How AI Could Cut Energy Trading Costs - Tem Energy

I'm your host, Ed Porter. Welcome back to transmission. Joe McDonald has spent over a decade inside the middle of the energy market, watching where the money goes on its way to the meter. He's now CEO of TEM Energy, a platform building AI infrastructure to strip those intermediaries out of the chain for business customers. At times, Joe says, close to thirty percent of a power bill goes to something other than power, trading desks, balancing costs, wholesale market fees, layers most customers have never heard of, each taking a cut before the energy arrives. It's a big claim and one worth testing. Is that a market working as designed or a market taking more than it should? Have a listen and make up your mind. We'll get into the regulatory exemption quietly reshaping who pays for the grid and how batteries might work as an insurance against price shocks. If you want to dig any further into the numbers Joe raises, Ko can help you find the answer. Sign up is free, and you'll also get trial access to Moto NG's research pieces. Link in the description. Let's jump in. Hello, Joe. Welcome to transmission. It's a pleasure to be here. Well, thank you for coming. And as ever, let's get straight into it. So what is one thing that people get wrong about supplying businesses with energy? Just one thing. Okay. The one thing I think most people don't recognize is the actual owner of the business relationship often is the supplier, the kind of brands that you would know, right? Your EDFs, your octopus, etcetera. But it's actually not them that add the most cost onto the transaction and the price that a business pays for their energy. It's not just the account management or brand or acquisition costs that get layered on. It's actually the behind the scenes. It's the trading costs, the balancing costs, the wholesale market costs. And behind that one customer application owner, the actual utility, there might be five or six more intermediaries that you don't even know about that are actually helping transact your power and adding on their fees. And that is pretty controversial, right? Because when we when we see the suppliers that are out there, it is in the press a lot. It's those those main names that you mentioned. So there are others. And it's always kind of looked at and you say, oh, there's the the margin in those businesses is a couple of percent. But you're saying sort of behind that sort of top layer, there's all this sort of machinery and and sort of middlemen that sort of all take a slice. Yeah, exactly. Mean, you see the people who make record profits when there's price volatility and actually very rarely is the utility layer or that customer application owner layer. They are running on very fine margins, really trying to optimize their cost to serve, cost to acquire to still be able to grow and be profitable. But behind the scenes, despite potentially how it's presented to market, most of that transaction flows through what I would call the true big energy intermediaries. And these are your kind of big energy companies that came from oil and gas and provide balance sheet, trading and access to all of those utilities to the wholesale market, which underpins all of pricing for certainly forward contracts for electricity businesses and generators today. Okay, let's just quickly, what's the forward contract? So when we look at energy contracts, you can basically have almost like a tracker mortgage equivalent, right? Where you're just getting the price that is being cleared every single settlement period. So every single half hour in the market, an index price in the UK, that system price, maybe you could index it on a day ahead price. Forward market contracts are effectively where you're agreeing a fixed price over say six months, twelve months, twenty four months, thirty six months. It can be called PPAs, it can be called OTC, there's many different ways of saying it, but it's where you actually get a fixed rate for your energy that is not gonna be variable as time goes on. So instead of locking into something that's happening very near term where you've got good transparency of the price just going going out into the market and booking something in every say six months and that's where you think that there's a chunk of value that's being handed over to the sort of machinery that sits in the middle of this. Yeah. And because you kind of needed that machinery, The problem we're trying to solve when you want price certainty to customers, right? So I'm a business, I wanna know what price I'm paying for my energy for the next twelve, twenty four months so I have budget certainty. I don't wanna be in the market, I've got enough risks going on, this is not the extra risk I want. Then you've got maybe generators on the other side thinking again for my returns, I wanna get a fixed price, I don't wanna be susceptible to price volatility up or down. There is a fulfillment job to be done because we need to discover price between the buyers and sellers of a market and we need to facilitate and fulfill supply and demand. And in order to do that, you need like machinery in the background effectively facilitating that transaction. Without going into too complex space immediately, the idea is how do I match if I'm a business, the profile that I need to use energy on every single half hour over the next year with a generator who's gonna generate energy potentially at different times every single half hour because if we don't fulfill then we have a lot of balancing risk and cost. So it's this kind of like shape matching which is what the Machinie kind of grinds out today across multiple intermediaries, human driven And ultimately very little competition. So there's a lot of profiteering that can exist behind the scenes. And and shape matching, it sounds it sounds potentially complicated. People start talking about sort of shape risk. I mean, to to help people understand, it's just it's literally you're trying to match the shape of the generation and the demand. So as long as they match, then it's kind of easy streets and you're happy. If they don't match, then you have to buy things from other places or you have to sell energy and you have to try and