This month began with some exciting news for renewables in Germany.
E.On, one of the largest utilities in Europe, announced a corporate split. The company will divide into (1) traditional generation (coal, nuclear, natural gas), and (2) the rest of the company -- including renewables and both electric and gas distribution. E.On's announcement was lauded by investors and analysts. No doubt the investors are focused on E.On's 5.2 billion Euro of write-downs this year, mostly for the now "risky" generating assets, and are delighted to see a separation into a "good" business of stable, low risk cash flows and a "bad" business of risky, mostly fossil fuel generation.
Interestingly, it is the traditional generation business that is seen as extremely risky. As renewables cut into demand, who is to say whether a new coal plant will ever pay back its cost? As nuclear is regulated out of existence in Germany, it will become a pure decommissioning operation. E.On and other utilities say that their traditional business models no longer work.
How long before Japan gets to this point? Will the "internal" separations of generation and distribution businesses now being mapped out for Japan get anywhere close to this? ... when the businesses remain under holding companies? How long will these changes be held at bay?
Why are there plans being announced for massive investments into coal-fired generation in Japan? Yes, the economics are different in Japan than Europe, but as these plans go forward it will put enormous pressure on regulators over future decades to sustain traditional business models.