Shell puts sonnen up for sale at a reported unicorn valuation: but what type of company is sonnen?

In sonnen’s early years the answer was easy – a manufacturer and vendor of residential batteries.

Now, the question is harder to answer as it has added on hardware such as photovoltaics and wallboxes for electric vehicles – with an electricity retail and finance wraparound. All of this optimised for the householder by home energy management software, and optimised for the wider electricity market as part of a virtual power plant.

So, hardware provider? Electricity retailer? Virtual power plant? Home energy management? Which category to put sonnen into?

It’s a natural question for those in the energy sector to ask. But in my view the wrong question. For sonnen is, in our opinion, a great example of how these categories are colliding to form a new category. A category that wraps together hardware, energy management software, tariffs and finance. It provides support, control and empowerment back to customers. Our working name for this category is ‘energy retailer of the future’.

The energy retailer of the future is a category of company who sits with the customer on their side of the table, working with them to help minimise their energy bills, reduce volatility and risk, and support them to do their bit for net zero. It brings together hardware and energy tariffs designed to work with that hardware. It uses software that optimises how customers produce, store and use energy over time – and networks together thousands, and ultimately millions of customers to work together as a virtual power plant, sharing the value created with them. It has a range of propositions from upfront sale of product to fully financed service-based offerings, leveraging the astonishing growth of interest in provision of green finance. And critically it uses insights from a wide variety of data to take customers on their own individual journey through engagement, empowerment to collaboration. It provides a level of risk and reward that’s right for that individual customer’

Ultimately, it’s about partnering with customers on their energy transition journey – bringing together energy management hardware, software, services, and energy tariffs that manage volatility in personalised propositions. All underpinned by data, AI (Artificial Intelligence) and green finance.

Yes, it involves a lot. Some readers may be raising their eyebrows in scepticism that this is all possible – let alone in a way that is scalable.

But this is the way the market is already moving. Companies are moving towards this future from a range of different starting points. Some, such as tibber and Holaluz started life as energy retailers. Others, such as tado (originally known for smart thermostats) and Viessmann (an HVAC manufacturer) started as hardware providers. And companies such as Enpal started by focusing on one category such as photovoltaics and then expanding horizontally to other product categories and vertically to more of the energy value chain.

These companies are all growing rapidly – partially answering the scale question. Sonnen is an example – having scaled in Germany and a number of other markets, and battle-hardened with years of experience in the market. Media reports give expected 2023 revenues at €450 million.

None of these companies have done ‘everything everywhere all at once’. They are all on a journey, with strengths in their original areas and more to do in others. Sonnen is no exception. They were pioneers of the residential energy storage market in Germany, embryonic at the time but now with over 200,000 installations per year. They were one of the first to offer an innovative ‘flat’ tariff, now being replicated in other markets. They were definitely ahead of the curve (and, in reality ahead of some of the value in residential flexibility) with their virtual power plant software and capability.

In our opinion the destination of ‘energy retailer of the future’ is a clear one. Sonnen provides an opportunity to acquire a scaled-up front-runner in this emerging category. Acquiring sonnen will come with quite a price ticket. But it will give the acquirer a great position to be a leader in the transition from a world of commodity and hardware, to one of new energy services and energy management.