Atomico supports Tem to help businesses buy renewable energy directly from renewable sources

The British startup wants to do for utilities what neobanks have been doing for the financial sector for more than a decade: revolutionize the industry by using technology to streamline it and cut out the middleman.

London-based Tem has built a marketplace and platform to connect businesses directly to renewable energy sources, and works with an existing Ofgem-regulated utility partner rather than applying for a supply license on its own. Ultimately, Tem aims to enable businesses to bypass so-called “big energy” and its high prices, while helping to meet climate goals.

“We like to think of ourselves as the UK’s first ‘neo-utility’,” Joe McDonald, co-founder and CEO of Tem, told TechCrunch in an email.

Founded in 2021, Tem said Wednesday it had raised 10.5 million pounds ($13.7 million) in a Series A funding round led by European venture capital firm Atomico, which earlier this week closed two funds worth a combined $1.24 billion. The investment comes as countries in Europe and beyond are pushing to reduce carbon emissions and achieve “climate neutrality” by 2050. The U.K., in particular, has pledged to reduce greenhouse gas emissions by “at least 100% of 1990 levels” over the next 25 years.

At the same time, rising oil and gas prices have highlighted the need to find an alternative to fossil fuels.

In addition to McDonald, Tem’s founding team includes CTO Bartłomiej Szostek, CTO Jason Stocks and Ross McKay. The three met at a startup called Limejump, which used big data to revolutionise the UK energy market, and it was there that the seed for Tem was sown.

“I’ve worked in the energy industry for over 12 years, and over that time, the winners and losers in the energy market have largely remained the same,” McDonald said. “Smaller companies buying from large energy companies have always struggled with high rates, variability, and a lack of guarantees of true renewable energy. They’re trapped in a system that doesn’t put people first. The lack of affordable, clean energy is one of the greatest challenges for businesses and the planet. We wanted to make sure every business could have access to the renewable energy they need, forever.”

Renewed energy

Tem’s platform matches utility energy needs with renewable generators using an “AI matching algorithm” that forecasts energy supply and demand among buyers and sellers on the startup’s network. The company provides its own pricing and billing system, customer service, and an interface through which customers can select their renewable energy priorities, preferred contract lengths, and view data on energy usage and where it comes from.

Tem says it currently services around 200 clients, including Silverstone, home of the British Grand Prix.

The startup operates a network of more than 50 renewable energy generators, which can include solar and wind farms as well as anaerobic digestion plants such as those supplied by British biogas producer Biodynamic.

While companies can technically transact with many of these renewable energy sources directly, this typically involves long-term Power Purchase Agreements (PPAs) and complex and costly administrative steps that are only suitable for the largest companies.

“In such a complex system, these (power purchase) agreements can be hundreds of pages long, negotiated for months and cost hundreds of thousands of pounds,” McDonald said. “What’s more, because the customer has to be able to buy all the power that the generator produces, it only works for really big companies with huge energy usage. That’s fine if you’re a mega-corporation like Google or Amazon – but what about the other 99 per cent of companies?

Tem charges a “variable” percentage of each transaction, but declined to say what determines that percentage. McDonald noted, however, that energy prices are typically at least 10% lower than wholesale prices, and can be as much as 25% lower.

Tem could apply for its own delivery license and become a completely independent provider — as some neobanks in the banking sector have done — but McDonald says partnering with a third-party licensor like P3P Partners allows the startup to focus on its rationale.

“We can (apply for a license), but our focus is on technology and transforming the buying and selling experience, not being a licensed utility,” he said. “We believe that for our model to have maximum impact, we need to stay above the integration of the individual market.”

State of the game

In addition to the big energy companies and the current wholesale market, a number of younger companies have emerged that are tackling the same problem. In Germany, we have companies like Trawa, which recently closed a €10 million funding round, while in the UK, we have companies like Al Gore-backed Octopus Energy, which acquired bankrupt renewable energy competitor Bulb in 2022 – a failure that was largely due to rising wholesale prices.

Tem says that’s one way it differentiates itself from its competitors. While Bulb sold itself on the premise that it was sourcing energy from renewable or offset sources, it was actually doing so through traditional utility markets.

“The energy crisis in recent years has also led to a number of company failures, which has created brand trust issues for new energy startups,” McDonald said. “But the reason so many new providers fail is because they operate in a traditional wholesale utility model, which exposes them to enormous volatility and high transaction costs. We mitigate these risks through our carefully calibrated, direct business-to-generator matching mechanism.”

In addition to lead investor Atomico, Tem’s Series A round included participation from AlbionVC, Revent, and angel investors including Holly and Sam Branson and Wise directors Harsh Sinha and Nilan Peiris. Tem has raised £13 million ($17 million) since launch.

The company currently operates only in the UK, but is looking to expand internationally in the coming years – and the fresh money is likely to help make that plan a reality.

“The focus will probably be on Europe first, especially markets with aggressive renewable energy targets like Germany, the Nordics, and then the U.S.,” McDonald said.