make that work. And when you get that, you get additional risk and additional cost. Exactly. And this is why the wholesale market exists today. Right? It's ported from the sort of oil trading and gas trading markets, this idea of creating liquidity where supply and demand can turn up, used to be twice a day for a few hours and an aggregate level be traded against each other. So you're netting off shape between buyers and sellers. We we promised. We said that we knew what we're gonna do. We're gonna keep it nice and simple. And here we are shape risk inside a couple of minutes, which is which is I always think of it as like, you know, we have the grid trying to keep the lights on with supply and demand, literal physical power, physical electrons. And then you have this kind of shadow market, is all about digital and financial transactions and it's just payment settlement. Right? So if I'm a business, I need to pay for the energy I'm gonna be using every period of the day. If I'm a generator, I need to get paid. And ultimately, those payments need to net out. Otherwise, someone's gonna lose money. And that's the job that's being done through wholesale markets, intermediaries, trading desks. It's also clearly where there is massive inefficiency and that used to be probably okay when you had a couple of big power stations and frankly the cost of Electron wasn't defining pretty much the new world order. So there wasn't this like urgency to bring down the cost. We now live in a very different space. Thousands of decentralized generators, millions of businesses all with custom profile requirements and the need to bring down the cost of the electron. And it's just forcing a massive question of like, why are we still using an infrastructure that's literally thirty years old and has frankly just not changed and kept up with the marketplace. Great description of the market as you see it and sort of the problem statement. For Tem now, where do you see the pitch? Like how do you see yourself fixing that expensive middleman? So I've been in space for about eleven years. So from Lime Jump when we were building virtual power plants and just training desks. Part of Shell. Yeah. Now part of Shell and actually integrating that into Shell, was probably a handful of people that actually saw every system, every human, every decision that was behind electricity transaction. What I could see is there was a technology play here fundamentally, probably one that's only existed in the last few years to be done, which is if the job is fulfillment, basically predicting price and fulfilling supply and demand, then there's an opportunity here for disintermediation. We can take all of that human labor cost, all of the jobs to be done in terms of like resolving a transaction between buyers and sellers and effectively utilize machine learning reinforcement learning a genuine AI native infrastructure Which replaces all of those costs and then you distribute the savings in transaction fees, which by the way can be up to about thirty percent of your power cost are literally just being paid out in intermediary fees. I can put that back into the users of the system pocket. Right? I can make a business pay less, I can get generator more and we become the single infrastructure that underpins that. And I I find it kind of crazy to get to that thirty percent number because I've seen this power trading desks, you see the bids and offers that come through and you see, so they, let's say there's an offer, let's say ninety pounds and you're bidding at eighty nine and you kind of get a bid off a spread and okay, we transact at eighty nine point five zero. Like the thirty that there's sort of, is it sort of special conditions where you see that thirty percent or are you saying it's almost like business as usual, there's thirty percent of sort of fat in that? If you'd simply take the very ends of the market, you take a business customer and the price that they're being charged for their power and you take a generator and the price they're being paid and you just compare that and let's say they have a very similar profile stacks, can actually like, you will see a spread of up to thirty percent, sometimes more, sometimes a little bit less. The bid offer spread in the wholesale market is a is a bit misrepresentative of the cost because that is again, we're to go too geeky here, but that is two baseload blocks being swapped. It's really simple, really easy to do. Your bid offer spread is gonna be a few pounds. The hard work comes when you have to chisel that big block of energy into a specific shape that suits every single customer profile. That's where you see a lot of the shape fees being added multiple trading desks needing to be involved. You have the balance sheet costs coming in of managing that risk and setting the price to the customer. And it's that kind of point that stacks up. The wholesale market today can only manage these big simple base load trades. It used to do like hundred trades a day. In fact, it used to only really be open for like two two hour windows. I don't know if the traders can go get like lunch and have their Pinot Grigio at five thirty. I don't know. But Friday afternoon. Yeah. Usually. Yeah. Usually exciting. But like that's not what needs to happen now when we thousands, if not millions of different customer profiles wanting to transact. But simply the wholesale market cannot facilitate anything more and so it forces these intermediaries to do the job of sort of translating the requirements of the market into this kind of like pretty antiquated slow inefficient process. Okay. So if I go behind the scenes at TEM, how does it work for you? Yeah. So we have a transaction infrastructure that we call Rosso. That is a machine learning reinforcement learning infrastructure. What it looks to do is it takes all of the supply and demand, so all of our buyers, all of our sellers, all of the businesses, all the generators, and it looks to set twenty four seven a forward contract price for their electricity fixed. That is not peer to peer. So it's independent of one transaction to another. So Rosso's job is to kind of work like an Uber surge pricing algorithm. It's trying to use price to incentivize transaction