Why we closed our UK supply business
At the end of last year we made the hard decision to shut down our UK supply business. Our goal has always been, and remains, to create a fairer, greener electricity system for the benefit of customers. Due to several factors, which I’ll detail below, our focus now has to be on improving and implementing the technology at the heart of Tempus Energy - the clearest path to delivering our goal. We are excited about the new opportunities this lends us; to extend our reach worldwide and implement change on a global scale.
Before launching our supply business in 2015 Tempus had spent three years developing technology and approaching existing suppliers with this technology, to change their business and encourage customers to become flexible with their energy consumption. We knew this model made sense for customers and decarbonisation, but it didn’t make economical sense for suppliers with their current business model. Met with the unwillingness to change we knew we needed to become an electricity supply company to prove our vision.
The approach that most energy companies currently take is to build up a customer base to cover the amount of generation they own so that customers effectively create an asset for the energy company and the energy company takes very little market risk. Around the world as energy markets liberalised, electricity customers have become a means to create assets for energy companies and infrastructure investors. This doesn’t always ensure that the energy system puts the customer interest at the heart of the system.
Running a UK electricity supply business had many challenges, but with a great team and the energy to affect change we were able to demonstrate that it was possible to move our customers energy usage in response to supply on the grid and mitigate the use of polluting power stations. It hasn’t always been an easy journey, it’s certainly one that no one has travelled before; but we are proud of the risks we took and the information we learned that now allows us to move forward with a new approach.
At Tempus we understand that the energy system is only there because of customers, and we believe that the focus of the companies participating in energy systems should be to serve those customers. Customer flexibility is an economical solution to make our energy systems cleaner and ensures that getting on with enjoying our lives doesn’t destroy the world we depend on. We can also do this as cheaply as possible but we can’t do it if we keep following the approach that we have so far. We can do it if we work together to create a flexible electricity system.
When the UK voted for Brexit it created a great deal of uncertainty. Our plan was to raise money again as the collateral costs of running a supply business are very high. Electricity suppliers have to hold deposits with all network companies, as well as Elexon and whoever supplies them with wholesale energy. We judged that the regulatory risk we had already been experiencing the UK would be greatly increased by Brexit and it would be hard to close another funding round successfully. This was borne out by the changes that have happened to network tariffs since Brexit as well as the general worsening of the investment climate due to uncertainty.
Having closed our UK supply business, we are now focused on countries with transparent and open wholesale markets where the economic principals of supply and demand ensure that the full value from flexibility is accessible by customers. We have set up a business in South Australia helping customers to reduce their energy cost while enabling more renewable generation in the grid mix. We are also developing a partnership with an Australian electricity supplier (or retailer as they are called in Australia) and will soon be making an exciting announcement.