Dutch Utility Bets Its Future on an Unusual Strategy: Selling Less Power

Source: By STANLEY REED, New York Times • Posted: Monday, August 21, 2017

A wind farm close to Almere, the Netherlands. Eneco has invested heavily in wind power, in part so that it can assure environmentally minded customers that their power comes from cleaner sources. Ilvy Njiokiktjien for The New York Times

AMSTERDAM — When Eneco, a major Dutch utility, tested a promising energy monitor in several dozen homes, things could not have gone much worse. The company making the devices failed to deliver enough of them, and some of those provided did not work.

But when Eneco sent workers to recover the monitors, something strange happened — a tenth of customers refused to open their doors. “They wanted to keep it,” said Tako in ’t Veld, a former Eneco executive who now leads the “smart energy” unit at Quby, the company that makes the energy meter. “They were so happy with the energy insight.”

The test in 2010 was part of Eneco’s efforts to adapt to upheaval in the energy market. In recent years, large volumes of wind and solar-generated electricity have undermined the economics of traditional power plants and provided the outlines of a future in which conventional power plants no longer supply the bulk of a home’s electricity.

Through acquisitions (including of Quby), by nurturing a cluster of start-ups and with other initiatives, Eneco has sought to provide new services to customers — and, in doing so, to enter new sectors, like the charging of electric vehicles and the repair of solar panels.

Clockwise from top: The new “Toon” in the Quby office; a meeting in the coffee corner of the office; and a Quby employee in a technical room. Ilvy Njiokiktjien for The New York Times

“We said ‘we have to create an increasing customer loyalty by doing something different,’” said Hans Valk, chief executive of Quby and formerly the leader of Eneco’s consumer business. “What we are trying to do is switch from selling a pure commodity to selling energy as a service.”

For instance, Eneco owns Jedlix, an electric vehicle charging unit, which has partnerships with Tesla and BMW and allows car owners to recharge their vehicles inexpensively when there are large supplies of renewable energy on the grid. Jedlix sometimes even pays them to do so.

Eneco is also starting a business called CrowdNett which, unusually, pays customers for some of their power. Eneco looks for people who already have solar panels at home and tries to sell them a large home battery, like a Tesla Powerwall. Surplus power generated by the solar panels is stored in the battery and Eneco taps into a portion of that storage to help balance the electricity grid. Customers will receive 450 euros, or $530, a year for allowing use of their batteries.

Eneco’s leaders concede that they are proceeding more by trial and error than following a grand plan. Still, these efforts may, over time, aid the company’s survival and contribute to creating ways to help consumers shift to cleaner energy.

“They are very forward-looking in terms of strategy and mind-set,” said Roberta Bigliani, a vice president at IDC, a market research firm. If Eneco’s experiments flop, though, “they definitely will not be in operation in the future,” she said.

So far, the experiment with its wall-mounted energy monitor, known as Toon, has been among its more successful.

When Eneco first considered the test, the utility was locked in a profit-zapping battle with competitors, cutting prices for electric power and natural gas while giving customers gifts for signing up. Seeing the danger signs, Eneco’s management decided that a radical change was necessary.

The Toon offered Eneco an opportunity to shift course and, despite early teething problems, Eneco expanded the rollout. The meters allow customers to control their domestic heating settings through a smartphone app, and they have displays that show electricity and natural gas consumption in detail, along with other information like weather forecasts.

Much as telephone companies offer discounted devices with longer-term contracts, the Toon typically comes as part of a utility contract; Eneco customers pay €3.50 a month for the meter. In return, customers say it helps them save energy, offering the dual benefits of saving money and cutting the greenhouse gas emissions blamed for climate change.

Quby says it has placed more than 300,000 Toons in Dutch homes and has deals to supply the devices to other utilities, like Engie in Belgium and Viesgo in Spain.

In his home north of Amsterdam, Marco Westenbrink has a Toon on his living room wall. “It is always there like it’s my big brother, and it is always staring at me,” the graphic designer said in an interview in his garden, overlooking a canal. “You can call it annoying, but it makes you completely aware.”

Clockwise from top left: Marco Westenbrink in his backyard; Mr. Westenbrink controlling his energy usage with the Toon app on his phone; an operator at an Eneco plant in Utrecht, the Netherlands. Ilvy Njiokiktjien for The New York Times

Mr. Westenbrink, who lives with his wife in a cozy, century-old house in Krommenie, estimates that the Toon has helped them cut their annual energy bills by nearly a third, to about €2,000.

His wife, Karin Krol, says the Toon is also helping their family battle climate change. “We believe that small things can change the environment,” she said.

Those who sign up for the Toon cut their average annual energy consumption by around a tenth, according to Quby. Lower energy consumption would not necessarily seem to be in Eneco’s interests, but it figures that any loss in revenue will be more than offset by growth in its services business. (The company does not provide details on its services unit in its public filings.)

Already, through Toons, Eneco can monitor the performance of natural gas boilers and solar panels and can send repair people when equipment needs servicing. And, as Mr. Valk, the Quby chief, had hoped, the devices have helped reduce the number of customers who leave Eneco for other providers by 60 percent, the company says.

Mr. Valk envisions a future where customers pay for various services, rather than kilowatts of energy. Unlike today’s dominant sources of electricity, wind and solar power are essentially free once equipment is installed. So, “you are going to pay for flexibility, not for the ‘neutrons,’” Mr. Valk said.

Eneco has also invested heavily in wind power, in part so that it can assure environmentally minded customers that their power comes from cleaner sources. That has paid dividends: The company has a 10-year contract to supply Google with clean energy for an electricity-hungry data storage center that opened last year in Eemshaven, in the north of the Netherlands.

Daan Berkouwer and his wife, Louise Bokhoven, at their home on the outskirts of Gouda, the Netherlands. They are part of a pilot project using the Tesla Power Wall battery, which is mounted on the side of their house. Ilvy Njiokiktjien for The New York Times

Much of Eneco’s strategy is in its infancy. CrowdNett, the battery storage service, has only a few dozen clients, but the utility has big ambitions for the initiative. If enough battery owners sign on, Eneco says, it can use software to electronically aggregate and sell the power, like a conventional utility.

Daan Berkouwer, who works for a water management company, said the combination of financial incentives and the promise of cutting emissions helped him decide to buy a lozenge-shape Tesla Powerwall battery to use with CrowdNett.

“When everybody is doing this, then the oil companies can quit with their production,” said the 27-year-old Mr. Berkouwer, who lives with his wife on the outskirts of Gouda, the town famous for its cheese. “Why take out all the oil and demolish the planet if you can do it with clean energy?”