E.ON CEO: We don't have a Plan A or Plan B for the elections; the power grid needs to be upgraded no matter what

Guntram Würzberg, the Chairman and CEO of E.ON Hungária, has been leading the German energy company's Hungarian subsidiary since July 1, 2022. He has a degree in law and decades of experience at E.ON in Hungary, Germany, and Turkey under his belt, so he keeps a close eye on current trends in the energy sector, both in Hungary and throughout Europe.

We conducted our interview the day after the the major power outage in Iberia on 28 April, at a time when Europe's energy sector is facing enormous challenges due to questions surrounding European competitiveness, the green transition, the decoupling from Russia and the major changes in US trade policy.

One day after the massive power outage in Spain and Portugal, as the leader of a major energy company, do you have more information about the causes than the general public?

I’m afraid I don’t know much more than you. We’re in constant contact with the regulatory authorities. What we know is that there was a problem with a high-voltage 400 kV transmission line which also affected one of the Spain-France interconnectors. But we don’t know the exact cause of the outage yet. I don’t want to speculate, but the incident clearly shows the vulnerability of the European electricity system. The connection between France and Spain has always been one of the bottlenecks in the European grid.

Are you present in those countries?

Not anymore. About 10 years ago, we had a renewable energy business there, but we’re no longer active in the region. Still, every major European energy company needs to follow these events closely because they highlight the system’s vulnerability. Regardless of the root cause, the grid needs to be massively upgraded to safeguard system stability in the future.

Meanwhile, electricity is becoming more important due to electrification in heating, transport, and industry. For Hungary or even Europe, the question is: how much investment is needed in the grid, and who can finance it?

We’re indeed in the middle of a major transformation. Ten or twenty years ago, no one cared where electricity came from—it just came out of the wall. Shocking incidents like this make people realize that their entire lives depend on electricity. Europe’s preparedness—let’s be diplomatic—could be better. We need to make the energy system more stable, both on the production and network sides.

The grid is facing new challenges. In the past, large power plants generated electricity; today, we have hundreds of thousands of small producers, such as rooftop solar owners everywhere in the system. Wind is popular in Germany, solar in Hungary, but the share of renewables is growing everywhere. This makes the system more vulnerable, because unlike traditional power plants, renewables don’t provide energy consistently. Moreover, Europe’s grids were built decades ago to deliver power from the plant to the consumer directly. Now, consumers are also producing energy, and the same grid must transport it somehow, just in the opposite direction.

At the same time, consumption is rising, digitalization is progressing, and businesses demand more energy. Simply put, there will be no electrification without major investment in Europe’s electricity grids. According to an independent study by Eurelectric- an association consists of the biggest European energy companies –, while the EU currently invests €33 billion annually in grids, we need to spend €67 billion every year on distribution grids until 2050 to meet our shared targets.

Europe is strongly committed to the green transition, but the Draghi report caused a stir by showing that energy is much more expensive in Europe than in Asia or the U.S. Donald Trump is president again, and he’s skeptical of renewables. Can the EU and large companies remain committed to the transition, or has the enthusiasm faded?

There’s been a shift, but not a reversal. We’re seeing a more balanced approach from the European Commission and national governments. Many have realized the high cost of massive investments, and Europe’s industrial competitiveness also needs attention. Climate goals haven’t been abandoned, but there’s a stronger push to cut bureaucracy at both EU and national levels. Another key point: so far, the EU has focused on boosting renewable generation but has paid less attention to the strain and cost this put on the electricity grid. If you install a wind farm or large solar park in a region that’s already congested by high generating power or low demand, you need to upgrade the surrounding grid—otherwise, the energy can’t be fed in. And that costs money.

E.ON is a German company, and Germany took an extreme approach in its energy transition, moving away from Russian gas, nuclear, and coal at the same time. How do you see the Energiewende?

We managed, but in hindsight, I think it was too much at once. It’s too late now, but the nuclear phase-out could have been handled better.

