British energy company Octopus Energy is taking steps to spin out its energy management platform Kraken Technologies.
The separation, expected to occur over the next 12 months, is being valued at as much as $14 billion. According to Sky News, which first reported the planned demerger, existing Octopus investors would receive shares in Kraken, and a stake of up to 20% would be sold to new shareholders.
Kraken provides all-in-one software for utilities, helping them manage both their customers’ bills and their controllable customer loads, including electric vehicles, thermostats, and batteries.
It is by far the most valuable of the ten businesses under the Octopus umbrella, and has been at the center of Octopus Energy’s rapid growth in the last decade.
Octopus, founded in 2016, was really designed to be a test case for the Kraken platform. In a matter of years Octopus has become the U.K.’s largest domestic electricity supplier; expanded into France, Germany, Japan, the U.S., and other countries; and become one of the fastest-growing energy companies in the world.
According to Sky News, the massive $14 billion valuation implies that the group as a whole is worth more than $20 billion. More than half of that value is attributed to Kraken, a promising sign for the expansion and commercialization of DERs globally.
But in separating from Octopus, Kraken itself is now poised to grow even faster, winning over potential customers who might have stayed away because of its ownership by Octopus.
Competing in a crowded market
The upcoming demerger isn’t exactly surprising.
In an interview with Latitude Media last month, Octopus U.S. CEO Nick Chaset stressed that Octopus and Kraken are functionally very separate and becoming more independent from each other by the day. Kraken has been licensing its technology to other retail suppliers and utilities, including Octopus’ competitors, and operating in markets where Octopus has minimal access.
A final separation, in addition to allowing Kraken to target more customers, is a testament to the group’s belief that Kraken is particularly well-suited to fulfill Octopus’ global ambitions.
As Chaset noted, while Octopus’ retail offering has had success in deregulated markets like the U.K., France, Germany, and Japan, “there are really only a handful of other countries in the world where that opportunity is available… The rest of the world are vertically-integrated utilities, either investor-owned or state-owned.”
In the U.S., for example, where the vast majority of residential customers are served by vertically owned utilities, Octopus’ access is limited.
Octopus has therefore been spearheading its U.S. expansion through Kraken, partnering with utilities to improve their load management and flexibility capabilities.
Kraken’s first U.S. pilot program, in partnership with Avangrid subsidiary United Illuminating, was announced in February 2024. The program prioritized VPP flexibility for consumers, combining multiple asset types into an intelligent demand program built on parameters set by the end users themselves.
A few months later, Kraken nabbed its first North American integrated utility customer, Canada’s Saint John Energy, which started migrating its customers to the company’s energy management platform in May 2024. And just a few months ago, Kraken announced its first deal with a major U.S. utility, National Grid, which is adopting the platform in its service of its 6.5 million customers in New York and Massachusetts.
But while the company has a strong foundation heading into the planned separation from Octopus, Kraken will also face steep competition. It’s entering an energy management software landscape already dominated by established industry players like Siemens and Oracle, whose comprehensive utility software platforms underpin much of the global energy sector today.