and it's trying to predict exactly how much we need to charge in order to facilitate transactions independently of each other. So it's like a many to many kind of matching, many to many fulfillment algorithm stack. Maybe just just I'd like a really important thing to add here. So we've been talking a lot about demand in this conversation up until now, but also within TEM, you have you have relationships and contracts with generators. And so that's what gives you this ability to sort of match in house. So people are thinking, well, hold on, this doesn't make sense because you've just got demand, surely you must be going to the market. You're saying actually we have this generation portfolio as well. And so we try and match as much as we can within the portfolio? Exactly, is that going to the users of the system? But perhaps your audience would know more about corporate PPAs or bilateral agreements where big data center makes an agreement with a big wind turbine. What they're doing is bypassing the market. Interestingly, in many cases, they're not actually bypassing all of the transaction fees that are gonna be layered on because it's very, very inefficient to match one big customer to one big customer. It doesn't scale. But ultimately, if you can make it work on a many to many basis, all the users of a system, the tens of thousands of decentralized generation from wind, solar, anaerobic digestion, through to gas power stations, coal power stations, it doesn't really matter. Then once you can net between those two customer types, the generators and and the businesses, you can effectively avoid having to use the wholesale market and all the fees that are charged in order to get there. So it's all about like netting at a portfolio level where the benefits really start to emerge. Okay. And let's say you get an extra thirty percent in your pocket, you've got a choice, right? You've got both demand on your books and you've got generation on your books. Like how do you where where do you put that? Because you could put thirty percent on one side or the other. So this is where the algorithms get quite complex. And I think it took Uber, I think it was like ninety PhDs to build their search pricing algorithm and ours is like four d chess compared to that. So honestly, it's right at the edge of like machine learning and data engineering. So what we do is we will use price as a deterministic factor. So let's say I have too much business volume compared to demand to generator supply. Well obviously in that situation generators are gonna get a shift in the price and a better price will surge pricing towards the generators to encourage that supply to transact and the businesses will get slightly worse price. All of this is still well within the realm of that spread between the buyers and sellers. Within that thirty percent you might distribute every single second, twenty percent of that to one side or the other or fifteen percent to either side. Obviously, we try and take our transaction fee as well that we have to be a profitable business but you're really looking how you distribute price as a signal to encourage the transactions to occur. And it's so important to understand this and so many people I think miss this. If any of this infrastructure required a behavioral change in the customers that we serve, this doesn't work. The one benefit of the current market today is a business doesn't have to think. They can go to market, they can get a fixed price, they can get a fixed price within maybe a day or a couple of hours and they can walk away. If I was to ask a business to hold on for another couple of weeks whilst we scrabble around in the background and find a generator, that's not gonna work, right? So it has to be liquid, it has to be twenty four seven, it has to actually be a better customer experience as well on top of that. And that's really where the kind of complexity all kind of compiles to technology, no behavioral change plus price innovation. Okay. And let's let me let me sort of package it up in in something that I think is as simple as possible. And that you have these generators, you have the you have these the demand customers and you're matching as much of that as possible with as many clients as possible to give you sort of a liquid view or a sort of real time view of what that cost will be in the future. That definitely is giving you for that portion of your volume, you've got a really clear view of what that looks like. And then you say kind of how you allocate the value between them kind of moves a little bit, just like in surge pricing as you were saying. If you then think about that total volume, let's say you're managing eighty percent of it in house, maybe I should have asked you what, like how much you're managing in your own portfolio. But let's say you're managing eighty percent and then it's twenty percent being sourced from the market. How do you think about that twenty percent? Because that feels like you'd have to go through the regular channels to pick it up. Yeah. So if this was a marketplace business, the question would be which is your limiting factor? Supply or demand, how do you get to a hundred percent? Because if you're not a hundred percent, you have to turn down transactions and that also wouldn't work. I guess the beauty with the infrastructure that we built is that residual, that fifteen, twenty percent, ten percent, sometimes more, sometimes less depending on how efficient our infrastructure is doing the kind of netting and fulfillment and depending on how we're getting our volumes, like how do we get the buyers and sellers to turn up and utilize us, which which we'll touch on with our neo utility layer, is red, which you will actually see in the market. That's what everyone sees as they see red and that, oh, this is cool utility, well branded tech enabled. The value of RED is actually all underpinned by Rosso. Once we have that, what we know is that twenty percent is gonna have to go through the wholesale market itself. So Rosso has a balance element which is both algorithms and agents that effectively make risk decisions based on predicting how much of our transaction volume will have to still flow through the wholesale market and what fees