Heating start-up Thermondo aims to be leading energy supplier
Company profile
- Thermondo was founded in 2012 and has already become Germany鈥檚 largest heating system installer by bringing a new, digital approach to the staid business.
- Based in Berlin, Thermondo runs an advising homeowners on how to modernise their heating systems, and currently employs 175 skilled workers all over Germany for the installation. The company has already modernised around 15,000 heating systems.
- 罢丑别谤尘辞苍诲辞鈥檚 is 鈥�<2掳鈥� 鈥� signalling that one key motivation is driving emissions reductions in line with the Paris Climate Agreement. The company tells potential clients that Germany鈥檚 energy transition needs everybody to contribute, and that exchanging a heating system can reduce emissions by up to 30 percent. 鈥淭he power plants of the future sit on the roof or in the cellar [鈥 You are the power plant operator of the future.鈥�
- If 罢丑别谤尘辞苍诲辞鈥檚 strong growth rates are anything to go by, the company has discovered a largely untapped market 鈥� it came 2nd in the with a compound annual growth rate of almost 400 percent between 2013 and 2016. The company has also won the , among other prizes.
- 罢丑别谤尘辞苍诲辞鈥檚 success story has also attracted the attention of prominent investors, including major utilities E.ON and the Netherlands鈥� Eneco. , Thermondo brought in 21 million euros.
- The company recently expanded its business by adding gas sales to its product portfolio, growing to 320 employees. And it doesn鈥檛 lack ambition: Thermondo wants to become Germany鈥檚 鈥渓argest decentral energy supplier.鈥�
- The company is secretive about current business developments. Its most recent published sales figure was 26 million euros in 2016. It aims for double-digit growth this year
Why Thermondo matters
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Increasing heating efficiency is central to reaching Germany鈥檚 climate targets, but progress remains slow. All experts agree that modernisation rates need to be increased significantly. Thermondo shows the potential of new business ideas that help lowering emissions in this sector.
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罢丑别谤尘辞苍诲辞鈥檚 business plans also illustrate how electricity鈥檚 role in heating is rapidly expanding 鈥� a process often referred to as 鈥渟ector coupling鈥� or 鈥渆lectrification鈥� 鈥� with the integration of heat pumps, solar PV arrays, and batteries.
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The company鈥檚 portfolio also reflects the evolution of end-customer relations 鈥� many energy providers can no longer compete on price alone, but have to offer additional services.
What Thermondo says
麻豆无码版 spoke to 罢丑别谤尘辞苍诲辞鈥檚 head of marketing Stephan Herwig.
麻豆无码版: How would you evaluate the current progress of the energy transition here in Germany, especially in heating?
Stephan Herwig: Germany is unfortunately not on the right track at the moment. While only about 20 percent of our total energy consumption comes from electricity, the energy transition seems to focus on electricity. By not focusing enough on the enormous energy saving potential from the heating sector, we are putting the success of the energy transition at risk. There are 13 million old heating systems that urgently need replacing. Many people are even willing to modernise their appliances, but the market currently doesn鈥檛 have enough installation planning and installation capacity to serve the demand. Especially at the start of the heating season, it can take several weeks just to get a replacement estimate from a heating installer.
Also, heating systems are not exactly a topic that many people want to deal with, and the processes involved can be very complex, for example when it comes to the confusing array of financial incentives that are currently available. It鈥檚 little wonder many people shy away from it.
Where is the future of heating headed?
We do see a strong trend towards heat pumps [that are powered by electricity and can be combined, for example, with photovoltaics], especially when it comes to new installations.
But Thermondo is currently focused on boiler replacements 鈥� we don鈥檛 do new installations at present. During the modernisation of heating systems, newer technologies like heat pumps still face too many uncertainties: Will the investment really pay off after the time advertised? It鈥檚 also a different picture in existing building stock because of heat pumps鈥� lower heating load - buildings have to be well insulated for their use. To make this technology more attractive, it鈥檚 therefore key that consumer organisations or energy consultants can work out holistic concepts for refurbishments, to guide clients through this process. For the time being, a large majority of clients will continue to opt for conventional heating systems. Therefore, gas will remain the primary heating technology for a long time to come. But we are seeing a trend for more hybrid solutions with customers combining their gas or oil heatings with solarthermal energy
Gas will remain the primary heating technology for a long time to come. But we are seeing a trend for more hybrid solutions with customers combining their gas or oil heatings with solarthermal energy
Could you explain how gas sales now complement your business model?
