17 June 2023

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

Reading time: 8 min.

Energy prices remain a crucial issue for retailers, producers and consumers. At REWE Group, we also focus on sustainable business practices and take a long-term view, particularly when it comes to energy. This includes the long-term portfolio management strategy of our energy wholesale subsidiary, EHA. In this interview, managing partner Jan-Oliver Heidrich talks about long-term procurement strategies, short-term factors affecting the price of electricity, and the green electricity of the future.

Mr Heidrich, few issues have affected consumers, businesses and policymakers in the past year as much as energy prices. What impact has this crisis had on EHA and its customers?

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

Managing Director of German energy company EHA Energie-Handels-Gesellschaft.

Energy prices recently fell significantly, but are still far higher than during the financial crisis of 2009, so there is only a certain amount of relief. What are EHA’s objectives in terms of energy procurement this year?

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.

How does this affect the price EHA pays for electricity?

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.

With the long-term supply contract for green electricity from the Borkum Riffgrund 3 offshore wind farm, we are taking on further responsibility.

If you purchase far in advance, you already have an idea of the electricity prices we can expect over the next few years. How are things looking?

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.

Many suppliers continue to charge higher prices, citing increased energy prices. How justified are these demands now?

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.

The REWE Group has fully supplied its stores with electricity from renewable sources since 2008. It is also set to be the first food retailer to source green electricity from a wind farm in the North Sea. What is the idea behind this?

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.

How much green electricity will the REWE Group source from the North Sea wind farm?

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.

Why do so many other companies, including in the retail sector, find it difficult to conclude this type of long-term supply agreement for power from a wind or solar farm?

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.

Germans were encouraged to save energy last winter. To what extent has EHA as an energy company noticed these savings?

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.

About EHA Energie-Handels-Gesellschaft

EHA Energie-Handels-Gesellschaft is based in Hamburg and serves as the 360° energy service provider for the company with its many locations in Germany and Austria. EHA generates individual added value for its customers by supplying them with green power and gas, efficiency and climate-protection advisory services, operation of trade fair booths and energy data management. The use of digital technologies facilitates continuous consumption and cost reductions. EHA pays more than lip service to climate protection. The company has committed itself to renewable energies and acts as an energy producer as well. EHA operates photovoltaic systems and combined heat and power plants fired completely by biogas at customers’ properties. EHA is a subsidiary of REWE Group.

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