are we gonna have to pay so we can predict and cost those fees into the underlying cost to the eighty percent too. So what it means is even if only ten percent is netted, that's still ten percent of a saving that can be distributed across the one hundred percent. Ideally, you you can do eighty percent and twenty percent is then going through the wholesale market. You're then use utilizing the big energy players to like take that residual tail risk off. Yeah. So you're fully hedged. We've seen in the past some businesses to try and avoid and be price competitive because there's no real price advantage right now for utilities who are all using the wholesale market, they're all reverse engineering the same price is to not hedge at all. And that's where things can get very messy because if you take a hundred percent exposure and you do not hedge the twenty percent or in fact you don't hedge the eighty percent, that's where when market prices go wild businesses go bust. And that was the as we saw many suppliers come into the market and this must have been almost ten years ago, you kind of had high prices that were coming down And so people who had hedged had sort of locked in higher costs. Brand new businesses who hadn't hedged all of sudden have this sort of cheaper energy and able to undercut everyone. So as prices fall, if you're unhedged, you're in a very lovely position. But as soon as things flip around those businesses, they find themselves in quite a difficult position, particularly if you get crises in gas or power, whatever it might be, and you get very spiky prices. So how do you how do you protect yourself from from that? Because this feels like the the the really critical question in in supply in in sort of the supplier process. Like how do you make sure that you're protected when things go into that tail risk? Yeah. Exactly. So at a fundamental level, what we're trying to look for is volumes that are unfulfilled. So if we have buyer or seller, I use the word interchangeable with demand supply businesses generators, volumes that are not fulfilled within your portfolio and not hedged through the market, what you have is price exposure. You've agreed to fixed price with your customer and you are going to be costed on a market price that is moving. So it's always a question of like balancing volatility and risk appetite and how you wanna manage that. But ultimately it then kind of arrives on two different time horizons. So one is just forward market prices thanks to a war on the other side of the world might start shooting up. That doesn't realize today prices that are coming to streaming through every single half hour necessarily. What it does mean is that the price you've agreed with your customer and now the price you might have to buy from market could be wildly different and and that can obviously put your business in a very difficult situation. Interestingly, the big energy companies with massive balance sheets can ride that out and that's actually how they generate a lot of profit. But small companies can just get eaten alive. Let's say you've solved that and you've hedged a hundred percent of your volume no matter what, right, you're fulfilled whether that's through your own portfolio, whether you've used the wholesale market to do so, you could still arrive at a point in time where your forecasts are not correct. That could be because you know, you've literally missed forecast the supply and demand volumes that are actually gonna be coming through every single half hour or it could just be there as a significant event, a grid balancing event, a weather event. And in that sense, you still have the same problem. You've agreed a fixed price for your customer and now you're paying an index price which is very different. That is where I think there are real opportunities for things like battery storage to play much more of a role not just in keeping the lights on for the grid but keeping portfolio and financials balanced between like the utilities portfolios that exist today. Otherwise you just have to charge for that fee upfront and effectively just ensure that you're managing that all the way down to delivery with a trading desk. At TEM, it's just done by agents and algorithms. Okay. Because it could get quite it could get quite spicy. Right? So let's say we're expecting wind to turn up this afternoon at five o'clock And all of a sudden, everyone's been sort of trading on the basis that wind's gonna turn up, so the price hasn't really been moving. And then what happens is, okay, well, the the wind is slightly later coming through. All of a sudden, the market looks quite short and then everyone is kind of collectively going, oh, actually we might need to buy, we really need to cover this position. And so you then got everyone coming to the market and you might have everyone coming to the market at the same time. And so you kind of get this perhaps slightly irrational like spiking in pricing because you don't have the ability to sort of bring storage into the equation. So so you see storage as a way of helping to manage that risk. I think so. You you can kind of think of it as you have your everyday like fulfillment risk, which is actually no different to what you've done in FX or payments or, you know, it's it's any sort of trading entity has to decide how much volatility do they expose themselves to. But then you've got these black swan event risks. And I think that's where you're looking for insurance or balance sheet. And I think actually batteries provide an opportunity for physical almost insurance because when you see volumes in your portfolio lead to exposures very short term with less than say a day's notice and you can't easily trade around that and price is already moving in the wrong direction. To be able to actually call on physical volume from batteries to create a netted and fulfilled portfolio again means you're not exposed to that price. So the question is just say how do you structure that with batteries it makes sense for them? Because a battery wants to be a hundred percent exposed to volatility to maximize its profit. Whereas maybe a utility wants to be zero percent exposed to volatility so it can protect its its business. And so you again, it's