Basically, we offer three types of product. First, a cash sale, in which the client buys the heating unit including installation in cash with the option of booking a maintenance contract. The second product is our 鈥淭hermondo365鈥� contract, in which clients can choose to repay investment costs over 2 to 10 years, and also receive a full-service package for a monthly instalment covering any future maintenance or repair costs for the heating unit. In December 2018, we launched our third product 鈥淭hermondo365plus鈥�, a carbon neutral heat lease, which is similar to Thermondo365 but includes the gas supply - including a certificate for carbon offsetting, which is a fundamental part of this product.
We see strong demand for the 鈥淭hermondo365鈥� contract, with around 25 percent of clients opting for the no-risk lease product. For our heat lease product, we see a potential of around 10 to 15 percent of clients in the longer term.
What鈥檚 your opinion on the recent announcement that Shell is taking over German battery pioneer Sonnen and possibly also green energy provider Lichtblick? Do you see a trend here?
It shows that times are changing and many large energy companies are looking to build more sustainable portfolios. They鈥檙e looking to invent, build up or acquire future-proof business models. Shell is one of those players who realised this relatively early on, and is now marching in the right direction. Gas and oil players will have to evaluate where the journey will take them in 15, 20 or 30 years.
Many utilities also wonder how they can reach end customers, and how they can establish a sustainable relationship with them. Many municipal utilities and other energy providers try to differentiate themselves from competitors with only tiny price differences, which 鈥� in the age of the empowered customer 鈥� results in customers switching between service providers often and willingly. Few of the large players have concrete ideas how they can stand out. In principle, the question is: Who is present in German households to offer additional services in the future?
Few of the large players have concrete ideas how they can stand out. In principle, the question is: Who is present in German households to offer additional services in the future?
What are your main competitors on the way to fulfilling your objective to become Germany鈥檚 largest decentralized energy supplier?
You have mentioned one of them yourself: Sonnen is a promising company with a strong value proposition. Sonnen is focusing on electricity, but they鈥檙e also an integrated energy service provider. We鈥檙e still focused on heat, but electricity is also on our agenda. We plan to reintroduce fuel cell heating systems this year, which will offer interesting intersections with the electricity sector 鈥� in future we will also look to expand our product portfolio to include heat pumps and PV systems. Fuel cells run on gas, but they provide both heat and electricity, which can either be used on-site or fed into the grid. But apart from new companies like Sonnen, we鈥檙e also competing with 55,000 mostly small and conventional installation companies as well as with the large utilities.
What are the next milestones for your company?
This year, we鈥檙e refocusing on growth and aim for around 40 percent sales increase. Our business model involves many people, which means the number of our employees needs to grow accordingly.
A further milestone would be our entry into the sale of solar PV, which would be an entirely new product for us. It鈥檚 mainly a decision about employing even more staff, because adding PV to our portfolio would require electric installation, which so far doesn鈥檛 play a role in our 鈥榩ure鈥� heating world.
We already offer solar thermal systems. Especially in the south of Germany, around 10 to 15 percent of clients decide to support their heating unit with solar thermal technology.
So far, your business focuses exclusively on Germany. Do you plan to expand abroad?
We keep an eye on several European markets, and some of them are interesting for us. But at this stage, we don鈥檛 have any concrete plans yet. The German market is huge, and even though we鈥檙e a fairly large player, our market share remains relatively small. As I said, there are about 55,000 companies installing heating systems, many of which are very small 鈥� just the classic plumber. Many others are HVAC (heating, ventilation, air conditioning) service providers, meaning they don鈥檛 focus on heating exclusively like we do.
What are the main regulatory obstacles slowing your business expansion?
It would help us enormously to get more clarity on local and national subsidy schemes. At the moment, it remains unclear where we鈥檙e headed in this area. For example, there is a new programme that will include support for fuel cell contracting, but it鈥檚 limited to two years, which is too short, especially when you consider this will require an entirely new marketing campaign.
How would you evaluate the general environment for energy start-ups in Germany?
In general, it鈥檚 fair to say that Germany is enamoured of laws and regulations, which is not conducive to an environment where start-ups feel at home. Start-up financing can also be a problem, especially larger funding rounds at later stages of development are normally secured with international investors. But for early-stage financing, there has been good progress in recent years. German venture capital has become more active recently.
I would also say that we have a strong culture of encouragement and support among start-ups - there is a very active exchange. Germany also boasts a very strong education system, translating into strong new blood in engineering and digital expertise, which means that Germany is nevertheless an attractive location for start-ups 鈥� especially here in Berlin, where a lot of international talent is based these days.
Additionally, there are many organisations that stick up for start-ups. In the energy sector, there is the , where more than 50 energy start-ups can exchange ideas, and which serves as a common voice. Another example is the . I also see a trend to networking among start-ups and German Mittelstand companies. We try to foster this dialogue. It鈥檚 not about us against them 鈥� rather, we can achieve progress together.
