VIDEO INTERVIEW Volker Raffel, CEO of E.ON Romania: Lack of investments and the global situation are reasons for rising energy prices / Possible solutions: Reducing energy taxes

Volker Raffel EON

The lack of investments in the past is a reason why energy has become very expensive in Romania, another reason being the global situation, in which supply does not meet the strong demand triggered by the restart of economies, said in a video interview for Economedia Volker Raffel, CEO of E.ON Romania. He says the government has made a good decision to protect vulnerable consumers, but other measures can be taken, such as those recommended by the European Commission, to use the extra revenue from CO2 certificates to reduce taxes. According to Raffel, if Romania had exploited the resources of the Black Sea, now there would have been more gas on the market, and prices would not have risen so much.

Watch FULL VIDEO INTERVIEW with Volker Raffel, general manager of E.ON Romania:

Filming and editing: Ovidiu Micsik, Inquam Photos 

The pandemic crisis has affected most companies in Romania, how was the past year and a half for E.ON, what challenges did you meet, what problems and what solutions did you find in order to make the company more resilient?

Yes, it was a challenge worldwide, not only in Romania, not only to our company. But we have been in a lucky situation that the services we sell are really needed: the electricity is needed, the gas is needed. And therefore no one was thinking about shutting down our services, because they are just needed. And therefore we were in the lucky situation that our employees had that stable working environment, just could continue to work.

But of course, especially at the very beginning, when no one knew what was going to happen, we were all forced to switch to the online mode to work from home. I’m really proud that our colleagues were able to switch 2.500 of our employees to work from home within 5 working days. So that was, I think, a very good and rapid reaction and I think we can be proud of it, because I’ve also seen that many other companies, administrations and whatsoever had taken far more time.

But, obviously, working from home is only one part of all business. Because even if there is a storm or wind or cold temperatures or very hot temperatures and there’s a problem with the grid, our colleagues need to be there. Someone needs to be there to make sure that our services are provided to our customers and for those colleagues obviously it’s not possible to make work from home, that does not work.

Therefore we had to take special care of our colleagues working at the fields or working in dispatch centers or on other very crucial points. And in the beginning we only had the possibility to take care of each other, to keep distance and all these kinds of things and we were able to handle the situation that we will have a resilient approach.

This winter it’s already much easier because many of our employees are vaccinated. Unfortunately the vaccination rate is very low in Romania which leads to the crisis of the whole system. And I’m also not really satisfied with the vaccination rate in the company, but it is far higher than on the national level and this helps to be resilient in this winter too.

Business-wise have you postponed decisions, any investments in this past year?

No, it was not necessary to postpone investments. It is true that in the year 2020 we have sold less electricity and less gas: more to households, because people were more working from home, but less to industry. Because of the lockdown there was far less need, and if we sell less, we have also less turnover.

But this is recovering now and we see right now the contrary, that there is far more need of gas and electricity than forecasted. So there we have these kinds of changes in the turnover. But we are in the lucky situation that we are in this environment where we can continue with our works, and construction works usually did not stop in the whole economy.

What problems caused by the pandemic do you see continuing in the future?

I think this working from home is a new possibility which was not really accepted before or not usual and now this possibility having been explored and people are more used to the bosses, employees, whatever, I think it’s giving another flexibility to all of us. For instance, we are currently applying something like a 50/50/50 approach which says that from those who are able to work from home it’s roughly half of the times they are working from home or here. We say up to 50% of the office space can be occupied and that’s how we try to give a little bit more flexibility to our employees too. We have to acknowledge it’s ok to work from home, it works quite well to a certain degree, but we also need social cooperation, we need the teams, we need new project teams and therefore I think a mixture will be the right approach.

Do you see in the energy sector labor market changes, like jobs threatened with extinction, or new opportunities coming out of the pandemic, but not only?

Usually jobs are not extinguished, but change over time, especially in our sector. As I said, we are in the lucky position to be a very stable employer and therefore we also have many colleagues there are very fresh and active and learning more and more, even though they already are working for decades in our company. Adaptation is needed to new technologies, to new environments, but it works, and if people are open to this, then I think we are also able to offer stable employment for the next decade.

What digitalization projects do you have at E.ON?

Oh, many of them. So that’s both for the external part of our customers, for the services, but also internally. When it comes to the external, especially, I think the pandemic circumstances made a lot of changes because our customers also were not really used to use online services and now they switched to online, many of them.

They are more and more used to e-bills, one million of our customers changed to e-bills, instead of having 12 letters a year. Which also supports sustainability, because you can imagine 12 letters maybe it’s not much for one customer, but we have millions of customers. If you save millions of letters it’s also something good for the environment.

Also, payments are often done by our application we offer and so I think it’s also again a comfort for our customers. We continue with offers like these. And we see still already now, even though the pandemic was coming down happily, still more and more customers join these digital services.

And what is not so much seen by customers, but is very important too is our optimization of our internal processes. For instance, when I came here first time in Romania there were many outages in the electricity grid, taking quite a long time in electricity supply. And for gas as well there were many leaks. And for the electricity supply, for instance, we managed to reduce the duration of interruptions due to automation. Because formerly you had to disconnect the whole region, you needed to send people around, they needed to do their work before they could reconnect the whole regional part. Nowadays, with automation, you are able to disconnect only exactly that part where works need to be done and this also helps the comfort of our customers. So I think it’s an internal part but it’s helping our customers too.

Did the pandemic accelerate the digitalization, or was it a normal process?