one of these things where you have to find what the right balance is and what's the right trade off of certainty versus value in terms of how you stack revenue for these asset base. And we see a lot of that happening for example in Australia where batteries work with suppliers to say, well when the price goes over a certain level then the supplier can call on the battery for physical output versus a capacity contract. Is that the same thing you're looking at for batteries in GB? Yeah, exactly. That's what we're doing. We've gone live with Electron to help facilitate this but it's exactly that. What we're asking about you to do is say give up a certain number of hours of volatility exposure a year but in return we'll give you a really good price. Obviously it's gonna be discounted what the potential price exposure could be for you but we'll give you that price, we'll call it an availability fee and we can give you some price certainty over three four years. So for the battery to be able to stack this additional almost like capacity market contract, but for portfolios like us as an option, yeah, they're giving up a little bit of exposure on some of their megawatt hours and they're giving up maybe a little bit of profit in the really kinda high price windows, but in return, they're getting some certainty that they can stack into their investment case. And I think a lot of batteries today just being a hundred percent exposed to merchant risk isn't a great way of getting new debt in to build your batteries, right? So we think there's a real opportunity to sort of increase the ecosystem through these new kind of product structures. Yeah, you were saying earlier, kind of like batteries want to be exposed to the upside and it's like, yes, they do but because there's so much sort of debt involved in this and they want a secure revenue stream, if you went to them and said, of this a hundred percent upside that you're expecting to get, if I give you say ninety percent of the upside, but I will guarantee it because I'll pay it through through the course of the year, I think a lot of batteries would be very happy to see that type of product. And it's almost the the start of products emerging outside of the wholesale market. I think the battery space would be very interested for this product. I think it's pretty exciting. Well, love it and it's just about again bringing it back to the the money's flowing to the users of the system. Right? Because the other way of doing this is you use a big balance sheet company that will just say, yeah, we'll just write it off every single time it happens because over a long period of time, you kind of end up equal, like net on your on your trading position. So I love anything that puts money back into the user's pockets, whether that's batteries, businesses, generators, rather than getting sort of sucked out into the kind of intermediary and like balancing management services that exist today within big energy. And you still like so we so we started off by saying, there's a hundred percent of your volume, eighty percent of it maybe you can match internally and these are numbers that I entirely made up. So we're gonna have to forgive me for this. And then there's twenty percent here. Of that twenty percent, you're now starting to physically contract batteries. You're saying essentially you're trying to get that twenty percent to be as low as possible so that the portion that you have to sort of in your eyes sort of fairly pass through, you can go, well, look, instead of having a hundred percent of your volume under a traditional structure, we've now got the amount that we're sourcing from the market down to say five or six percent. And even though that's costing us more, like it's more but it's only for six percent. That's kind It's distributed. Your weighted average position becomes obviously beneficial for your whole portfolio. And look like our North Star is literal dollars put back into businesses pockets. That's all we obsess about at TEM. Right? So I think we've just put now annually about fifty million pounds worth of value back into real businesses. Like actually a school is paying fifty thousand pounds less and rugby clubs paying twelve thousand pounds less. Every single time we have to make a hedge through the market of that twenty percent because it's not you wouldn't use batteries for the full twenty percent, you might use it for the five percent residual that will flow through, you know, at real time. But the the rest of it will get traded through the wholesale market. Every time that happens, we work out exactly how many transaction fees have now just gone to Big Energy and we promote that across the whole company and be like, this could have put a teacher in a school and instead we just paid another trading bonus. Yeah. Okay. Let's move off the sort of middlemen trading structure. Let's go to something a little bit more niche, which is around locational matching and and supply. There's a few angles to this. Just to kick it off, there's something called p four four two, which nobody will know what that means except for about fifteen people. So maybe Joe, I can continue. P four four two, what does that mean? Yeah. Okay. Let's I guess bring back to real first principles here. So everything I've talked about is about power. Right? Power is ubiquitous everywhere. The cost of your bill, let's say in the UK, forty five percent of that is the cost of the actual power. So when we talk about the savings we make, it's on that power element. The rest of your bill is made up of subsidies, taxes, network charges and there isn't much innovation there, it's just the cost of having your infrastructure in a country and that's different market by market. P four four two is an interesting one because p four four two is a code modification that helps clarify what has been around for a long time which is called supplier exemption. And the whole premise of this was saying, well, if we have a, you know, a generator and a business and they have a direct contract with each other and they're not and potentially they're local and why should they be paying for all of these grid costs? Surely they can be exempt for that charge, especially if they're smaller. So what p