UK electricity upstart hires former Powershop boss for New Zealand launch

  • Jan 18, 2021
  • EIN

A fast-growing UK electricity retailer which promotes the supply of clean energy to more than one million customers has hired a veteran innovator of the industry to launch in New Zealand.

Sargent told the Herald that the parent company had approved a business plan to launch in New Zealand and had indicated it was "definitely interested" in acquisitions to assist its growth.

While New Zealand has more than 30 companies offering electricity, an industry group figure acknowledged that the arrival of Octopus could represent a change in the market.

Founded in 2015 by Octopus Group, the retailer has more than 1.5 million customers in the UK and a strategy to expand internationally.

In 2020 the company signed agreements in Australia (Origin Energy), the US (Evolve Energy) and Japan (Tokyo Gas) which will see its technology or brands introduced in those markets.

Its chief executive told the Guardian he believes the company could one day supply power to 100 million homes.

Sargent quit Powershop after its owner Meridian Energy focused on adopting the technology of its energy retailing software business, Flux Federation, a move he said gave up on its ambitions for international growth.

A period of time working as an electricity consultant led him to come into contact with Octopus, discovering "uncanny" similarities between what the UK company was doing and what Powershop began a decade ago.

"We mutually said there's so much similarity, and our view of the world from a customer and technology perspective and opportunities that it seems like a match made in heaven."

Octopus now has seven staff in Wellington, all of whom previously worked at Powershop. Several are focused on helping the project to migrate Origin's customers onto its Kraken technology platform, the rest preparing to launch a New Zealand retail offering.

"That number will scale up quite quickly," Sargent said.

A friends-and-family trial would precede a full launch expected to take place around the middle of this year.

Octopus had indicated that as well as organic growth they were interested in "any acquisition opportunities that might come along," Sargent said.

As well as building a team and clearing regulatory hurdles, Sargent said it would take time to adapt Octopus' technology for the New Zealand market.

"It won't be Powershop or Flick version two, it will be its own thing, but it will be a digital offer so that customers will interact, probably through mobile."

Octopus has won plaudits in the UK both for its customer service, but also for selling its customers only electricity from renewable sources.

This could present complexities in New Zealand, which has a high proportion of renewable generation but does not have a framework which allows retailers to differentiate retail products based on generation.

In October, Meridian Energy, New Zealand's largest electricity retailer, was ordered to take an advertisement off the air by the Advertising Standards Authority.

Rival Electric Kiwi complained that claims that Meridian's claim that "doing your bit for the environment just got easier" could not be substantiated, because no retailer could prove that its energy was any cleaner than another's.

Sargent said countries including the UK and Australia allowed electricity retailers to use a kind of "accounting equivalency", in which they notionally bought the production of a particular renewable generation plant and offer it to customers, even though the physical electricity could not be differentiated from that from non-renewable generation.

Octopus was confident it could find a proposition which enabled it to operate within New Zealand's framework.

"We're confident there is a way, but we just don't quite know what that looks like, yet."

Cameron Burrows, chief executive of Electricity Retailers Association of New Zealand (ERANZ), said while there were more than 30 companies retailing electricity in New Zealand already, many had only a few thousand customers, meaning the entry of a player like Octopus could have an impact.

"If you've got a brand that's going to come and jump to 10,000 or 20,000 or 100,000, although it's only one of 30-something, it's a change in the market," Burrows said.

ERANZ claims that, accounting for inflation, electricity bills had dropped $180 in the past five years, with Burrows adamant the market is already highly competitive.

"More competition is always good, and that's not just prices. These guys are coming in and they might have new technology which makes doing things easier, they might have a service that people love and we think it's great that people have different options."