A U.K. startup is seeking to transform the utility sector, similar to what neobanks have achieved in banking over the last decade. Tem, based in London, has developed a marketplace platform that links businesses directly to renewable energy sources, working alongside an existing Ofgem-regulated utility partner rather than securing its own supply license. The goal is to help businesses move away from reliance on major energy firms and their high prices while facilitating the pursuit of climate objectives.
Tem’s co-founder and CEO, Joe McDonald, expressed their ambition to be recognized as the U.K.’s pioneering ‘neo-utility’ in an email to TechCrunch. Founded in 2021, Tem recently announced raising £10.5 million ($13.7 million) in a Series A funding round led by European venture capital firm Atomico, which earlier this week closed two funds totaling $1.24 billion. This investment is timely as countries across Europe aim to lessen their carbon footprints and strive for climate neutrality by 2050, with the U.K. specifically targeting at least a 100% reduction in greenhouse gas emissions from 1990 levels within the next 25 years.
The surge in oil and gas prices has underscored the urgent need to find alternatives to fossil fuels. Besides McDonald, the founding team encompasses chief technology officer Bartlomiej Szostek, chief commercial officer Jason Stocks, and Ross McKay, who previously collaborated at Limejump, a startup that leveraged big data to transform the U.K. energy market. It was during their time there that the concept for Tem was conceived.
McDonald, who brings over 12 years of experience in the energy sector, noted that despite the evolving market, the same players have largely dominated. He highlighted the challenges smaller businesses face when purchasing from large energy companies, which often results in exorbitant fees, unpredictable pricing, and a lack of genuine renewable energy options. “The scarcity of affordable clean energy is among the significant obstacles confronting both businesses and the planet. We aim to ensure all companies can access the renewable energy they require indefinitely.”
Renewed energy is powered through Tem’s innovative platform, which utilizes an “AI matching algorithm” to align businesses’ energy needs with appropriate renewable generators, predicting energy supply and demand within the startup’s network. Tem provides a complete pricing and billing system along with customer support and an interface that enables users to outline their renewable energy preferences, specify contract durations, and access data related to power consumption and the source of their energy.
Currently, the platform serves around 200 clients, including Silverstone, the venue for the British Grand Prix. Tem connects a network comprising over 50 renewable generators, which can include solar and wind farms, alongside anaerobic digestion facilities, such as those offered by U.K. biogas generator, Biodynamic.
While businesses can indeed transact with various renewable energy providers, this usually entails complex long-term power purchase agreements (PPAs) and intricate, costly management that typically suits only large corporations.
According to McDonald, “In such a convoluted system, these agreements can stretch over hundreds of pages, taking months to negotiate and costing thousands of pounds. Moreover, since customers must commit to purchase the entire output of a generator, it is feasible only for substantial businesses with considerable energy needs. This model benefits megacorporations like Google or Amazon — but what about the remaining 99% of companies?”
Tem operates on a “variable” percentage for each transaction but has chosen not to disclose how this percentage is determined. McDonald mentioned, however, that energy pricing is generally at least 10% lower than wholesale market rates, sometimes reaching a reduction of 25%. While Tem could pursue its own supply license and function as an independent supplier, McDonald maintains that collaborating with a third-party license holder like P3P Partners allows the startup to concentrate on its core mission.
He pointed out, “We could seek a license, but our priority lies in enhancing technology and transforming the buying and selling experience, distinct from becoming a licensed utility. To achieve maximum impact with our model, we must remain above the integration of individual markets.”
In the current landscape, numerous newer companies are emerging to tackle similar issues. For instance, Germany’s Trawa has recently closed a €10 million funding round, while the U.K. has seen firms like Octopus Energy, backed by Al Gore, which acquired its struggling rival Bulb in 2022, a move prompted primarily by escalating wholesale prices.
McDonald stated that this distinction is one of the many ways Tem sets itself apart from competitors. While Bulb claimed to source energy from renewable or offset sources, it predominantly did so through traditional utility avenues.
He elaborated, “The energy crisis of recent years has resulted in the downfall of several firms, leading to trust issues regarding new startups in the energy arena. Many new suppliers fail due to operating under a conventional utility model within a volatile wholesale market that incurs significant transaction expenses. Our approach, conversely, mitigates these risks with our well-balanced, direct business-to-generator matching engine.”
In addition to Atomico, Tem’s Series A funding round received investments from AlbionVC, Revent, as well as angel investors such as Holly and Sam Branson, and Wise executives Harsh Sinha and Nilan Peiris. Since its inception, Tem has garnered £13 million ($17 million).
Operating solely within the U.K. for now, the company has ambitions for international expansion in the future, with the new funding likely aiding this endeavor. McDonald indicated, “We will probably concentrate on Europe initially, particularly in markets with ambitious renewable objectives like Germany and the Nordics, followed by a potential expansion to the U.S.”