four four two does is it says if you have less than five megawatts of capacity as a generator, you are able to strike a deal directly and supply without the license, but directly supply a business through a contractual relationship. And when you do so, that business does not have to pay a substantial proportion of those taxes I've just talked about. So you could see of that fifty five percent of their bill, sixty percent of that could be removed through p four four two as an exemption. The question is is that the intention kind of came from a I think it was like a Welsh village that kind of petitioned for this because they had generation right next to their homes and they're like, why why are we paying all of these grid costs? And we thought, this is a great idea. And then some very large corporates also took this on, but there's probably less than like fifty applications for fifteen years. That now has been blown up because it's been made incredibly accessible through p four forty two. So you're seeing now every supplier in the market is offering this because if you don't, you just lose on price. The location aspect therefore is not present. Okay. So long as there is a direct relationship between the buyer and the seller, the generator and the business and it's within those thresholds, you can simply tick the flows with the Lexon and then the charges don't flow through to those businesses. And then it's up to the utilities to structure the fee sharing and how that pot is distributed as a saving to the customers. And it feels for me somewhat similar to like behind the meter. So this concept that like I'm a factory, I put solar on my roof and I don't pay any fees on that solar that comes through. Like that seems very very similar. But perhaps in the same way that the Behind the Meter has this problem, if you take lots of volume and you float through, I'm gonna keep on saying p four four two and hopefully people just will just follow along with what that means now. Also Behind the Meter the long form name that we were talking about earlier. Oh gosh. No. I could I could find it, but it would fill the rest of the podcast. So never never read a full code modification document. You will fall asleep. Sorry to the code mod fans out there. But it feels like there's a little bit of a problem in it. Let's say you take over a hundred users, if you could take sort of ten of them, thirty of them off the sort of supply demand balancing that's going on, you take them out of paying for the fees of the of the market. Those fees or taxes, they have to then be recovered from the rest of the market. And so although it's sort of a good thing for the people who are avoiding them, it's almost a bad thing for everyone else. And this, by the way, happens in other places. Right? So we have this sort of AI data center, like one off reduction. There's a large large industry has extra fees they don't have to pay. So it's it's not it's not a singular problem in power. It's actually quite a few of these exemptions exist. Yeah. Absolutely. I mean, there is a moral philosophical debate, right, which you can see where Ofgem has fallen on with, for example, behind the meter, which is who pays for the roads that effectively move electricity about, right? You can't simply say, because I don't use it, I shouldn't pay because in many ways you will use it and you benefit from it day to day. And that should be a shared cost potentially for the whole grid, right? So the kind of question of fairness versus like innovation. However, on the other side, what we have is a situation where the one percent of large enterprise customers have ways of avoiding all of these charges. Consumers have had relief quite recently on some of these charges too. And then the ninety nine percent of businesses are just stuck in the middle. Lowest levels of innovation as we've already talked about highest transaction fees being charged them and no way of avoiding these costs and they cover the cost of the whole grid right now. Our view is is that whether people for two intentionally or not should allow for every single business to simply stop paying these costs because effectively that bill was gonna have to go somewhere and it could even have to go on general taxation, which I'm sure the government and the public will not like. But whilst it exists, these businesses need a lifeline. They're like the lifeblood of our country. So Thames view on this and we're often mistaken as like a p for four two company, our value comes in the power transaction saving. What we realize is if we don't offer this saving, not only should we because customers need it and they have no one fighting for them right now, but also if we don't, all of our thirty percent transaction fee savings would just be written off by actually what is a relatively simple regulatory like tick box exercise. So for us we've tried to scale it as quickly as possible, offer it to as many customers as possible and work and consult with government to say like, what is the intention for this long term? Right? Is this gonna work? Is this gonna make sense? Whilst it provides relief to some of these businesses that are struggling, you know, the more we can do that, the better and the more value we can put into their pockets right now the better in my opinion. What do you think the end game is for P442? I think generally there needs to be different mechanisms based on different industries for how they subsidizing their competitiveness in market. Right? And the government has to decide that. Right? We can't just talk about energy costs only at a GB level. We have to think about how our energy costs compared to every other market on earth because the cost of the electron today is setting that new world order. It sets the cost of competitiveness for businesses. So I think we need things like p four four two. They need to be probably tighter, more clarified, more targeted to industries, but it can't just be to the big data centers and it can't just be to the big manufacturers. It has to be something that kind of works for everyone. And I do see some value in thinking about the location aspect too because there there is less stress on the grid put when you're moving electrons physically closer