Opinion: The end of competition in the energy market | Business| Economy and finance news from a German perspective | DW | 12.03.2018
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Opinion: The end of competition in the energy market

German energy giants RWE and E.ON want to reposition themselves and are planning a radical change. It's a necessary development but will come at the expense of both workers and consumers, says DW's Andreas Becker.

In the past, the German energy industry was all about the future.Long-term planning was paramount. Now decisions are being made under more pressure and with greater urgency, a reflection of the sector's current nervous mood.

A couple of years ago, the major energy providers E.ON and RWE started carving up their companies.

Eon channeled its coal, gas and water concerns into a new company called Uniper and floated it on the stock market. It was a similar story at RWE, except it was their green and renewable interests which were floated as a new company called Innogy. In the process,RWE became a sort of "bad bank" that had a legacy of producing fossil fuels.

All changed, changed utterly

Two years later and this fundamental restructuring has already seemingly been laid to waste. If the complicated new superstructure that RWE and E.ON have dreamed up becomes a reality, Innogy will be no more — a problem not just for its 40,000 employees but also for its management.

Read more: German utilities E.ON, RWE in energy market shake-up

E.ON, once the largest German energy producer, wants to end its electricity production and concentrate instead on grid operation and distribution of electricity. The group now holds just three nuclear power plants (which will be shut down by 2022) and has already sold its shares in Uniper.

RWE's sea change is different: the former number two in German energy is giving up its distribution services in favor of energy production, from fossil fuels as well as from renewable sources.

Best of enemies, best of friends

When this all comes to pass, it will end, in one fell swoop, decades of fierce competition that has existed between RWE and E.ON. Competitors will effectively become partners.

Becker Andreas Kommentarbild App

Deutsche Welle business reporter Andreas Becker

The stock market is certainly happy — the companies' shares have shot up on news of the deal. Markets generally respond well when core businesses are clearly defined and focused upon. Investors also clearly believe that the era of losses for both RWE and E.ON is over.

But what about the principle that competition is good for business? The antitrust powers-that-be have to agree to all of this of course, although at the moment it is unclear if the decision will lie with the German or the EU authorities.

What is certain is that Germany's high energy costs are not going to go down any time soon. Another certainty is that business specialization enables savings — which means massive job losses are coming.

Barely a whisper of criticism

Despite this, the Verdi trade union has welcomed the plans while consumer advocates have greeted the news cautiously. The noises from the Federal Government were positive, with apparent support for the notion of a national champion.

German energy companies were often rightly accused of sleeping through the energy transition. Now, they are suddenly awake and showing a willingness to depart from previous strategic decisions.

So far, there has been hardly any criticism and no political opposition. This suggests a willingness to clear a path to salvation for what have been troubled entities. Could it be that the politicians in Berlin have a guilty conscience, having previously overwhelmed energy companies with frequent, and sometimes inconsistent, shifts in policy? It certainly looks that way.

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