Tdworld 20070 Germany Getty

The Digital Transformation of Small Utilities in Germany

Oct. 15, 2019
A municipal utility is more than a service company: it is part of a city’s identity, core of what is often called the municipal corporation, an important power player.

The Germany town of Emden sits at the edge of the North Sea. This community of 50,000 people has been operating as a town for over 800 years. Today, it is home to a shipbuilding wharf, an automotive plant, and a university. Emden is surrounded by water and endless flat land with windmill farms and biogas plants. Unfortunately, many young people are not convinced that Emden is the sexiest place they ever wanted to live in. Like many European regions, Emden is fighting demographic change and the exodus of young people, while larger cities fight collapse because of inflow.

For both regions and cities, digital transformation has the potential to help cope with their challenges. In Emden, the municipal utility — called Stadtwerk — took the lead in 2016, starting with the digitalization of its own company while developing a digital roadmap for the city.

Germany has more than 1000 municipal utilities. They range from the very small companies (servicing a few thousand people) to large multi-billion corporations. But they all have a two-fold mission in common: to efficiently provide citizens with water, power and gas, and often public lighting and public transport; to be profitable on the bottom-line, paying an annual dividend to the city’s treasurer.

Many small utilities are currently operating in Austria and Switzerland. Other European countries have merged their utilities into large governmental or semi-governmental organizations; some of them vertically integrated, but others not so. Before the deregulation of the energy market in the late 20th century, profitability was considered to be a given: every citizen had to buy power and gas from the local municipality at a regulated prize — and the winters were cold! It has taken many years before the energy market has really become a competitive commodity market for the simple reason that people remained faithful to their local municipality.

Now, times are really changing. A municipal utility is more than a service company: it is part of a city’s identity, it is core of what is often called the municipal corporation and as such an important power player. It is an important employer, it not only warrants the survival of loss-making infrastructure like pupil transport and public swimming pools, but it is also a sponsor of independent sport clubs and cultural organizations. This means you don’t just shrink a utility because the markets have shrunk. Utilities are fighting for their future; they are seeking out new viable business models.

In Emden the mission of the utility, and the mission of the city and its region are identical: creating the joint vision of a sustainable and environmentally friendly place to live in, making the region attractive for economic investment, securing an efficient infrastructure for water, energy, and health. Last, but not least: making Emden a home for (and with) all its citizens, whether affluent or poor, indigenous or immigrant.

Backed by a strong local political situation, Stadtwerk Emden has started the digital process by organizing open workshops together with interested stakeholders. Out has come a digital roadmap with challenging goals: a smart energy city, a dynamic map for electric vehicle (EV)-charging stations, smart traffic and parking management, smart rain- and wastewater control, a geographic information system (GIS), and an integrated social plan.

It was decided that founding a new company, Emden Digital, will help realize digitalization projects. It will manage an internet of things (IoT)/Open Data Platform, rolling out both a smart meter program and a broadband expansion. Citizens will experience the smart city through the Emden-App KEPTN for city related information and participation services, a public WiFi network, an attractive charging infrastructure for EVs, and a marketing campaign for electric transport. The milestones of the smart energy roadmap are a heat-to-power converter, the development of a battery storage, and the development of a power grid simulator. Other milestones have been defined for smart traffic management; for smart building technology; and for the development of an IoT and urban platform, based on Siemens’ Mindsphere technology.

Heinsberg near Cologne is another example worth mentioning here: a German town that is going digital, together with its local utility. The municipality of Heinsberg consists of 13 townships and villages with altogether 41,000 people. Its economy was historically determined by agriculture, coal mining, and synthetic fiber production.

The old industries disappeared in the 1980s. Like so many other cities hit by structural changes, Heinsberg was fighting for its future. Heinsberg’s utility is independent from the city and belongs to the Dutch network company Alliander, one of Europe’s innovation leaders in smart grid development.

In Heinsberg, Alliander is operating the power and the gas grid and street lighting. Alliander identifies itself very much as part of the municipal family, developing a strong commitment to help shape a successful future of the city and its villages. Early on, Alliander started to develop a smart power distribution grid with smart transformation stations, fuel cells for load balancing and a sensor system to remotely identify near-outages in the grid. The smarter grid enabled the solar power for thousands of private rooftops, making the city’s energy provision more independent of fossil energies.

Alliander started to systematically modernize street lighting with LED technology and a smart controlling solution to reduce the energy consumption of the city and to empower the administration to switch public lighting driven by demand. As early as in 2012, Alliander had taken the initiative to organize an annual e-car rally. At the same time, Alliander built EV-charging stations for electrical bikes and cars. The push is to make citizens and local companies participate in projects and not only in digitalizing infrastructure. Therefore, the focus is on strengthening social cohesion and the shared identification with their hometown.

Both the utilities of Emden and Heinsberg have understood one key fact: their strength lies in the local rootedness of their companies, and their physical contact with people and neighborhoods. For them, digitalization of the company means digitalization of the city. The latter can only be achieved jointly with the city, jointly with citizens, and jointly with customers.

Voice your opinion!

To join the conversation, and become an exclusive member of T&D World, create an account today!