Creating virtual energy stores with KrakenFlex

A case study

At a glance

The UK’s electricity system faces a challenge in matching a growing demand for power with the intermittent supply from renewable energy sources. To address this, Nesta’s Challenge Works ran the Dynamic Demand Challenge in 2013, a prize designed to stimulate solutions that shift energy consumption to off-peak times.

The prize acted as a catalyst for KrakenFlex (formerly Upside Energy), a startup that developed a system to harness backup power from existing electrical facilities to create a virtual energy store. This innovation enabled them to become a market leader, and the project demonstrated the power of challenge prizes to turn abstract ideas into viable businesses and accelerate the transition to a carbon-neutral world.

"The funding, recognition and increased profile that taking part brought us was the springboard that enabled us to convert an abstract idea into an active venture."

Devrim Celal, CEO KrakenFlex

The challenge

The UK's electricity grid was under increasing pressure to keep up with growing demand. While the increased use of renewable energy sources like wind and solar are vital for decarbonisation, these sources can't always meet fluctuations in demand, especially at peak times such as the famous ‘kettle surge’. To make widespread renewable energy feasible, a solution was needed to shift energy consumption or store excess power. The challenge was to find an innovative way to address this disconnect and stabilise the grid.

What we did

Challenge Works, in partnership with the National Physical Laboratory, created the £100,000 Dynamic Demand Challenge. This challenge was designed to incentivise innovators to develop new products or services that could use data to shift energy demand to off-peak times or utilise excess renewable energy, and was won by smart Heating Control product Hestia.

But challenge prizes are not just about finding one winner - they’re about supporting a number of finalists with funding and support so they can progress more quickly. One of those finalists was Upside Energy: they developed and built a deep-tech platform that connects a network of electrical facilities - from data centres to care charging points - to create a virtual energy store.

The prize provided essential funding, recognition, and the tools to develop.

The impact

The innovators involved in the Challenge played a significant role in the transition to net zero. It’s now more possible than ever before to store excess power from renewables and to accommodate variations in energy demand.

For KrakenFlex, the prize kick-started the transition from an abstract idea into a viable company. The company experienced rapid growth, with the number of megawatts under its management increasing from zero to over 600 in just a few years. It also expanded its customer base and has since been acquired by Octopus Energy, becoming KrakenFlex.

The company is now applying its technology to the electric car charging sector and is expanding internationally. The project demonstrated the power of a challenge prize to provide the momentum and support needed for a startup to grow, scale, and have a real-world impact.

What we learnt

Challenge prizes can be a powerful catalyst

A well-designed challenge prize provides more than just funding; it offers crucial recognition and a platform that can turn an abstract idea into a viable, real-world solution.

A well-defined problem attracts the right innovators

By setting a clear, ambitious target – to stimulate demand-side response solutions – the prize successfully focused innovators' efforts and attracted a range of brilliant minds to address a complex problem.

Focus on unlocking existing assets

The success of KrakenFlex showed that a breakthrough innovation can come from looking at a problem differently and finding a way to harness and optimise existing, underused infrastructure.