Big profits were once unavoidable for Energie Baden-Württemberg (EnBW) in Karlsruhe. In those days the German energy market was dominated by the “big four” utilities – E.ON, RWE, EnBW and Vattenfall – and it was practically impossible for them not to make money. For more than a century power stations dictated the rhythm of life for EnBW and its predecessors: three years planning, five years building, 50 years operating. The electricity generated supplied about six million households, and demand rose year on year.
In 2010 the company published a record operating profit of €2.1bn before tax, half of it from just its four nuclear power stations.
But the accounts had barely been published when the big money era came to an abrupt stop. In March 2011 reactors in the Japanese nuclear power plant at Fukushima went into meltdown. The German government ordered safety checks on the country’s nuclear power stations and the shutdown of elderly plants. Two of them belonged to EnBW. In June, the chancellor, Angela Merkel, announced that nuclear power in Germany was to be phased out by 2022 at the latest. Meanwhile, the expansion of renewable energy sources, which the big electricity concerns at that time still regarded as a mistake and technically not advanced enough, was breaking records.
For EnBW that meant the steam-turbine plant in Karlsruhe Rhine harbour – where an eighth power unit had only become operational in 2014, at a cost of more than €1.3bn – was surplus to requirements. For the first time in its history, EnBW had to record a major special depreciation even before a coal-fired power station began operating.
The chief executive, Frank Mastiaux, must now find an alternative to the traditional power station business. He and the other 20,000 employees are saying goodbye to a business model that was successful for more than 100 years. The search is on for new ways of doing business.
For EnBW workers, the idea that one day power stations would not bring in any money was simply absurd. Mastiaux says: “Even when the problem was staring us in the face, many shut their eyes to it.” Right up to the end, many in the sector thought that the politicians, whom the power companies felt had bungled the whole business, would help them out. But the politicians did no such thing.
So in 2013 the EnBW management decided on a massive reduction in coal and nuclear power. Five power stations were listed for shutdown and turnover from renewables was to be more than trebled. The power giant was shrinking.
EnBW was the first of the big four to change its strategy. But the others are also moving. More than 40 power stations in Germany are now scheduled for closure. The German government is planning to cut coal as an energy source by 60% by 2030. The goal is clear, but the roadmap varies: RWE launched its renewables business on the stock exchange as Innogy. E.ON amputated the past in the form of its old power stations by means of a spin-off company, Uniper SE. Whereas EnBW is trying to change its whole organisation.
As the nucleus of this rebirth, the Innovation campus was opened in 2014, in the Rhine harbour, a few kilometres from the company headquarters. It is a hive of activity: on the ground floor staff work at desks in a jumble of electronic components and cables. One floor above, designers and marketing experts sit on upholstered palettes. The spacious communal kitchen provides the feeling of a startup and the big fridges are stocked with bottles of lemonade.
They are working on 10 projects, including monitoring levels in dustbins, tele-learning, virtual power stations and smart street lamps.
In the summer of 2014 when Matthias Weis and his three colleagues moved in, they were on their own. Carpets were still being laid and walls painted. “We had people like Bill Gates in mind and stories of great things being created in garages,” he says. Former workmates eyed them with a mixture of scepticism and curiosity – after all, they had been largely relieved of their duties to work off-site on a project with no clear objective.
What emerged is “Smight”, a portmanteau for smart and light – lamp-posts that not only supply light but also wireless local area networks (WLAN), emergency phones, charging points and Big Data. They have been bought by more than 80 towns and municipal authorities, as far away as Australia, and cost from €9,600 a time. Weis is now the director of the startup. “We are in the scaling-up phase,” he says, “it’s about reaching the quantities needed to break even.” But he’s not worried. There are a good nine million street lamps in Germany.
It might seem insignificant compared with the turnover from energy in the old days but Smight represents a new departure, breaking into a new business world and a change in corporate culture. Mastiaux says the turnaround in energy policy means more than just switching from power stations to wind turbines or solar panels. It’s also about leaving the old routines behind.
The fossil-fuel era was a comfort zone. For more than 100 years there was hardly any major change in technology. The organisation added a bit of knowledge with every generation, but the work remained the same. Demand grew all by itself. Those days are gone for good.
EnBW has had to accept that it is only one of many suppliers. Customers are no longer waiting for current from the power stations: they are producing it themselves on their own roofs. Sometimes they even generate so much of it that EnBW has to buy electricity from them instead of supplying it.
And suddenly they are competing against invaders: Apple, Google and car manufacturers are penetrating what is for them an alien habitat. Web.de, a German internet service provider, has also been supplying electricity since 2016. Now speed and new ideas are needed – and new partners, because the technology has become fiendishly complex overnight. EnBW can no longer do everything on its own. That, too, is a new lesson to be learned.
Behind the glass facade at the Karlsruhe headquarters stretches a light and spacious foyer with a cafeteria at one end. An artificial stream runs through it. The receptionists are as friendly as you’d like them to be in hotels. From department to department the route passes through brightly coloured open-plan offices. Tables, sofas, beanbags – it seems as if it has always looked like this. The only clue to the new, modern way of working is some A4 notices in a corner: “Please use these seats at any time you like. Unlike in the old days, you don’t have to book a conference room first.”
