INTERVIEW: Is electricity retail complicated? Farouk Alhassan says no: he wants to make it easy for suppliers and customers

Janet Wood talks to Senapt’s Farouk Alhassan about dismantling preconceptions on electricity industry processes, changing the game on supplier platforms and his new ‘MyWatts’ website aimed at helping customers use their supply data

 

Farouk AlhassanSometimes electricity industry members wonder why Amazon, or other platforms, have not entered the sector to compete with suppliers. Farouk Alhassan has a different view: “Be the Amazon of the energy market. Why not?” he says.

Alhassan is new to the energy market and came into it by chance. In 2015 he was at Goldman Sachs and doing a masters in applied statistics. His plan was to apply maths to financial pricing, so he spent a lot of time studying financial modelling, but he says new finance regulations had cut down activity in that area. That lull meant Alhassan took note when a friend working for GEnergy started grumbling about the shortcomings of the platforms used by energy suppliers. He started to get more interested when the friend described smart metering, the role of the DCC (the smart meter data hub) and how it will change how the market works. Alhassan says, “I thought that was where I could use applied statistics, because you are going from reading every six months to reading every half hour. That is a lot of data I can apply my statistical skills to.”

He says, “All of a sudden I had a new objective, which is to save people money on their energy. If I can build an advanced dashboard that allows you to go in and understand your energy consumption, look at how much energy your devices are using, then you are putting your data to good use.”

All of a sudden I had a new objective, which is to save people money on their energy

He built a dashboard for GEnergy – too late for that company, which has since left the energy market. But “By then I had read a lot more about the DCC than GEnergy’s own local team had done. … I wasn’t even in the industry but I had spent a significant amount of time on it.”

GEnergy asked him to sit in on a meeting with a new platform provider and Alhassan took another snap decision. “On the way to the meeting, my goal was to see whether this platform provider would allow me to connect my funky dashboard with their back-end. By the time I got there I had decided that if they did not allow to get the data we would build our own platform.” He was taken aback to find that the provider was planning to use another intermediary to get the data from the DCC. “I said, is that it? Not only did I not get the data that I wanted, but it appears the market view is that smart meter data is just for billing.” He thought that was not good enough: “It’s the household that pays for the smart meter,  spread over the life of the asset”.

‘It appears the market view is that smart meter data is just for billing’

If the data is there and sustainability is the destination, the data has to be used for more than just billing the customer, he says  - and that, for Alhassan, was “a prime opportunity to go into a market that is struggling“.

Without a history in energy retail, he says he was surprised by what he found. “I have been involved in finance where people book trades in very very complicated places and on trading floors. It’s all automated, it goes into your database and it moves money into the central banks online in an automated fashion.  Why can’t I do that in the energy market?”

Since it was not possible, he decided to build an ‘energy as a service’ platform that he describes as, “end to end dedicated to the DCC and smart metering platform and puts the customers’ needs at the front. We put the customer need first and we automated the rest.”

 

Funding a new entrant

Senapt foundersThat was five years ago, when Alhassan joined up with four other co-founders – Bijay Thapa, Bibek Gurung, Bishal Gurung and Sunam Rana - to set up Senapt. The five (see picture left, of their first day in the office in 2016) each contributed £500/ month to bootstrap the business. “A month later we registered as a business and a month after that we registered as a DCC user,” says Alhassan.

That took up a lot of the seed money. “It cost about £500 to be a user, but then you have to pay about £5000 to get the DCC cables from BT into your data centre. We didn’t have a relationship with anyone where we could use their cable,” says Alhassan. Anyway, he thinks that a connection is important. “Our view is that if we are going to let energy data drive the energy transition it is good that the pipelines that release that data are clear for everyone, not congested – it is not good that everyone is using the same data channel so someone has to threshold-manage – it’s a single point of failure.”

After two years the group knew they needed more seed money and persuaded 75 ‘family and friend’ investors to back them at £400/month. Alhassan says, “It’s the only funding we have raised so far. We approached crowd funders but they said we had to have already a partner providing some of the money – but we didn’t have that. It was a chicken and egg situation.” And so far the team has been unsuccessful with innovation funding. Alhassan says it “requires you to be working on specific things and it is very very resource intensive and we don’t have [that resource].”

However, Senapt now has its platform and a customer for it: “The company went live with our first customer [Logicor Energy] in June 2019 and they have been using the platform to sell electricity and gas.”

In January 2020, just before the lockdown, the company took on its second customer – but that was G Energy. “We were back down to one and we were in lockdown. Now we are hoping to land another deal,” says Alhassan.

 

The platform

Alhassan says Senapt’s  energy supply platform takes a very different approach to others in the industry: “We have built it with its own industry flows …. so it is a single integrated end to end platform.” He is referring to industry data flows managed by the industry’s ‘central bodies’ that underpin processes such as change of supplier.

Those flows and the platform as a whole are being supplied as a service. By including the flows, Alhassan says, “we can largely automate the energy supply process. For example, up to 99% of what you have to do to on-board a customer is automated and you can do it in minutes”.  What is more, he says, “We is offer the platform for free, including cloud hosting. In return, you pay us a commission on every kWh  of electricity you sell.” That could open up the industry, he suggests, because “The transaction-based approach means that for any company coming into the market, you get this platform and it does everything you need, all you have to do is build your website.”

