Release the Kraken! Origin strikes $500m deal to smarten customer systems in digital, distributed world | RenewEconomy

Release the Kraken! Origin strikes $500m deal to smarten customer systems in digital, distributed world

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Origin acquires $500m stake in UK-based Octopus Energy, and will deploy its ‘Kraken’ platform to streamline interactions with customers as they adopt solar, storage and EVs.

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Origin Energy has struck a $500 million deal with UK company Octopus Energy to revolutionise the retailer’s customer experience in an effort to cut costs and retain customers as they shift to a digital and distributed future.

Origin will deploy the innovative ‘Kraken’ platform developed by Octopus, which will work to streamline and automate many interactions between Origin and its electricity customers, and lay the foundation for the multiple and varied engagements that will come with the increased adoption of rooftop solar, battery storage and electric vehicle charging.

As part of the partnership, Origin will also take a 20 per cent ownership stake in Octopus, in a deal worth $507 million.

Origin expects the deal will pay for itself relatively quickly, saying the shift to the Kraken platform will deliver immediate savings of $70-$80 million in 2022, growing to as much as $150 million annually within the next five years.

Customer platforms have proven challenging for several Australian utilities, but Origin believes the Kraken platform provides a highly automated, but high-quality, platform, which manages the end-to-end experience for customers, including connections, billing and allows Origin to develop real-time analytics of customer needs.

The new platform will allow Origin to slash licencing costs for other technologies, as well as reducing the costs incurred in delivering services to customers.

Octopus Energy has already established itself as a successful retailer within the UK, growing to more than 1.5 million customers since its formation in 2016, and Origin saw an opportunity to apply Octopus’ experience in the Australian market by licencing the Kraken platform.

“I have to say they have shaken up the UK energy market in just four years,” Origin CEO Frank Calabria said in a media briefing. “They’ve been growing and at about 50,000 customers a month. Nearly all of that growth has been organic. And they’ve done that through offering the best cost customer service in the market and the lowest cost to serve.”

Origin will look to replicate some of the offerings Octopus has developed using the Kraken platform.

This may include an “agile” tariff, which adjusts the price of electricity paid by consumers on a half-hour basis, in response to changes in wholesale electricity prices, along with a tariff that incentivises low-cost electric vehicle charging at optimum times.

Calabria expects that the company will be able to use the Kraken platform to provide new offerings to consumers to support the deployment of distributed energy systems like rooftop solar and storage.

“As we go into a future world, we’ll be actually having a far more connected world, there’ll be more devices connected, there will be more storage units, there’ll be more rooftop solar,” Calabria said in response to a question from RenewEconomy.

“Your ability to be able to take propositions to customers that are responsive to that environment needs to be very, very simple and easy. [The Kraken platform] does enable that. And they’re able to actually really integrate those new propositions very, very quickly, because they have all of the information flowing through the one platform.”

“It will just make it so much quicker and easier for us to actually seamlessly integrate products and services that are enabled by those technologies.”

Origin Energy will start transferring its 3.8 million electricity and gas customers onto the new platform and will hope to grow this number, with Octopus Energy showing strong growth in earlier rollouts of the technology for retailers in the UK.

On Thursday, Origin announced that its electricity sales to residential customers had been slashed by 11 per cent in the first three months of 2020, due in part to a reduction in Origin’s customer numbers.

In its half-year report released in February, Origin said that it had a net loss of 19,000 electricity customers in the second half of 2019, citing increased market competition.

The decline in sales was also partially driven by the increased use of rooftop solar, including as a result of increased working-from-home arrangements which has seen households using more of their solar during the day, rather than seeking it exported to the grid.

Origin hopes the new platform will help strengthen its offering, helping to attract and retain customers.

“While we have made good progress towards improving our customer’s experience and the efficiencies within our retail business, this partnership with Octopus will help us transform energy retailing by automating our end-to-end processes and embedding an operating model design around, and for, the customer experience. This will make every transaction simpler for our customers,” Calabria added.

Origin’s partnership is part of a wider shift within a dynamic Australian energy market, with many of the largest energy companies are looking for ways to modernise and diversify their product offerings to maintain customers.

Last year, fellow Big-Three energy company AGL made its first moves into the telecommunications space, purchasing regional internet provider Southern Phone Company, as a way to offer data and phone services alongside its energy products.

The Australian Energy Market Commission has launched a consultation into possible new market reforms, to enable the greater participation of consumers in the electricity market, saying that it wants energy companies to think like eBay and Airbnb in modernising their energy platforms.

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