BürgerWerke is an innovative energy retailer start-up aiming to ‘close-the-loop’ on citizen energy in Germany. Chris Cooper pays them a visit in Heidelberg.
Kai Hock and Felix Schäfer are two friends who happen to be some of Germany’s leading community energy entrepreneurs. At just 20, they started the Heidelberg Energy Co-operative whose achievements earned them the 2014 German Solar Prize. Now, their latest project BürgerWerke is one of Europe’s most innovative electricity retail start-ups (and not a burger joint).
What does Bürgerwerke do? Bürger (citizen); Werke(power plants/utility)
They sell the generated energy from community energy projects directly to customers, most of which are also community group members. This provides existing projects with price certainty and means their customers can be sure that most of their power is coming from citizen-owned renewable energy sources.
Put differently, it ‘closes the loop’ for community energy projects, allowing investors to consume the energy they own. Why is this important?
Felix explains, “the guaranteed feed-in tariff for electricity is now virtually gone. The plant operators are now supposed to market their electricity directly on the market, however prices are increasingly uncertain.”
“The aim” he says, “is that Bürgerwerke will provide the price certainty required for new citizen energy projects to be built, well after state support falls away”. They currently buy energy from the co-operative projects for between €0.07 -0.10/kWh.
In theory, if Bürgerwerke can continue to grow its customer base, it should create a market for future community energy projects which otherwise would not have been constructed. How it works?
Bürgerwerke match forecast customer load profiles with real time interval data from their generator fleet. If there is surplus generation, the energy is pooled and sold on the spot exchange. If there is surplus demand, they balance using a Bavarian hydroelectricity generator. C
urrently five community owned generators totalling 6MW of solar and wind sell their power to Burgerwerke. However, together the 38 member co-operatives own 250 plants across the country, totalling 20MW capacity, meaning there is room to expand the generator fleet as the customer base increases.
A lean start-up
Felix, Kai and co are doing a good job of running a lean ship. The highly dis-aggregated electricity retail market in Germany (thanks to the hundreds of municipal energy utilities) means there are many third-party ‘off-the-shelf’ software solutions for electricity retailers to buy to quickly scale up a retail organisation.
“We’ve pulled all the ‘blocks’ you need for an energy retailer into place. We’ve got them talking to each other smoothly” (i.e. the back-end software is interfacing).”
Now, the day-to-day retail back-end is run almost entirely by Felix himself, a handy programmer. This leaves the other six staff to focus on marketing and customer relationships. This level of automation – just one year after start-up – would make any Australian energy retail start-up very jealous.
Despite being a co-operative, the team look and feel like any other start-up. They may not have the profit motive as their driving force, but according to Felix, they still get out of bed excited by the challenge that Bürgerwerke offers.
Could this go mainstream?
Whilst the concept looks fantastic on paper, my big question for the team is, ‘does it create enough customer value to scale up and grow into a profitable business? ‘
Kai admits uptake has been a slower than they had hoped.
“Co-op members who invest tend to be older, and therefore less inclined to switch provider,” explains Kai.
“Also, Germany has very low churn rates of about 8% per annum. Despite liking our story, it takes time to get people to change utility”. (By comparison, Australian states have more active churn rates between 14 and 30%, according to the AEMO).
The initial target market for Bürgerwerke is the members of their co-operatives, of which less than 20% have switched from the total 8000 members.
“We’ll need about 7000 customers to break even,” says Felix.
With their seed-funding running out in the coming months, the boys seem battle-hardened, but relaxed.
“You have to be relaxed, don’t you”. Felix says, literally oozing a sense of calm.
I leave their offices sensing they will work these challenges out. If – like Felix and Kai – an entrepreneur is intelligent, experienced and calm they will figure out solutions through perseverance and adaptability. buergerwerke.de Look out for my post next week about Vandebron, a similar energy retail start-up who has a different approach to marketing, with amazing results. Bürgerwerke – Dossier Entity type: Co-operative of Co-operatives Founders: Felix Schäfer, Kai Hock, Torsten Schwarz What they do: Electricity retailer specialising in selling power from co-operatively owned generators. Value proposition:
Provides project price certainty to co-operative generators
Customers get nearly all power from co-operative owned renewable energy sources, at the same price as regular power.
Co-operatives get a share in operating profits Launched: 2013 Staff: 7 Generators: 250 systems, 20MW total, from 38 member co-operatives Source: Citizen Power. Reproduced with permission.