on brand and become a trusted technology
  integrator
• Leverage existing customer service capability to
  reduce hassle factors
• Economies of scale in purchasing

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Our vision To be the leading major
sustainable energy solutions provider, providing
affordable, reliable and integrated low carbon
solutions that meets customer needs
Sustainable Energy Solutions
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Our business model
Sustainable Energy Solutions
Serve all major business sectors public sector,
commercial businesses, developers, community
consortia
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Integrated Solutions Energy Strategy Advisory,
Design, Installation, Build, Operate and
Maintenance services. Support offerings include
financing, information and reporting and trading
services
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Technology Integrator CHP, Micro-Generation,
Biomass, District Heating, Light House projects,
International Research and Development
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Investment in capability and training
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Leverage skills and capability across the E.ON
Group
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E.ON is one of the biggest energy players in
Europe

• E.ON has been building up experience with various
  types of DE solutions across Europe

• Sweden
• Extended biomass supply and district heating
  business
• Malmö harbour 100 renewable energy development

• UK
• One of the market leaders in GSHPs
• One of 2 energy suppliers to take part in 50m
  Low Carbon Buildings Programme
• Extended microgeneration portfolio
• 14 industrial CHP sites

• Germany
• E.ON Ruhrgas leadership in heat pumps
• E.ON Energy Institute at RWTH Aachen

Countries with E.ON businesses

• Including Viesgo/ Endesa Europa assets,
  transaction still pending, closing exp. 2008

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More heat in the pipeline the Innovation funnel
E.ONs process for technology commercialisation
Technology filter
Advanced metering controls (AMC)
Air Source Heat Pumps (ASHP)
microWind (5kW)
Solar thermal and PV
USB Fuel Cell Clear Edge Fuel Cell Thermo PV Thin
film solar
Proposition development
Technology evaluation
Market testing
BAU
Anaerobic Digestion
Biomass boiler
Ground source heat pumps
Mini CHP
Fuel Cell CHP

• Comprehensive field testing of different products

• Discussions with waste technology suppliers
• Further market evaluation planned for 2008

• New technology development agreement with Ceramic
  Fuel Cells (lab testing etc.)

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Community solutions

• UK experience Citigen in London
• Strategic Partnership with Barratt Developments
  Plc
• Demand for ESCo proposition

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Critical success factors for DE policy

• Build long-term consumer confidence in technology
  (e.g. through quality standards), rather than
  creating disillusionment
• Resolve training and installer competence
  bottlenecks
• Market-pull as well as technology push

Delivery and customers

• Research and development and demonstration (RDD)
  for the least competitive
• Market stimulation (e.g. subsidy, fiscal support)
  for near-commercial options (while providing
  dynamic incentives)
• Predictable support based purely on carbon value
  for mature options
• Dont forget Heat does not capture EU ETS carbon
  price signal

Competitive potential
Commitment

• Government commitment as important as financial
  support
• Target-setting provides clarity of expectation
  and opportunities