From environmental expert to CEO: E.ON boss Michael Lewis reflects on his remarkable sustainability journey
EXCLUSIVE: Michael Lewis explains how his rise to the top at E.ON has intertwined with the company's transition from a fossil fuel-based power generator to a provider of sustainable energy solutions.
Exactly 25 years ago, Michael Lewis was appointed to the role of environmental specialist at E.ON, known then as Powergen. In his own words, Lewis was at the time working for a “fundamentally unsustainable company”. The publicly-listed firm was providing 90% coal-fired power generation, and operating without a sustainability business unit in place.
“I did not think that 25 years later I would be chief executive,” Lewis told audience members on an action-packed second day of the edie Sustainability Leaders Forum.
“I don’t suppose most of us join thinking we’re going to be CEO.”
So, how did it happen?
During the mid-1990s, the domestic and global environmental agenda started to come to the fore, as the world witnessed the early stages of the Kyoto Protocol process, while the “dash for gas” saw the UK electricity sector begin to shift from its traditional coal to modern gas-fired power plants.
However, neither the UK or EU had by this point adopted any meaningful carbon or energy efficiency regulations, and for Powergen, the focus was mainly centred around mitigation and compliance.
Lewis said: “Right at the very beginning, I really did want to make a difference and I could see that while we were making a difference in the environment team, it was very much in ‘mitigation mode’.
“I moved over into strategy shortly after Kyoto because I could see that if you really want to make a change to the company then you have to get involved in the strategy.”
Sustainability started to become part of the group’s corporate strategy at the start of the millennium, when the new-look E.ON, which acquired Powergen in 2002, did some “serious thinking” on what the carbon agenda meant for its legacy assets.
In 2007, E.ON channelled €12bn into its newly-launched renewables business, of which Lewis became the first employee. Lewis and E.ON focused on picking winners from the large amount of nascent technologies on the renewables scene, ranging from solar, onshore and offshore wind, through to less established options such as tidal and biomass.
“We tried to pick those where cost reduction cost be made most efficiently so that renewables could compete on level playing field. At the time they were being subsidised and significantly more expensive than fossil fuels.”
The decision to make the low-carbon transition has been well and truly vindicated. Last year’s Contracts for Difference (CfD) auction saw record-low offshore wind costs become competitive with fossil fuels, while in some cases, onshore wind and solar are even cheaper.
At the same time, the UK’s carbon tradition system has pushed up the cost of fossil fuels. The result is testimony to what can be achieved when industry and Government work together, Lewis said.
New energy world
The thread of mitigation to transition has played a huge part of Lewis’ career and the development of E.ON.
In the last couple of years, the company has looked again at its group strategy. This time, the board decided something much more fundamental – a transformation of the organisation.
“We realised there were two worlds of energy arising: the old world, centralised, large-scale generation based on fossil fuels, and a new world based on customer choice, with networks linking renewable energy into those networks.”
In November 2014, E.ON became the first major UK-based energy company to announce it would abstain from fossil energy in the future. E.ON now focuses exclusively on generating renewable energy, with a customer-focused strategy that helps industrial consumers to build processes such as energy efficiency and on-site generation.
Having played an instrumental role in expanding E.ON’s renewables business to the point where it is not just merely part of or subsidiary to the corporate strategy, but in fact the central pillar, Lewis was handed the role of E.ON UK chief executive in March 2017.
He reflects on both his personal career tajectory and the company’s low-carbon transformation as the “perfect match”.
“It was a transition of myself becoming more commercial as well. I had to learn a lot along the way, about finance, strategy and all the rest of it. I made a gradual transition towards a much more commercial position and the company made a transition towards sustainability and the two met perfectly as far as I am concerned.”
The major challenge for Lewis and E.ON now is to rebuild trust with a highly-sceptical consumer base. Lewis acknowledges this will be a major challenge in an industry where people have historically suffered from poor customer service and rising energy prices.
“The energy industry is not trusted, that is very clear,” he said. “We measure our so-called Net Promoter regularly, that’s how our customers perceive us, it’s not where it needs to be. There are many reasons for that.
“All I can say is that we have to deliver what we say we are going to deliver and over time, you should see a transformation of how we are perceived, and the trust that our consumers have for us.
“It is not one of these things that can happen over night. Trust takes years to build – it can be lost like that, but it take years to build. B our journey is about building trust, saying what we are going to deliver. That is how you get trust.”