By better, do you mean slower?

Yes. The last three nuclear plants were shut down in the middle of the war in Ukraine. That decision is now under review by a parliamentary committee. There’s also some debate about the coal phase-out—perhaps it will be extended, though not indefinitely. Coal has strong regional and social implications, including job losses and high system costs.

Will the new German government decide on these issues?

Yes, a new government is being formed, and hopefully, they’ll take a pragmatic approach. Interestingly, the new economy minister is our former E.ON colleague, Katherina Reiche. She’s highly knowledgeable about the energy sector.

And another government member, Karsten Wildberger, the digitalization minister, also worked at E.ON. The German press noted that he took a pay cut of more than 90% compared to his previous role at MediaMarkt. Does having two former colleagues in government help E.ON?

No. Karsten was on our board, and we’re happy for him, but the key isn’t that he worked at E.ON. What’s exemplary is that excellent corporate leaders are willing to serve the country—even at a major financial sacrifice.

Returning briefly to German reforms: you mentioned coal. As a polluting fossil fuel, it’s public enemy number one—but is it really? You have advanced CCS technologies, like a project in Denmark, and even a coal plant in Turkey, where you’re on the board. Are we completely past coal, or is there still room for clean coal tech in the mix?

Our Turkish lignite plant in Tufanbeyli, is a joint venture with a local company, but it is not our core business anymore. When it comes to coal, the only question is the timeline for phase-out. That’s why we’re also investing heavily in renewables in Turkey—it’s the future across Europe. However, we get more and more critical questions about the coal plant, not just from environmental groups but also the financial sector. I see no chance for new investments in coal.

How do you see EU–China relations in this sector? China dominates renewable equipment manufacturing. Could new U.S. tariffs push the EU and China closer? Should we cooperate instead of compete?

China has a factual monopoly in some areas. In solar panels, their market share is over 95%. They dominate rare earths and batteries too. It’s not too late to compete, but their position is very strong. Still, I believe Europe must grow stronger—industrially, economically and obviously also in its defense sector. We won’t solve our problems by replacing one dependency with another.

That applies to China, but also to replacing Russian gas with American LNG. Trump is pushing U.S. LNG exports.

Exactly. So we should diversify and build a strong Europe together. No single country—also not Germany—is big enough to succeed alone. This brings us back to bureaucracy and innovation. If you compare Europe and the U.S., you’ll see that Europe introduced three or four times more new regulations in recent years. Too many rules kill innovation, we won’t be competitive this way.

Let’s turn to Hungary. A major shift took place recently: the government, Opus, and E.ON redivided the market. How satisfied are you with E.ON’s current position? Is it stable for the long term?

It was a massive transformation, even by E.ON Group standards. First, we integrated ELMŰ and sold other network interests to OPUS and MVM. Now, E.ON operates the electricity grid in Budapest, Pest County, and all of Transdanubia, serving millions daily. Last summer, we also handed over our universal service customers to MVM whilst keeping our solutions and sales business countrywide. (The universal, or territorially defined general electricity sales across the entire country are the responsibility of the state-owned MVM Group in Hungary, but the operation of the grid is managed territorially by three companies: MVM, along with E.ON and OPUS – editor's note.)

Has this been fully completed?

Yes. Legally it’s simple—sign a contract—but the real challenge is swapping IT systems and the seamless transferring customer data. As part of the transformation, MVM also became a 25 percent financial shareholder in E.ON Hungária. In short: yes, the changes are complete and the market is stable. Our employees deserve a break—it was a demanding process. One issue: customers often don’t know who their universal provider is or who runs their local grid. So, we still have work to do to explain this better.

From this stable position, where can you grow?

E.ON’s overall vision rests on three pillars: growth, sustainability, and digitalization. Around 80 percent of our investments go into the grid. We can invest when the regulatory environment is predictable and stable, which is important everywhere, not just here in Hungary.