The internal part was a normal process. We are optimizing all the time already, for years we have been working on it. But also new technologies arrived which give you more possibilities for the internal part. But this is ongoing, that’s also our target. But I think what has really changed through the pandemic was that so many of our customers are ready to use online services now. Of course, sometimes you need personal help: we offer chatbot, we offer a virtual assistant which can help you round-the-clock 24/7 with standard problems. But, in case of need, if you have specific requests that cannot be answered, I think every one of us is happy in such a situation to be able to talk to a person too, and of course we continue to offer this one too.

I’d also like to talk about Green Deal, which will affect a lot energy production, energy consumption. How will it affect E.ON?

Green Deal is a very large package, it will affect many industries, producers, but also us. I also think E.ON especially in Romania is a frontrunner in using this. We already finalized three EU funded projects in the past, we are currently running five more projects. These projects are partially investments, but it also can be trainings to employees, to adapt to new technologies, and so on. So it’s quite a broad scope of things, but it’s usually investments. And with Green Deal right now and with PNRR, the resilience program with the European Union, this is a once-in-a-lifetime chance for Romania to get all these amounts to invest into the Romanian infrastructure, here in Romania, for the Romanians, and we are really contributing as much as we can. So I think we can say that we in Romania are the Green Deal company in our sector using most of these possibilities and we are able to administrate because, you need to know, an European funded project needs to be well prepared, well documented and so on in order to be able to handle it, and we are.

You also have green energy projects in progress, like solar panels, can you talk a little about this side of the business?

We are a frontrunner in this, we have already finalized 200 PV projects, just recently we finalized the 200th, and we already have in the pipeline 150 more. And usually this is not necessarily something where we are investing ourselves, but we are doing it for our customers. So our role here is to help our customers to get more sustainable too and I am really happy to do something good, not only for the business, but for all of us. And I think we are just at the start of development here in Romania for the photovoltaics. The technology has become far more cheaper. I also think more political support is already somehow in preparation, I heard there are some programs to increase the incentive for the so-called prosumers and if this is going to come we are supporting them too.

Regarding electric cars, especially charging stations, you have partnerships with Volkswagen, you have bought a company to develop this part, can you talk about this side of the business?

In e-mobility we are, I think, one of the more advanced companies in Romania. But I also see there are some competitors in this. Today, still, on long distances it might be debatable whether it’s really reducing CO2, but for sure smaller cars in the cities are contribution to the environment protection: they are not so noisy, less polluting and also they are saving CO2 on short distances. The technologies are just starting to be developed to also become more attractive on long distances. We are building the infrastructure for this and we are convinced also at E.ON that this is something to be strengthened.

What do you think are the causes of the price increases, especially for gas?

I think there is a mid-term, short and long-term answer. One part is the lack of investment in the past that leads to the fact that there are not enough power plants or enough gas available. For instance, Romania has a long history on discussing about exploring gas in the Black Sea and if it would be explored you would have more gas around. I think it’s clear that if you have more offers than the prices would not increase so far. In order to have a mid or long-term solution for the future it’s clear that investments are needed. Investments in all parts of the business are needed. Energy transition is a challenge for many players. The producers have to invest, but also we have to invest into our grids to be able to connect more of renewables, for instance, and that’s what we do. We have increased our investments on a record level: in the past we have invested something like roughly 100 million euro/year. Now we plan to go for 194 million next year. Because we’re really convinced now is the time to improve our services, to make the energy transition possible, to participate in this. But that’s also coming in the short term. The investments, it’s clear, they need time until they can help.

In the short term, it’s not a problem for Romania. It’s a European or worldwide problem right now that this winter there’s a scarcity of supply, because worldwide demand after Corona now has grown because many Industries tried to catch up what has been missed the last year, the pandemic year.

So now there is a high demand and not so high offer and therefore we really have a challenge in energy prices. And we are close to our customers because in the whole energy system we are the face to the customer. Our customers see E.ON on the invoice, even though we are only responsible for supply. So we run our customer care centers and from the total invoice, for instance, from a 100 lei invoice, we only take 5 lei for our services.

What we also know is that some of our customers really need support. As I said, our services are really substantial and our customers need these services. So, while I’m convinced we have also customers who can afford higher prices, it’s also obvious that there are also customers that cannot.

And therefore I’m very happy that the government decided already on a support scheme. I’m optimist and confident that it will be revised in a way that there is going to be support for this winter. And also we, as a company, support, by offering products like not having high invoices in winter and low invoices in summer. We also offer products that have a stable invoice and that’s our contribution to it. And I’m happy that the politicians are taking their responsibility also on protecting vulnerables and doing social policy measures.

The Commission announced yesterday that it would support the member states to take measures like postponing bills or reducing taxes on energy, what do you think about that?

The European Commission announced a kind of toolbox as they say which is set of policies that member states can apply without having problems within the European Union. And I think those measures are really worth to be considered. Usually these are temporary measures for coping with this specific challenge we have in the market in this winter. And those measures taken by Romania supporting those that really need support are absolutely in line with what the European Union also now proposes. The European Union has proposed some other topics too, which are welcome, for instance, using the income of his high CO2 certificates for social policies or for reducing tax or for taking the cost of wind certificates. And I think that here there is really a possibility to react. And this is right now a political debate in the parliament and we as a company cannot decide about. We just can tell what is working, what is not, how something can be implemented. Of course, we want to help. But finally it is a democratic decision to be taken and therefore it’s right that is discussed in the Parliament.

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