Octopus intel to power Origin customer experience

Share

Enhanced customer experience, cost savings and a tentacle into UK and European renewable energy markets — Origin Energy’s $500 million-odd strategic partnership with UK-based renewable-energy retailer and tech business Octopus Energy, is designed to deliver on a number of fronts.

Announced on 1 May, the alliance will see Origin Energy migrate its 3.8 million retail electricity and gas customers to a tailored version of Octopus’s Kraken customer management platform over a period of 24-30 months.

Heralding a “radical improvement” in customer service, Origin CEO Frank Calabria said in the company’s announcement that, “Kraken allows a more agile integration of products and services, putting Origin in the box seat to deliver new technology to enable smarter and more sustainable energy for customers ahead of the market.”

The shift to Kraken’s automated, streamlined self-service platform, already in use at Australia’s Hanwha-backed retail start-up Nectr, is expected to result in pre-tax savings to Origin of between $70 million to $80 million dollars in the financial year to 2022, increasing to between $100 million and $150 million annually from 2024.

Octopus well-armed with solar

In addition to licensing the Kraken platform, Origin, which has diversified interests in gas, coal and renewable  generation, rooftop solar installation and the retail electricity market will acquire a 20% stake in Octopus Energy, and a director’s seat on the company’s board.

Octopus delivers 100% renewable electricity to its customers, and offers carbon offsets for gas purchased through its platform. 

The company is backed by Octopus Investments, which is responsible for nearly 40% of the UK’s large-scale solar generation, and which also has an arm in the Australian renewables scene — Octopus Investments opened shop in Melbourne last year and has so far committed $450 million to the 333 MW Darlington Point solar development in New South Wales.

Origin’s green side 

Origin’s renewables portfolio includes agreements to buy more than 680 MW of solar energy since 2016 from generators such Moree, Clare and Darling Downs solar farms, and includes power purchase agreements with wind farms that have a combined generation capacity of around 700 MW.

As a rooftop solar installer, Origin has supplied some 80,000 homes with the ability to generate their own renewable energy.

“We are very aligned around our purpose and values and also our customer strategies,” says Calabria in the video released to announce Origin Energy’s new partnership.

Octopus CEO, Greg Jackson, said Octopus Energy had been “courted” by platform partners and investors around the world, but says of Origin: “They have the most forward-thinking management of any market-leading energy company we’ve met and we admire their commitment to accelerate renewable energy adoption and deliver better service to Australian customers.”

UK CEO is “over the moon”

For Octopus Energy the deal provides “Stage 2 of our rocket ship”, said Jackson, likening his company to a multi-stage rocket on a mission to “make the green energy transition cleaner and cheaper”.

Since its inception in 2016, Octopus has attracted a customer base of around 1.5 million customers, or 5% of the UK market, and is growing at 40,000 to 50,000 customers a month.

Jackson writes in his “announcement” blog to Octopus customers,”We are aiming for 100 million customers worldwide on our platform”, and expected that the Origin investment would help drive that growth.

The Australian energy company will make an upfront payment of $134 million to Octopus, followed by $373 million in equity instalments and progress payments related to the adoption of the Kraken technology, over four financial years.

Jackson writes, “This will help power our growth into new markets, build more tech to make energy greener and increase our investment in service and growth in our existing markets, (the UK and Germany).”

Octopus also intends to invest millions of pounds into a Future Energy Research Centre, which Jackson says will bring together “climate experts, data scientists, economists and policy specialists to devise plans and models to make net zero faster and more affordable.”

Fossil-fuel interests a waning fact of energy life

He justified partnering with a business that has “serious fossil-fuel operations” — referring to Origin’s gas exploration and LNG processing interests, gas-fired power plants, and its 2,880 MW coal-fired Eraring power station in NSW — saying that almost every potential investor with which Octopus had engaged had some interest in fossil fuels.

Origin, he said, was “refreshingly upfront that they needed to become greener”.

For his part, Calabria said in his announcement, that the opportunity is to deliver “transformative change through a partnership with a company that is leading in customer satisfaction and experience in products and services that sit at Origin’s core”.

This afternoon Goldman Sachs analyst Baden Moore told The Australian Financial Review that although the 20% stake in Octopus is modest relative to Origin’s existing customer base, the move into the UK market looks well timed and also offers opportunities for indirect expansion into Europe.

Octopus Energy reports 40% lower costs than its next-best peer in UK energy supply; and Calabria anticipates that adopting the Octopus platform and operating model will enable a step-change in Origin’s cost to serve.

At the same time, he said, customers will benefit from “a vastly simpler experience, with the technology capable of integrating multiple services into a single bill, delivering agile tariffs and easy integration of smart meters, solar, storage and electric vehicles, accelerating demand-side management capability”.