together. And we've thought about like nodal pricing reviews and making actually pricing of energy contracts actually ten times more complex. And generally with the complexity, it just breeds lower competition and worse outcomes for all customers. But there has to be some incentive of like where we build generators and how we effectively solve some of the transmission and network distribution like issues that we have today on infrastructure side. Yes, you're right. It does this complexity, but there's also so much simplicity to like a more locational market. So if you're in Scotland and you are a business in Scotland and you see that for the six month running, it's been a zero carbon system with loads of wind generation and that wind generation can't get through the networks, go south. You're thinking like, why are my bills not really cheap? We've got all this excess wind generation. And it's because we don't have that locational market and because we have these kind of more complicated reallocation mechanisms going on. It it both feels very simple to have a national price. But underneath it all, there's all of these complex mechanisms that are trying to reallocate costs and trying to get play and people just kind of do the right thing. But wouldn't it just be simpler if we had a more locational price? So let's say you're a business in Scotland, you could say, right, look, the wind is blowing. I've I've got cheap energy today. I, you know, for me, when we try and represent all businesses, I don't like the idea of postcode lottery and you're not gonna get someone moving their business from x place to y place, you know, in order to chase lower electricity costs. Similar to what we've even just spoken about when it comes to p four four two or behind the meter, I think as a country, we need competitive energy prices for everyone. So I don't think that's gonna be solved by locational. What I do think is you can use all of that locational knowledge and signals to encourage, you know, I saw I think you had GB Energy on the podcast to build the infrastructure in the right places and as a government to take a position in a state with maybe we shouldn't just keep building huge offshore wind turbines that effectively are just as bad as big coal power stations, just not environmentally in terms of how we create efficient pricing through and lower prices to businesses. So I think if we can more stress test where we build without having to use a market signal to suggest where we build and then keep a fairness and principle on everyone benefits from a lower transaction cost generally, we could remove like twelve billion of costs and transaction fees alone overnight without any long ten year painful process of having to move to a new pricing mechanism in the UK. So I always go for simpler, fairer, but then ask, you know, from an infrastructure side, the government to take a lot more of a role in saying how is the UK gonna compete and have an unfair advantage against how quickly, you know, India can build coal or China can build nuclear or the US can build gas. I'm I'm gonna I think find a bit attention in some of these, certainly China building nuclear, I would say China, big big builder of solar and batteries. That's where I but let's come back to the GB point. I don't see businesses moving in a locational system, but I do see, let's say that rugby club, right, that you're talking about in Scotland. Do they run off a gas bowler or do they get a heat pump? And if you can show them very low cost throughout all of winter, then there's just so much easier decision to go and do that. And then you get demand going in the right places. So I'm a big advocate of location and pricing, but it's great to get the the sort of contrarian viewpoints on this. Sure. And it's, you know, ten years, fifteen years, I think some of these things are necessary. I think to tomorrow rather than trying to either completely tear up the entire board we're playing on and go through a huge process, by the time we get there, we're already a tourist state and businesses have already failed, I would concentrate on how do we make it simpler, fairer, and more transparent to remove all of this weight in the system that could put billions back in customers' pockets, right? But I don't think they're mutually exclusive. I would agree with you that something needs to change and we need to get way smarter about where we build and how we send those signals. Yeah. Would say if the system is wrong, the best time to change it is now rather than waiting because it's gonna get more complicated the further down we go. But I respect the view of trying to get this stuff changed. We run tech businesses, that's easy for us. You know that the moment we start that process, the bureaucracy and the regulator, it will just take a long time. So you're right, we should start now but we can't rely on that to be the thing that saves us to be competitive in the next five to ten years. Even p four four two, that's a relatively small modification. That's taken two years. Were we were looking at we were looking at the the page earlier and on the sort of the headline of the page and the summary it said, it's sort of like issue ninety six especially highlighted. And you're thinking like, you're highlighting issue ninety six, that means there were ninety five issues before it that were less interesting. Yeah. No wonder it took two years. And look, I would love to overhaul the cultural and risk appetite of our regulators and our government when it comes to energy markets, So we can move way quicker and take some of these bigger, more like iterative steps, not just like incremental changes and moving around the kind of same broken pieces around the board, but just the reality is that's probably not gonna happen. So what can we do? I think this is where, like, technology providers have an opportunity. Just make it better as of today. Don't rely on regulatory change. Just use what we have today and, you know, take the learnings we've seen in FX, in payments, in mobility, and just apply it right now to energy. It's like the last bastion of like old antiquated markets and it's ripe for disruption for sure. I agree. Two final questions. You've just raised your series b