The headquarters of the electricity company Octopus, located in London, England, found earlier this month. Founded in 2016, Octopus has risen to the top of the UK electricity market in less than a decade since its launch. Octopus's powerful asset is its subsidiary, Kraken Technologies, which shares the same building. The office of Kraken looks more like an information and communication (IT) company than an electricity provider, with various graphs and figures displayed on screens throughout.
In a country notorious for high energy costs like the UK, each household can choose a power provider with lower electricity rates. In the past, the UK electricity market was dominated by the 'Big Six' — British Gas, EDF Energy, E.ON, OVO Energy, Scottish Power, and SSE — creating a strong oligopoly; however, Octopus Energy has rapidly increased its market share, becoming the number one electricity supplier with a 22% share of the UK residential electricity market as of April.
Because producing electricity requires substantial investment, Octopus initially operated as a power wholesaler, purchasing electricity from external producers to sell in the retail market. Now, it directly operates wind and solar power plants and is valued at $9 billion (approximately 13 trillion won).
◇ Distribution network usage rate at 15%, set to expand significantly with AI
The secret to Octopus's rapid growth is its artificial intelligence (AI)-based energy platform subsidiary, 'Kraken Technologies.' Kraken was created by Greg Jackson, the founder and CEO of Octopus, and James Eddison, its Chief Technology Officer (CTO), as an in-house technology platform. It analyzes data using AI to predict energy consumption and optimize supply.
In the past, enormous coal, gas, and nuclear power plants built on the outskirts of cities, led by the government, transmitted electricity to millions of households and businesses. Now, the emergence of small-scale solar and wind power facilities has transformed energy supply from 'centralized' to 'decentralized.' Energy now flows bi-directionally, making stable management of the power grid crucial.
According to internal statistics from Octopus, the typical usage rate of the distribution networks constructed by regular electricity companies is only 15%. The remaining 85% acts as a sort of safety net, kept generously for times when electricity demand spikes. As demand for electricity rises from sources like electric vehicles and data centers, this safety net's capacity must also increase. Expanding the power grid will inevitably raise costs and electricity rates. Kraken has reduced expenses by optimizing electricity demand and supply instead of increasing the distribution network.
Devrim Celal, the Chief Marketing Officer (CMO), noted, "In the current system, which produces more electricity from the sun and wind, managing energy supply and demand has become much more complex. The decentralized generation sources and unpredictable power flow have increased the need for sophisticated software to manage it." He added, "Rather than physically expanding the power network, we should focus on increasing its capacity during peak times upwards to 30-50%. AI software plays a crucial role here."
Thanks to Kraken's ability to reduce Octopus's expenses, the company has been able to secure over 9 million customers in just eight years since its establishment, by offering low electricity rates. Kraken currently supervises more than 300,000 distributed energy resources (DERs) and manages over 50 gigawatts (GW) of electricity. One gigawatt typically corresponds to the generating capacity of one nuclear power plant. CEO Jackson stated, "Kraken is at the heart of everything we do," and added, "We believe that the role of software is crucial in the utility industry (Utility - industries that provide essential services like electricity and water)."
◇ Lowering electricity rates with AI… Managing competitors' power flow as well
Kraken AI predicts power supply and demand, guiding users to consume electricity when prices are low. This consideration includes not only typical demand factors, such as high-demand time slots during the day and weather conditions, but also supply factors when wind and solar generation increases due to strong winds or sunny days. Kraken runs a program that allows consumers to resell leftover power generated from solar panels or battery storage systems installed in their homes. Celal, the CMO, said, "With Kraken technology, consumers can access the cheapest and most eco-friendly electricity while also taking on the role of producers."
According to statistics released by the UK energy regulator (Ofgem) last October, Octopus's electricity rates are the lowest in the industry. The average annual rate paid by households receiving electricity from Octopus is £1,553 (approximately 2.85 million won), the lowest among the UK's large energy suppliers. In comparison, annual energy rates for competitors like British Gas and EDF Energy ranged from £1,563 to £1,568.
Kraken also provides services to competitors in the electricity market, such as EDF Energy, E.ON Next, Origin, and Tokyo Gas. The brand Nectr, operated by Hanwha Energy's Australian subsidiary, also uses Kraken services. Kraken is expanding its market presence not only in the energy sector but also in water and telecommunications. 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, the director of engineering and integration at Kraken, stated at the technology hub, "Kraken collaborates with various manufacturers to build a more sophisticated system for supplying environmentally-friendly generated electricity at low prices. We are currently testing Tesla and Ford electric vehicles and Mitsubishi heat pumps, which are machines used to transfer heat from one place to another."
Octopus argues that building an efficient energy market requires the use of software platforms and close communication between the government and related corporations. In this regard, Celal, the CMO, mentioned that while the Australian government had promoted a large-scale supply of solar panels, local government regulations hindered the effective utilization of solar-generated electricity.
He stated, "The biggest challenge is to stop thinking in small silos and to consider the overall system solution. Regulatory authorities must make decisions together with technology companies, utilities, and trading firms to achieve this."