Our CEO recently told German regulators we’ve paused major investment ramp-ups in Germany until we understand the long-term regulatory outlook. The same principle applies in Hungary: we’re ready to invest but must carefully assess the return on investment.

Looking at electricity and gas networks separately, it’s obvious the electricity grid needs major investment. But without EU funds like the RRF, financing is hard. Do you have enough resources?

As I said, Europe-wide there isn’t enough. If you only consider the Hungarian grid’s age, customer connection times—sometimes measured in years—and the need for digitalization, we could easily double our investments.

What kind of numbers are we talking about?

We’ve spent huge amounts on the grid in recent years—HUF 166 billion last year alone, HUF 380 billion over the past three years. We promised the state we’d do this level. Year after year we’ve even exceeded it. Now, we are not increasing the level of investments further until we know whether the regulation will remain stable in the long term – not just for one, but for several years. It is not a secret that compared to other countries, Hungary isn’t the most attractive market.

As for gas: no one has significant investments anymore, the system is built, and consumption is not growing. However, the operation and maintenance of the gas network is a significant cost, so we need to reach an agreement with the regulatory authority on how this can work in the future.

As I understand, you’re negotiating a four-year price period. The big question is: what’s the long-term future of the gas grid? Is green hydrogen transport realistic?

Hydrogen is only feasible for high-pressure networks. Some blending with gas is possible, but full conversion isn’t technically feasible for distribution grid-operators. This gas grid will primarily serve heating. Due to Hungary’s housing conditions, gas heating will remain longer than in Germany, which is shifting quicker to heat pumps. Hence for us, it is becoming more and more a maintenance issue. The economic challenge is that over time consumer numbers will drop, but maintenance costs will stay the same.

In both network areas—investment or maintenance—you operate in a business fundamentally dependent on regulation and the state. Does your job reflect that? Do you often negotiate with Hungarian politicians? Do you try to convince the regulators?

That’s truly the key. In every country I know—including Hungary—you always have to engage with the energy authority. You must convince those responsible for regulation, and there may also be broader political topics to discuss with ministries. But the main thing is persuading the regulator. There’s no magic in this—that’s exactly what we do.

Earlier you made a mildly critical remark, something like “maybe other countries have better profit opportunities.” I’d like to dig a bit deeper into this. So, what’s the main issue with Hungary? Is it the formulas, the uncertainty, or too many regulatory changes? In a background discussion, someone from the industry told me E.ON is very innovative in Europe, but Hungary seems to get less of that innovation. Could it be due to the more uncertain investment climate?

Let’s start with regulation and the network business. Yes, our main concern is predictable and fair investment conditions, and our primary request is always exactly that. If the regulatory conditions change every year, predictability disappears. Another concern is the Robin Hood tax—we propose phasing it out because we believe the concept of “excess profits” doesn’t apply at all in a business operating within a state-regulated framework.

As for innovation—our customer solutions business offers modern, innovative energy solutions for residential and business customers—solar panels, air conditioners, heat pumps, green electricity. I don’t think Hungary lacks innovative services compared to other countries. There is one area where this may be true: although we handed over our universal service customers to MVM, in some countries, households can access innovative flexibility services.

For example, if someone has rooftop solar and charges an electric car at home, they can get tariffs tailored to their consumption patterns, and with proper digital support, the entire system’s costs can be optimized. In the corporate segment, however, I can confidently say that Hungarian businesses have access to the state-of-the-art solutions available on the market.

Since you sold that part of the business, my next question may not be that relevant, but I can’t resist asking: can a household flexibility project succeed in a country where the population receives electricity at a uniform price due to utility price caps? I think low utility prices kill energy efficiency projects.

It’s always the Hungarian government’s decision how to regulate household utility prices. We adapt to it. As for energy efficiency—I wouldn’t go so far as to say it kills everything—but it definitely sends the wrong signal. If energy is cheap—even though it actually isn’t—why should people change? Why should they consume less? If something is cheap, people just don’t care about it.

