How Octopus Energy has swam into a winning position despite the crisis which is ruining its competitors Business

With increasing investments and struggling competitors, Octopus seems increasingly well placed to achieve its vision.

The road ahead, however, is far from risk-free. Large losses and slim margins – a loss of £ 46million in 2020 on revenue of £ 1.2bn, compared to a loss of £ 30million on revenue of 456 million pounds sterling in 2019 – is quite normal for a high-growth, well-supported challenger, but cannot last forever, as Bulb has discovered. And other license deals for Kraken aren’t guaranteed, with some potential buyers reluctant to change.

In the shorter term, Britain’s gas price crisis shows no signs of abating, and it’s unclear how customers will behave when the price cap is raised by hundreds of pounds in April. Octopus recently took 580,000 customers from its collapsed rival Avro Energy – an increase of nearly 24% from its books which now stand at 3.1 million. With opportunity, however, comes risk.

“They are good at customer service,” says Martin Young of Investec. “One of the challenges when you grow fast enough is to bring in all of these new people without disrupting your customer service. “

Jackson points out that Octopus’ focus on customer service is “relentless” and that he joins other senior executives every Monday morning to go through 200 pages of customer reports sent out the night before.

Starting an energy company was not the initial goal, but the sector was chosen for its reputation for high costs and poor service. The founders were looking for technology platform opportunities after selling their software company.

“One of the challenges in any industry is that they don’t believe [the digital revolution] will happen to them, ”he said. “We thought the only way to really harness this technology is to start an energy company, to demonstrate how technology can make a difference. “

Kraken Technologies has been licensed to rivals Octopus, EDF and E.ON, as well as Australia’s Origin Energy and others, serving 25 million customers. Octopus hopes to serve 100m by 2027. Jackson says this means businesses can cut operating costs by up to 75%, and says its cloud-based platform gives it an important role in the transition global move towards cleaner energy.

“It’s the same platform whether you’re in Australia, Tokyo, London or Munich,” he says. “What this means is that when you learn more about how to optimize a car battery charge in Houston, the same optimization is instantly available around the world. “

The technology is also helping Octopus weather the gas price crisis, giving it very accurate demand forecasts that can help it buy energy at decent prices up front and avoid some of the mistakes of purchase from its competitors.

With such strong growth, a move to government procurement is an inevitable possibility, although unlikely for now. “We have such exceptional private shareholders who are really focused on our long term goals,” Jackson said. “I think we can create more value for society, for our shareholders, for our staff and for our customers than we would if we were public.

“There’s no plan right now, but you wouldn’t rule it out at some point. “

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This notice was published: 2021-12-14 06:00:00

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