I ask whether his in-built flows bypass the industry process and he says no: it uses all the industry flows, but, “We send them ourselves, we have a framework to generate every flow. We spent the first two years building frameworks … to allow suppliers to assemble and automate their business processes, and structuring the platform in a way that doesn’t look like a fixed platform. We use some of the latest technologies I have used in banking.”

With the platform in place the team is working on product innovation to allow suppliers to produce innovative tariffs, based for example on time of use or carbon intensity. “We can do all that because the framework at the bottom is really flexible. Also, we imagined what the energy future is going to be and we know it is not going to be fixed scheme – it will require flexibility and we built that in, so we are well positioned for innovative tariffs,” says Alhassan.

‘We imagined what the energy future is going to be and we know it is not going to be fixed scheme – it will require flexibility and we built that in’

I ask whether Senapt has to be a BSC party and he says no, the supplier does that. “We just simplify the process for them. Normally it takes 6-12 months but we want to say that if you come to us with a licence, by the end of the day you should be able to take on your first customers. You don’t need to order and wait – we will come and install your flow system and configure it for you.”

 

The cost base 

One reason I wanted to talk to Alhassan was that he claimed to offer a potential dramatic reduction in costs for suppliers. I ask him to explain that. He says there are lots of costs in the energy market today that are ‘dead wood costs’. They happen because the market has evolved from the traditional energy markets, but his platform removes third party fixed charges. He lists them:

“One thing you would pay for in the old market is a DCC adaptor, but our platform comes with a DCC native connection and that connects directly with the DCC and gets the data so you don’t have to pay for it.  Another thing you need to buy is an industry flows mechanism – we have that built in. We are not charging you for it separately. You have to buy gas flows and a gas shipper licence – but we have the flows and the licence, so it is sorted.

“You need a system to build tariffs and products – that is included and you don’t need to buy it. You need to integrate with direct debit providers so you can collect payments – we have already done that. We have removed almost everything that you need to buy, so that can come off the bill.”

He says that in addition the automated system cuts to a fraction the number of staff needed to serve customers. “Putting it together means that we have cut out about 40% of fixed costs”.

‘we have cut out about 40% of fixed costs’

He claims more potential savings because the billing engine was built on a half hourly basis that mirrors settlement processes from the start. A supplier can model system and network charges, levies etc at the half-hourly level, “so that at any point in time you know exactly how your prices bubble up into the tariff. You can break it down and the supplier can track all those components on an independent basis.”

He adds, “What we really want to do is show other energy suppliers that there is profitability in energy if you do it right. At the moment only four suppliers are making money, but they can – all these cost savings we are talking about the companies can retain as profit.”

That may be so – but at the moment Logicor Energy remains Senapt’s only customer. Alhassan hopes to use customer power to solve that problem.

Still talking about the costs energy suppliers could avoid, he notes that today they recruit customers through comparison websites at a cost of up to £70 per switch. He wants to give both suppliers and customers a way around that, at the same time solve another problem for switchers – and build some momentum for his platform.

 

Amazon for energy

He is set to launch ‘MyWatts’ – a site that will allow customers to manage their energy, as well as access services like bill payment and switching between energy suppliers. They will use their own energy data to get quotations and continue to have access to their historical data, retaining ownership of it. In contrast, in current switching data is not passed to the new supplier.

This is Alhassan’s ‘Amazon for energy’. In a parallel to the US behemoth, “we do the marketing for it, we bring people to MyWatts. Suppliers come there to sell their products and customers come there to look for products. It is creating a marketplace for energy,” he says.

Clearly, that needs suppliers to sign up for MyWatts too and Alhassan hopes to use customer pressure to get them in. “The plan is to launch MyWatts next month to domestic customers, who will be able to sign up to look at their energy data. Logicor’s customers will be able to pay their bills that way too. It will have a button to contact the supplier to say ‘please join MyWatts’”.

For once, Alhassan may follow a well-known industry path and talk to Ofgem about the regulator’s ‘sandbox’ for new ideas. “We may need to do that – I am thinking  of approaching them to see that MyWatts is innovating in the right way, with the right data security,” he says.

MyWatts should open doors for Senapt’s other services, he says. I ask about his per kWh payment model and how that fits with an often-discussed future of ‘energy as a service’ or suppliers whose offering includes on efficiency services. Not a problem, he says. “People forget the other side of the story. The whole electrification of heat and transport is going to double or triple everyone’s electricity consumption. It actually gives me a better return than a fixed fee because your consumption is going to grow and I am exposing myself to that growth.”

‘Some people in the market have a vested interest in keeping it the way it is. Some people have built skills and careers around the way it is now’

He is also not worried by the fact that he has still to persuade incumbents to use his platform, as he assumes that new entrants will come along who want a different approach. “Some people in the market have a vested interest in keeping it the way it is. Some people have built skills and careers around the way it is now,” he says. But for those that think the energy market is complicated, “They haven’t taken the time out to think about it”.

MyWatts launches in May and time will reveal whether Alhassan can recruit customers to force incumbents onto the site.

Alhassan may have cracked the software side of the industry, but can he break up the suppliers’ complacency?  That is more ambitious. However, the last people I interviewed who said the electricity industry was simple was then-new entrant – and now major supplier – Bulb. It can be done.

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