You mentioned solar panels and electric cars. I’d like to ask about both markets. As journalists, we often write about changing solar regulations—sometimes a big subsidy program is launched, other times projects are limited. As a service provider, how do you deal with such volatility?

It’s really a problem—and again highlights the importance of stable, predictable regulation. I remember the summer three years ago when I arrived in Hungary—there was complete chaos in our call centers because household solar regulations were changed almost overnight. Everyone was flooding customer service to try to start their project under the old regime. This also created issues for our electricity grid—suddenly it seemed like almost everyone wanted to connect solar panels. Without stability, we’re often forced into firefighting mode.

And what about electric mobility? I must admit I’m confused about the Hungarian market—are subsidies increasing or decreasing? Is EV operation really cheaper, or is charging at public stations more expensive than gasoline? Are more people buying electric cars, or is penetration still painfully low?

My colleagues in the charging infrastructure business are quite optimistic about the Hungarian market. They see major growth potential. We don’t expect penetration to skyrocket overnight, but there is national-level growth. Urban areas are doing better, rural areas less so. Overall, our outlook is positive.

We’ve talked about networks and services, but you also trade energy. You had a Hungarian trading company but had to sell it—that became Audax—and then you re-entered the market with a new company. I don’t know the legal rules here, but how does this work? You sell it, and then shortly after, you're competing again for the same customers?

When we talk about trading, I also include wholesale trading, which we kept—that part isn’t linked to Audax. What we had to sell were our large B2B customers. These clients are sophisticated and know how to make the most of competitive trading—and with Audax, another strong player entered the market. After the war in Ukraine started, we were hesitant to re-enter and win large clients again—the profit margins were often too low to make it worthwhile. We’re now ramping up this business again but are mostly focused on small and medium enterprises for now—that’s where we’re more active.

You mentioned the market volatility caused by the Russia–Ukraine war. Do you think Russian–Western European energy relations could ever be restored?

It will take a very long time. Perhaps we should look at it on a national, not European level. I see three categories. Hungary, for example, never broke ties with Russia—because if you don’t have access to LNG delivered by sea, you simply can’t afford to. Countries like Germany had a long and stable relationship, but it was cut off and rebuilding it will take a long time— nothing lasts forever. Then there’s a third group, like Spain, which has huge LNG terminals but never had any ties to Russia. I worked for an E.ON subsidiary, Ruhrgas, which had a very close relationship with Gazprom. One of our largest gas supply contracts was with them. We always believed gas would come from Russia no matter what—even during political crisis. Turns out, that’s no longer true.

Speaking of politics: along with major carmakers, you are one of the biggest German companies in Hungary. How have changes in Hungarian–German political relations affected business? When a more left-wing coalition ruled Germany, things were quite tense—now perhaps relations may improve.

I’ve often participated in such discussions in recent years, and I felt that political tensions were also growing on the business side. Some German companies active in Hungary also complained. The German auto industry always had direct negotiations with the Hungarian government on investment conditions—they’ve always been somewhat different from the rest of us. I think things are a bit calmer now. A good example is the airport—the previous owners, who had strongly voiced complaints, sold it. That was the solution. In the energy sector and for E.ON, we haven’t seen such fundamental problems—our relationship with the government is balanced.

Next year there will be elections in Hungary, and the outcome seems more open than in previous years. As a large German company active in Hungary for a long time, how do you prepare? Do you just wait for the result and then engage with the new government, or do you try to build relationships in advance with opposition parties that have a real chance of winning?

Our job is to serve our customers. We don’t plan to contact political parties or hold energy-related discussions with them in advance. We always talk to those in office. In our industry, the regulatory frameworks span longer time periods, and EU law defines the possibilities more and more. Our issues don’t fundamentally change, so we don’t have an A and B plan for the Hungarian elections.