The headquarters of the energy company Octopus, located in London, England, which was found earlier this month. Established in 2016, Octopus has risen to the top of the UK energy market in less than a decade since its launch. A powerful asset for Octopus is its subsidiary Kraken Technologies, which shares the same building. The office of Kraken had various screens displaying graphs and numbers, resembling more of an information technology company than an energy provider.
In the UK, notorious for its high energy costs, households can choose electricity providers with lower rates. In the past, the UK energy market was dominated by the 'Big Six,' including British Gas, EDF Energy, E.ON, OVO Energy, Scottish Power, and SSE, establishing a solid oligopoly. However, Octopus Energy has rapidly increased its market share, growing to become the number one energy company (as of April, with a 22% market share of the UK household electricity market) within eight years.
Generating electricity requires substantial investment, so initially, Octopus only played the role of a wholesale electricity supplier, purchasing electricity from external generation companies and selling it in the retail market. Now, it operates its own wind and solar power plants, with its corporate value estimated at $9 billion (approximately 13 trillion won).
◇ 15% level of distribution network usage rate, significantly increased by AI
The secret to Octopus's rapid growth lies in its artificial intelligence (AI)-based energy platform subsidiary, "Kraken Technologies." Kraken was created by Greg Jackson, founder and CEO of Octopus, and James Eddison, chief technology officer (CTO), as an internal technology platform. It analyzes data using AI to predict energy consumption and optimize supply.
In the past, large coal, gas, and nuclear power plants built on the outskirts of cities under government leadership were the sole means of transmitting electricity to millions of households and enterprises. Now, small-scale solar and wind facilities have emerged, shifting energy supply from 'centralized' to 'decentralized.' Energy now flows bidirectionally, making stable management of the power grid increasingly important.
According to internal statistics from Octopus, typical usage rates of distribution networks set up by conventional power companies are only 15%. The remaining 85% serves as a safety cushion, reserved for times when electricity demand rises. As demand for electricity increases, such as from electric vehicles and data centers, this safety cushion's capacity must also grow. Increasing the power grid raises costs, inevitably leading to higher electricity bills. Instead of expanding the distribution network, Kraken has reduced expenses by optimizing electricity demand and supply using AI.
Devrim Celal, chief marketing officer (CMO), noted, "With the current system producing more power from solar and wind, energy supply and demand management has become much more complex. As generation sources are decentralized and it is difficult to predict power flows, there is a growing need for sophisticated software to manage this." He added, "Rather than physically expanding the electricity network, we should shift our approach to increase normal network capacity by 30% to 50%. AI software plays a significant role here."
Thanks to Kraken's ability to reduce expenses for Octopus, the company has secured over 9 million customers in just eight years by leveraging affordable electricity prices. Kraken currently supervises over 300,000 distributed energy resources (DER) and more than 50 gigawatts (GW) of power. One GW usually represents the power generation capacity of one nuclear reactor. CEO Jackson stated, "Kraken is at the core of everything we do," adding, "We determined that the role of software is essential in the utility industry, which provides necessary services like electricity and water."
◇ Lower electricity rates through AI… managing competitors' power flows as well
Kraken AI predicts power supply and demand, encouraging power usage when rates are low. It considers conventional demand factors, such as peak electricity hours and weather, as well as supply factors like increased power generation from wind and solar due to high winds or sunlight. Kraken operates a program that allows customers to resell surplus electricity stored in solar panels or batteries. CMO Celal said, "Through Kraken technology, consumers can access the cheapest and most eco-friendly electricity while also playing the role of producer."
According to statistics released by the UK energy regulator, Ofgem, in October, Octopus has the lowest electricity rates in the industry. The average annual bill for households receiving electricity from Octopus is £1,553 (approximately 2.85 million won), which is the lowest among major energy suppliers in the UK. Competitors like British Gas and EDF Energy charge annual energy fees ranging from £1,563 to £1,568.
Kraken also serves as a client for EDF Energy, E.ON Next, Origin, and Tokyo Gas, all of which are in competition with Octopus. The energy retail brand Nectr of Hanwha Energy's Australian subsidiary is also a customer of Kraken. Kraken is expanding its market not only in the energy sector but also into the water and telecommunications sectors. The number of accounts managed by Kraken has reached 60 million.
Kraken has opened an energy technology hub (EnTech superhub) in Manchester. In November, Dr. Andy Molineux, Kraken's director of engineering and integration, stated at the technology hub meeting, "Kraken collaborates with various manufacturers to more effectively build systems that supply green energy at low prices. We are testing with electric vehicles from Tesla and Ford, as well as Mitsubishi heat pumps, which are used to transfer heat from one location to another."
Octopus asserts that establishing an efficient energy market requires leveraging software platforms and close communication between the government and related corporations. In this regard, CMO Celal mentioned that while the government successfully supplied a large number of solar panels, local government regulations have prevented the efficient use of electricity generated from solar energy in Australia.
He stated, "The biggest challenge is to stop thinking in small silos," adding, "To consider holistic system solutions, regulatory authorities in various countries must make decisions together with technology companies, utilities, and transaction firms."