A model wind turbine seen during the WIRED Energy Tech Summit at Kraftwerk on Oct. 10, in Berlin.Axel Schmidt/Getty Images
The beating heart of one of Canada Pension Plan Investment Board’s most ambitious green energy investments is not a sea of wind turbines or a field of solar panels, but a single piece of software pulsing with tens of billions of pieces of data every day. It’s called Kraken.
Like the mythical sea monster, Kraken sits below the surface of Octopus Energy Group, the British-based energy provider that has surged to the lead in Britain’s energy market less than a decade after it was founded. Since 2021, Canada’s largest pension fund manager has invested US$1-billion in Octopus, betting that Kraken’s technology could reshape the way many consumers use electricity.
The Kraken system runs all aspects of Octopus’s business, which provides power to 7.2 million households, handling everything from customer service to forecasting energy demand and use across its network of renewable and nuclear energy. It stands out in an industry dominated by large electrical utilities that have often run on dated systems with opaque billing rules. And that has attracted interest from investors such as CPPIB and U.S.-based pension fund California Public Employees’ Retirement System (CalPERS), as well as from Octopus’s competitors.
CPPIB has a $33-billion portfolio of energy investments, roughly half of which is focused on renewable sources. The transition to cleaner energy could be a massive investment opportunity, expected to require trillions of dollars in capital. But it is also increasingly fraught. Populist politicians have pushed back on clean energy requirements and questioned green investing mandates. At the same time, high inflation and interest rates have driven up construction costs and disrupted supply chains, making it harder to affordably develop new clean technologies.
As CPPIB screened companies around the world for investment opportunities, the first reason Octopus stood out was that “their customer satisfaction numbers are off the charts,” Bill Rogers, CPPIB’s head of sustainable energies, said in an interview. His team is convinced that “to make the energy transition work, you need to change behaviours and engage billions of consumers around the world.”
Octopus CEO Greg Jackson credits Kraken for the company’s performance on customer service, and for lowering operating costs and making its energy supply more reliable. The company also operates in France, Italy, Germany, Spain and Japan, and has smaller businesses in Texas and New Zealand.
What really struck Mr. Rogers and CPPIB was that Octopus had started licensing its Kraken software to other energy utilities. The first North American utility to purchase a license to Kraken’s platform was Saint John Energy, the municipal energy utility serving more than 36,000 homes and businesses in Saint John.
But most of Octopus’s licensing revenue comes from the competitive British market, where companies “reluctantly decided” to pay Octopus – in many cases, a direct competitor – to use Kraken to run their own systems, Mr. Rogers said. “In terms of proof points that the platform was that strong,” he added, “that was quite reassuring.”
Whether Octopus is answering a call from a customer, creating an optimized charging schedule for an electric car or forecasting how much energy will be generated minute by minute from the company’s network, Kraken is the nerve centre, absorbing troves of data and using it to optimize the company’s services.
It was built to supplant a tangle of interlocking software that energy providers assembled over years and decades. Clients that license Kraken replaced between 15 and 200 different software systems, Mr. Jackson said.
The licensing business now serves 66 million customers, bringing in about US$500-million in annual revenue, out of Octopus’s total revenue of £13-billion ($23-billion) last year.
“If Kraken were a standalone business it would be one of the largest U.K. software businesses,” Mr. Jackson said in an interview. “It replaces the sludge in the middle of most companies with an elegant, agile, 21st-century, cloud-based software system.”
That, in turn, has become a useful tool to nudge customers to change the way they use energy. With the British energy grid under strain and the cost of electricity rising, Octopus started notifying customers with smart meters about windows of time – called “savings sessions” – when the utility would pay them small rebates for using less power during times of peak demand.
When those messages go out to a WhatsApp group with 400,000 members, “the load on our servers as they respond to that, it’s like Ticketmaster when Taylor Swift goes on sale, because there is such incredible interest, desire to make a saving,” Mr. Jackson said. “Often, they’ll be saving 50 cents or $1, but they’ve got agency.”
At other times, when sunny or windy weather is producing a surplus of renewable power that either needs to be used up locally or turned off, Octopus will alert customers that electricity is free for a period of time. On average, customers use four times more energy than normal in those periods, Mr. Jackson said.
That back-and-forth with customers is becoming more important as rising costs have left many feeling that their living standard is slipping, which has contributed to a backlash in some quarters against green energy regulations. “This is not just prices, it’s also perceptions,” Mr. Jackson said. Even small signals “can shift behaviour, making people feel in control – which they’ve never felt before – and making the system more efficient for everyone.”
With U.S. president-elect Donald Trump promising to “unleash” U.S. oil and gas production, the political climate for global energy providers is also shifting. But Mr. Jackson said there is insatiable demand for energy, including renewable power, especially as technology behemoths build out artificial intelligence. He points out that Texas – “the oil and gas HQ of the U.S.” – gets proportionally more of its electricity from renewables than any other state.
New tariffs or changes to energy subsidies “may lead to short-term dislocations” in energy markets, Mr. Rogers said. But when the cost of delivering new renewable power rose in recent years, corporate customers in Canada, the United States and around the world “were willing to pay more because they wanted to buy that power.”
The coming years are “going to be interesting, no doubt about it,” Mr. Rogers said. “But we think the long-term trends will remain.”