Interview with Jan-Oliver Heidrich: “As EHA, we offer reliability”

Jan-Oliver Heidrich: The tendencies of the past year were already foreseeable before the war in Ukraine. We have a clear strategy for supplying our customers, which is: be prepared. That’s why we make advance purchases on the futures market and had already secured the supply for 2022 and large parts of 2023 to 2025 before the crisis. This has the advantage that we didn’t – and won’t – have to procure this share at high prices on the short-term spot market.

Jan-Oliver Heidrich: Recent experience has encouraged us to structure our procurement as broadly as possible and to plan for the medium to long term. For instance, we are continuing to focus on power purchase agreements (direct supply agreements) in 2023, in order to secure at least some of our energy supply in the long term at fixed prices. We also support our customers in generating photovoltaic energy. We have already installed a large number of PV systems at REWE Group and will continue to do so this year. This is how we aim to make our contribution to the expansion of renewable energy.

Jan-Oliver Heidrich: What’s clear at present is that we offer reliability in times of volatile prices. By taking a structured and broadly diversified approach to purchasing electricity, we can offer low and reliable prices that are only slightly affected, if at all, by short-term impacts such as power plant outages or the economic revival following the pandemic.

As a general rule, we purchase larger volumes on the long-term futures market when prices are low, such as during the pandemic. By contrast, we stay away from the long-term futures market when prices are high. This is the result of active portfolio management.

Jan-Oliver Heidrich: At the moment, electricity for 2025 is much cheaper than for 2023. The market participants are clearly assuming that the current prices won’t last. That suits us because we are running out of the futures market volumes we realised at favourable terms. Despite all our precautions, we expect higher energy costs for our customers, suppliers and ourselves in the short to medium term.

Jan-Oliver Heidrich: There’s no single answer to that question. But in this respect too, it depends whether the provider has relied on cheap prices on the spot market or has made long-term preparations and procured energy in advance. Based on the logic that higher energy prices cause higher product prices, suppliers would also have to reduce their prices when energy prices fall. But that hasn’t been the case thus far.

Jan-Oliver Heidrich: We took on a more active role with this project to help drive forward the energy transformation. We have been providing the REWE Group with green electricity since 2008 and in this regard were pioneers in the German retail sector. We have also taken on more responsibility with the long-term supply contract for green electricity from the Borkum Riffgrund 3 offshore wind farm. This type of direct supply agreement makes a much larger contribution towards achieving climate targets.

Jan-Oliver Heidrich: Borkum Riffgrund 3 will have a total capacity of 900 megawatts. An annual capacity of roughly 100 megawatts has been agreed, which is equivalent to the consumption of approximately 1,500 REWE Group stores and accounts for around 15 per cent of Germany’s total electricity needs.

Jan-Oliver Heidrich: There’s a lot of interest in the sector, because everyone is under growing pressure to become carbon neutral. However, it takes a great deal of expertise in energy trading to get a project like this off the ground – whether in-house or with a contracted service provider. The REWE Group has a distinct competitive advantage in this regard with its subsidiary EHA. We have the necessary processes in place. It makes no difference to us in terms of processing whether the power is sourced from a spot or futures market or from a wind farm. But I have no doubt that other companies will follow our example, and as such we are setting a trend at REWE Group that will help to accelerate the energy transition as a whole.

Jan-Oliver Heidrich: Yes, we have noticed the effect. The REWE Group was also able to save energy. We noticed it a lot in the smaller volumes of electricity that we had to stock up on.