* Big utilities must link up with start-ups
* Future energy markets are carved up anew
* Small firms have new knowledge, need mass markets
* Big players risk being left behind
By Christoph Steitz and Vera Eckert
FRANKFURT, Jan 19 (Reuters) - After a year of majorrestructurings, Germany's big utility companies are underpressure to either buy up or cooperate with small and nimbleplayers that are eating away at their core business, industryconsultants and analysts say.
"No energy supplier can meet the upcoming challenges alone,"said Jan-Philipp Sauthoff, partner and head of energytransactions at PwC in Germany, adding he expected "a wave oftransactions and new cooperations".
Analysts at Goldman Sachs even anticipate "large,game-changing M&A moves" this year for German utilities.
However, Innogy, Germany's largest energy group bymarket value, has said it is only open to small selective deals,while Innogy's parent RWE said last week it had noplans to merge with Uniper, its rival conventionalgenerating firm floated off by E.ON last year.
Analysts pointed to the similarity of their remainingbusinesses, which also includes energy trading, as a reason forwhy a tie-up would make sense for RWE and Uniper.
Reeling from years of falling wholesale power prices and asurge in solar and wind capacity, E.ON and RWE broke up theirbusinesses in 2016, separating ailing thermal power generationand trading assets from promising distribution networks andsubsidised renewables.
Meanwhile small but confident independents like solar powerstorage systems maker sonnen GmbH are making inroads into theGerman electricity market with business models which encourageconsumers to tap their home-produced power, becoming "prosumers"who no longer need external supply.
In a sign that competition in the retail market is heatingup, millions of households switch supplier each year to findbetter deals, with 42 percent of Germany's 40 million havingdone so between 2005 and third quarter 2016, PwC figures showed.
Utilities have therefore started to enter into small andselective partnerships to adapt to the industry's changes andharness specialist know-how, including E.ON, which last yearstruck a distribution deal with battery maker Solarwatt.
Innogy, which comprises the renewable and network assets ofRWE, followed up by buying Belectric Solar & Battery to boostits position in energy storage and photovoltaics.
"If the big utilities don't count on partnerships, partiesfrom outside the industry will come in and take away marketshare," said Metin Fidan, partner at Ernst & Young, pointing toemail portal web.de and petrol station operator Shell,which both have started to sell retail electricity.
Renewables now supply nearly a third of electricity consumedin Germany and account for nearly half of the country's totalinstalled generating capacity, according to most recentstatistics from the German network watchdog.
Less than 10 percent of renewable installations are owned bybig established utility companies, with the bulk held byindividuals, project firms, investors, industry and farmers. (Editing by Greg Mahlich)
