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AGL Energy strikes tie-up with UK’s OVO to fuel smart power push

Power giant AGL Energy has struck a digital tie-up with one of Britain’s biggest energy suppliers, buying a majority stake in its Australian business and tapping into its tech platform Kaluza.

Ahead of its investor day on Tuesday, AGL said the joint venture with OVO would allow it to tap real-time energy solutions for customers while orchestrating electric vehicle charging, battery systems and home devices through artificial intelligence.

OVO, founded in 2009, is Britain’s third-biggest energy supplier. It bought the retail arm of SSE in 2019 but made 2600 job cuts last year, blaming the COVID-19 pandemic.

“Australia has one of the highest levels of rooftop solar generation in the world and ensuring grid stability is a priority as energy supply continues to decentralise. Kaluza’s advanced software is primed to help towards solving these grid challenges by intelligently shifting device charging to times of lower demand,” a joint statement said on Monday.

The deal mirrors an investment struck by rival Origin Energy last year for a stake in British electricity disrupter Octopus, a fast-growing tech start-up with ambitions to become “the Amazon of energy” through its Kraken platform.

Origin is understood to have also looked at OVO but opted for Octopus, which has greater penetration in the market with 17 million Kraken accounts globally and a target of 100 million by 2027.

“We’ll continue to build our core technology stack and explore this as an option for the future as the energy landscape changes over the next five to 10 years,” AGL future business and technology boss John Chambers said. AGL is reviewing its business model and has hinted at potential changes to its retail and generation arms as a solar-sparked price rout and government intervention hits earnings growth.

That led some analysts to suggest it may consider a split of its ­retail and generation arms on Tuesday and could sell one of its coal plants to grab extra market value from a move into green ­energy.

Macquarie said AGL may look to divest or split out its Loy Yang A coal plant in Victoria to reduce its carbon footprint and gain a rerating as a greener energy operator.

The broker said such a move could be considered by AGL given it has already flagged the potential for structural change.

Chief executive Brett Redman has been touring generation sites ahead of the investor day and such a move could help answer an expectation in the market of a bigger strategy shift.

Still, JPMorgan said AGL was likely to focus on improving the profitability of its generators such as Loy Yang and Bayswater, ­rather than pursuing a split of its business.

The broker thinks AGL will focus on lowering operating and capital costs, increasing asset flexibility, changing bidding and contracting behaviour and, most importantly, appealing for government subsidies.

AGL last week approved a 250MW battery at its Torrens Island site in South Australia, the latest move in a plan to hit 850MW of battery storage by 2024. The 250MW battery will have one hour duration rather than the four hours originally envisaged. It also plans to proceed with a 200MW, four-hour duration battery at its Loy Yang A coal plant in the Latrobe Valley.

Source: The Australian