and you have talked publicly about there being expansion path. So Texas and Australia, then Europe. Why are you going to things in that order? So I think it's the case of we wanna do everything at once. We're trying to build a generational company here at TEM and at the risk of sounding like the American founder, like, don't see why I can't both build a very successful business here as well as expanding, improving the interoperability of the platform. And I think to really solve this problem, there is about a trillion dollars worldwide that's being sucked out in transaction fees for power. So you can't just focus on the UK. However, where we are today, we're barely getting started in the UK. We're already gonna be close to the end of this year, maybe having over a billion pounds transacted annually through our platform, which is crazy to me in less than three But that's still just scratching the surface. And today Rosso is being used by our neo utility Red as I talked about, right, exclusively. Our infrastructure and our agents are being exclusively used by our neo utility. Red might get to a ten, twenty percent market share. Rosso has the right to power ninety plus percent of all transactions. So really moving towards the infrastructure provider for each market we operate in is incredibly important to us. So we then pick markets that are similar to the UK and are suffering in the same way. So price matters, certainty to businesses is difficult when it comes to getting forward prices, there's fat in the system, decentralized generation. There's about one hundred and thirty two markets worldwide now moving in the direction of the UK market. Kind of winning here is the perfect litmus test for being out to win in other markets too. Maybe just kind of sorry. I promised two more two more questions and here I am. There's a bonus one in between. But in a way that say Kraken worked with Octopus Energy, is that how you see the relationship between Rosso and Rosso and Kraken and Octopus Energy and Red? Is that that a parallel I should draw or is that right? I think so. We we see RED is perhaps a little bit more of a show home, right? And stalking horse in the market. It's purely application layer, it's run by agents. So today I think we manage now over eight thousand businesses that have transacted through us. We run about fiftieth of the operational costs of a typical utility. So Redden itself is a very efficient kind of show home to say, look, if you utilise Rosso, which is our pricing infrastructure plus our agents, you can be really competitive here. And so I think in that sense, there's a lot of similarity that one's the kind of platform and the infrastructure that's quite agnostic to who brings us the volumes. I think the only slight difference there is that RED is more of like, we're not installing hardware, we're not trying to build assets, we're not trying to get vertically integrated into the market. It's simply the kind of customer application layer and home and experience that customers that we've had to use today because when we tried to sell our infrastructure three years ago to the utilities they all said no. Yeah. Yeah. I mean what could be better than We've got to build it ourselves and then build it yourself and prove it out. Okay final question. What is a contrarian view you hold on energy markets? Okay. I think well, I have a few contrarian views if you haven't already have guessed. But I think other than I think genuinely an extra trillion dollar company is energy AI and it should come from the UK. I I think we genuinely have an unfair advantage here, which we probably had in financial services and that's been proved out with the companies like Revolut. And that's been sort of the merging of financial services, it's the sort of innovative structures that apply to energy markets, that's what you're seeing? We have the access to open data, the fact we're in islands, we've had to manage all of this. The fact that although we complain a lot, it's a pretty efficient system compared to many in the market. So I think, we have the ability to be right on the cutting edge here and it's probably three to four years ahead of any other market in some ways. So I think what wins here has the right to go win elsewhere in the same way that what won in Silicon Valley for compute have the right to win elsewhere. So I do think there's a genuine opportunity there. I think to be honest, the the more I think the more contrarian view that I hold today is Rosso will remove about ninety percent of the labor cost in the energy market for transactions. So we will be replacing a lot of jobs with our agents and with our platform. And I'm comfortable with that not because that means I make all the profit and everyone loses their job in in our market but because it's a distribution and a redistribution of effectively value which means today when I might cost job in the energy market, can protect or generate three, five, maybe even six jobs in the wider UK business market. And we see this right when I'm either putting fifty thousand pounds in a school's pocket that is a new teacher for the year versus another fifty thousand pounds on top of the other ten fifty thousand pounds that one trader has made by facilitating a transaction. So I think morally we get very comfortable at TEM of saying that redistribution has to happen and therefore there is a consequence that we will be replacing jobs and there will be jobs lost in our space. But that is necessary. It's necessary for the country, it's necessary for sovereignty, it's necessary for the AI story and it's certainly necessary for the ninety nine percent of businesses that currently being left behind by the market. And a great parallel would be like, you look at say Amazon, did did they care about Woolworths? Did they no. They didn't. So we see we see that time and time again and then we're all very happy using well, I say we all. People are very happy using Amazon. I know that will that will be a contro. Yeah. Yeah. So I'm glad I said it at the end. We can cut it out. Okay. Joe, thank you very much for coming on. You've a wonderful guest and I think people have learned a lot about how supply works in GB. Pleasure. Thank you so much for having me.