In a matter of years, the once-tiny British energy company Octopus Energy conquered the deregulated United Kingdom power market, as well as other deregulated markets like France, Germany, and Japan. Now, the energy supplier is developing an expansion strategy for regulated markets — especially those in the United States.
Founded in 2016, the company started as a retail electricity provider in the U.K. In the years since, Octopus has become the country’s largest domestic electricity supplier, and in 2024 it raised $800 million from existing shareholders. It is now one of the fastest-growing energy companies in the world.
But to continue that pace, Octopus Energy U.S. CEO Nick Chaset said Octopus will need to operate in a new frontier: in partnership with vertically-owned utilities that effectively have a monopoly to serve their customers.
“The U.S. is quite different than the markets where Octopus and Kraken had great success in the rest of the world, because most U.S. states are not open for retail competition,” he said.
But Octopus is making progress, starting in Texas, which is one of the country’s most dynamic deregulated markets. In 2020, the company acquired Evolve Energy, which became Octopus Energy U.S. Then in 2023, the company partnered with Enphase Energy, also in Texas; the two used Octopus subsidiary Kraken’s platform to create a virtual power plant using home battery systems, and then bid the capacity into the ERCOT ancillary market.
And just last month Kraken — an Octopus Energy subsidiary that provides all-in-one software for utilities — also announced its first deal with a major U.S. utility. National Grid will adopt the platform in its service of its 6.5 million customers in New York and Massachusetts. This follows the company’s partnership with Saint John Energy in Canada, announced last year.
‘Flexibility-as-a-service’
As one of 10 businesses under the Octopus Energy Group umbrella, Kraken is key to the company’s expansion.
However, the two companies, according to Chaset, are functionally very separate, and are becoming more independent from each other by the day. Kraken is now licensing its technology to other retail suppliers and utilities, including Octopus’ competitors, and in markets where Octopus has minimal access.
“In states where Octopus has no route to market, we’re not a competitor,” said Chaset. “We’re not a competitor of Georgia Power. There is no world where we will be providing consumers in Georgia direct consumer electricity.”
But what Octopus can offer is the experience of a competitive energy retailer, and a successful consumer company. The pitch to regulated utilities is for “flexibility-as-a-service,” and Kraken is an important part of that pitch. Essentially, Octopus wants to partner with utilities to help them better manage their controllable customer loads, like electric vehicles, thermostats, and batteries, and demonstrate how the Kraken platform can meet that need.
In a regulated market, the plan is “to design and build flexibility portfolios for utilities using Kraken,” Chaset said. And then once a utility has more sophisticated flexibility capabilities, Octopus is “very happy” to say goodbye and “transfer them to operate in the Kraken environment.”
It’s an approach that Octopus’ energy generation arm is very familiar with. In the world of building power plants, the model of “design, build, transfer” is common: a developer is generally completely separate from a facility’s owner-operator. “It’s very like a solar farm or a wind farm or battery project,” Chaset said.
But in the utility DER space, the incentives are different. Utilities are slow-moving and risk-averse by design, so Octopus has an uphill climb ahead of it.
There are tailwinds, too. This all comes as a moment when utilities are facing new challenges like load growth and customer electrification, and many are weighing rate increases as a result. In a moment of economic uncertainty in the U.S., utilities can see customer backlash. And in Chaset’s words, some are “wanting to transform.”
Going (even more) global
The model won’t fit for all utilities. According to Chaset, the ideal regulated customers for Octopus are utilities with “meaningful penetrations of things that can be managed…like air conditioning, heat pumps, electric vehicles, lots of batteries.”
That includes utilities operating in California, the Northeast, and the Pacific Northwest, as well as places experiencing enormous load growth like Georgia.
But if the approach works, it could open up even more markets for Octopus, Chaset said: “What we prove here is going to be very applicable in most of the world where you don’t have liberalized electricity markets.”
In addition to the U.K., Octopus has had success in markets like France, Germany, and Japan. However, Chaset said, “there are really only a handful of other countries in the world where that opportunity is available,” as well as in certain U.S. regional markets like ERCOT. “The rest of the world are vertically-integrated utilities, either investor-owned or state-owned.”
That means that if Octopus wants to keep growing, it will have to shift. And the U.S. patchwork of electricity markets is the perfect testbed.
“The U.S. is sort of the place where we have the opportunity to operate a retail business, which is our bread and butter, but also expand to work with vertically-integrated utilities as well,” Chaset said. “Hopefully [we will] learn a bunch of lessons that will help us both do that really well in the U.S., but also do that everywhere else in the world.”