Mastiaux slumps blissfully into a chair in a conference room, flings his jacket over the arm, and rests his polished shoes on the fine leather of another chair. When he took office in 2012 the corridors were gloomy rows of box-like rooms and closed doors. The boardroom floor, which was said to be 267 metres long, was off-limits. Directors gained access via a hand-scanner, but entry was complicated for others. Mastiaux had all the doors opened and recalls how one member of staff first waited at the open door for permission to enter.
Mastiaux used his first 100 days to get to know the company. From morning until evening he talked to staff, retired colleagues and local mayors. He concluded that the mood in the labour force was almost as gloomy as the situation in the market. On the other hand, the prophets of doom had overlooked three of the company’s key assets: expert knowledge acquired over decades; close relations with private households, local authorities and companies; and the fact that EnBW still had a presence in the main markets.
When his consultations were over, Mastiaux urged the staff to commit themselves to the process of change and asked for their support, but he roused little enthusiasm. Wariness was a more common reaction. Some staff were surprised when the new boss said, “Give me a call if you have questions,” and actually gave them his mobile number. Some did send a message and were shocked to receive an answer within minutes.
Mastiaux’s career had already included stints in the oil industry and for the utility company E.ON, where he had built up the renewables business. He had experienced “crazy competition” and also public sneering; now he had both. “At times the public and customers were saying, ‘serves those companies right.’ Electricity is needed everywhere, but what the energy utilities do to provide it was no longer appreciated.”
If you walk all the way through the open-plan offices, you end up in a small corner with big monitors, electronic components, stylish seating – and Sven Meier. If someone in the firm thinks a particular technology might be interesting, or would like to understand what it involves, the tall man from north Germany is the man to go to for an explanation and to explore it further. “The idea is to try something out fast, without first having to design a project, submit it, obtain approval and then keep records of specifications and requirements.”
Under the old procedure it often took two months to get a project drafted and approved. Today, Meier just does what he thinks is right. “Colleagues tell me what they are interested in. I get hold of the components and then they spend two weeks fiddling about with them.” And that is in full view of everyone, not behind closed doors. Anyone can watch. They recently tackled artificial intelligence. “That’s hard to explain so we simply had a go at testing how that kind of system deals with customer enquiries,” says Meier, who comes from a commercial background and used to work as a project manager for Lufthansa Systems, a leading IT provider to the airline industry.
Why did he move to EnBW? “Because I wanted to do something meaningful, something I can explain to my children.” He has put solar panels on the roof of his house and controls his smart home from his mobile. Technology is his passion.
Every day Meier plants a seed or two and Christine Wienhold ensures the soil is fertile and tends the germinating plants. The less pleasant but equally important part of her work is weeding out the duds. “Starting projects is always easier than ending them,” says Wienhold.
She speaks quickly and animatedly. It is her job in EnBW’s innovations management to create the right conditions for new business ideas to bear fruit. She is constantly recruiting pioneers for the innovation campus and supporting them in planning and implementing projects. “Any staff member can apply to us with an idea at any time,” says Wienhold. Some perhaps only want to join in with a project. The managers are instructed to support these activities. Members of staff can devote part of their working time to a project and may even move to the campus for three months. Employees’ passions have priority. “We don't ask if they have the right qualifications or if the subject is in their field. They only have to tell us that they want to do this project at all costs.”
After three months there’s an assessment as whether the project has a future. An innovation board was set up for this, composed of managers from all areas. Then it is not so much the passion that counts as sober business arithmetic. The plug may be pulled.
Admitting failure is often tough. “[People] make a commitment to something, leave their teams and then come back, seemingly without anything to show for it,” says Wienhold. “But breaking off a project does not mean failure. It is only failure when you don’t do it at the right time.”
Some have been successful. Apart from the smart street lights there is also the digital learning platform WTT CampusONE. This was originally developed for internal training but was so successful that it was marketed externally: the firm that was then set up recorded turnover of more than €1m in its first year.
They are nice stories, but far from being able to support EnBW. It dawned on everybody very early on that the company could not make it on its own. So the search has been on for the counter-concept of a traditional firm: founders.
EnBW is running an accelerator programme with other major firms such as Bosch and Porsche, intended to breathe the startup spirit into the company. Mixed teams can apply with projects and implement them outside the company structures. A venture capital fund of €100m was also set up, so far taking stakes in four startups. This leads to cooperation with young firms that extend into the core competence, namely power stations.
A virtual power station is being developed, allowing electricity to be managed locally. Homes with their own electricity supply are networked and controlled. If a building produces more electricity than it needs, the surplus is routed to a neighbour. This requires complex software. “It would have cost us a long time to develop it ourselves,” says Wienhold
During the summer she will be joining a hybrid team with the founders’ project for three months, tracking road surfaces. This data can help local engineering departments predict the state of highways and plan maintenance more efficiently. It is a long way from the old business.
The question is, how much further can you go? In an interview with the Greenpeace magazine, Frank Mastiaux said he could envisage dispensing with power generation altogether. “Much as I personally like the kilowatt-hour, as a company boss I could not stick with it if it were no longer profitable.”
The shifts in power generation and getting out of nuclear power have had tremendous consequences, says Mastiaux, positive as well as negative. “As an industrial sector and as a company, we were forced to make fundamental changes and to take key decisions.” Letting go also means having a hand free for something new.