Amin: Future of utilities uncertain

A shakeout is looming for the world’s largest power companies, and it is not clear that many will survive into the energy industry’s next chapter, says the head of the International Renewable Energy Agency.

Answering a question from Recharge, Adnan Amin, director-general of IRENA since 2011, says the world will not wait for energy companies to catch up to the renewables transition.

Amin cited the example of Germany, where immense companies like E.ON and RWE have seen billions of euros wiped from their market values in recent years.

“One of the principal utilities in Germany last year lost half its market capitalisation because it had not equipped itself for the transition to decentralised energy."

“Their business model was wrong. Simple as that.”

The disruption of the world’s electricity sector is “not going to be a replay of Wall Street”, said Amin, speaking alongside this week's Sustainable Energy For All Forum.

“You’re not going to be able to misjudge the market, and then claim that somebody else has to bail you out. You’ll go under.”

Amin notes, however, that attitudes are changing withing many utilities, and points out that they are "at the forefront of renewables investment" in the developing world, mentioning South Africa and Brazil as two salient examples.

While many can imagine a world without power utilities as they currently exist, Philippe Joubert, head of the Global Electricity Initiative, says that -- unsurprisingly -- the utilities themselves cannot.

In terms of the UN's goal of bringing sustainable electricity to the entire world within the next 15 years, the message from utilities is, “You will not do it without us”, says Joubert, former president of Alstom Power.

The GEI was created to showcase the sustainability efforts being made by utilities.

Power companies believe they are capable of tackling the world’s climate and energy challenges, but feel they lack the right policy signals, Joubert says. “We like to see this sector as market-based, but it’s not. One hundred per cent of utilities are either government-owned, or they have to obey very clear rules and policies.”

From the perspective of utilities, two of the biggest challenges posed by the rise of renewables globally is a lack of water and land, Joubert says. Renewable-energy takes up “an awful lot of land” compared to older means of generation.

IRENA’s Amin acknowledges that the transition towards renewables will cause economic dislocation.

“There is – and perhaps justifiably – tremendous anxiety” in coal-centric US states regarding the carbon regulations proposed this week by the Obama administration.“These people earn for their families, or they're the breadwinners.”

But, he says, the job losses that will come in older industries will be offset by new jobs in clean energy.

“The benefits may be distributed in different ways. But we can compensate for the losses there will be in the short term in some industries that will become more or less defunct.