In 2013, we posed a challenge – how do we manage intermittent, variable and decentralised renewable power supplies while keeping the lights on? The Dynamic Demand Challenge called on innovators to solve a problem that we knew would be critical to the green energy transition today.
The £100,000 challenge prize set out to stimulate new products, technologies or services using data to reduce carbon emissions by shifting energy demand to off peak times or through making the most of excess renewable generation.
Five finalists were selected at a 36-hour hackathon in October 2013 and spent 8 months developing their prototypes. One of those teams was Upside Energy – or as you may know them now, Kraken.
Through the prize, the team behind Kraken kicked off work on a cloud-based service that would combine energy storage capacity in different devices into a “virtual energy store” that could be used by the grid to balance supply and demand.
It didn’t actually win the prize, but as is the case with most challenge prizes, it was one of multiple companies that got its start and was supported to develop thanks to a tried and tested methodology that levels the playing field for innovators.
Typical R&D grant funding awards a lump-sum for the promise of future innovation, usually to a well-established incumbent (because they appear less risky on paper). Often it is contingent on following very narrow guide rails of what will be delivered - and how - regardless of whether that inhibits development, and with no guarantee that the promised innovation will come to fruition.
Challenge prizes are different. They level the playing field for innovators to identify and progress multiple bold ideas to solve a specified problem, prioritising the quality of an idea over the name recognition of the people behind it.
They don’t insist on a process of how the problem is fixed, instead focusing on the outcome, allowing space to iterate and pivot – essential for innovation to flourish. Through a challenge prize, multiple approaches are progressed through different stages of a competition with seed funding and expert support along the way, nurturing a diversity of ideas.
Across more than 100 challenge prizes, in energy, finance, health, international development, AI and data, we have seen company after company launch from idea to start-up to scale up – some as winners, many more as finalists.
Kraken is one of those many successes – in fact it is the poster child for the lasting impact an open innovation challenge prize can have on society and the economy.
From a germ of an idea at the start of the challenge prize, the team set up a company which went on to be bought by Octopus Energy for a reported eight-figure sum, with its dynamic charging technology for EVs rolled out nationwide. We took part in the Dynamic Demand Challenge. Until that point we didn’t have a business, we didn’t even have a name. It gave us access to some funding, some expertise, but importantly the first idea and gave us the room to start shaping that. The biggest benefit of [a] challenge, in my view, is it focuses sometimes on ideas that maybe commercial venture capital firms, incubators, would actually not. Kraken now uses AI to automate customer service for energy companies making it easier to manage billing, smart meters, electric vehicle charging and home batteries to make using renewable power cheaper.
With the wind in its sails, last week Octopus Energy announced that it would spin off Kraken, after a deal to sell a stake in the platform that values it at $8.65 billion (or £6.4 billion).
Kraken’s Devrim Celal says that, “Challenge Works’ recognition gave that idea the instant momentum it needed to become a reality”.
In an economy that needs scalable, commercially successful solutions to massive environmental and societal challenges, the UK needs a thousand more Krakens to be unleashed – and fast.
That means being bolder and braver with the way we fund and incentivise innovation and innovators.
Challenge prizes rapidly surface ideas, they nurture the most promising from a concept on paper to a working prototype to real-world product.
They are the launch pad for multiple companies with diverse approaches to the same problems, creating markets where there were none before in which to create long term business successes.
Importantly, they deliver – for funders, for innovators, for the economy, for society and for the problem that they set out to solve.
