Axle Energy's UK Virtual Power Plant Set for $25m Expansion

It is no secret: modern energy infrastructure can be very, very expensive.

Take Hinkley Point C, for instance. The nuclear power station, which has been under construction in the UK since 2017, is expected to cost tens of billions by the time it is finished in 2030. 

Meanwhile, a recent update from NESO, the UK's national energy system operator, estimated that the country's upgrades to the grid could cost around US$119bn in the fullness of time. 

But what if there was a way to make better use of the energy that we already have in the grid, without the need for any new generation whatsoever? That is the pitch of 'virtual power plants'. 

For laypeople, VPPs are networks of decentralised energy assets – things like EV chargers, home batteries and solar panels – which are controlled by sophisticated software.

The software links all these resources together, allowing them to function together as one flexible power plant, capable of balancing the supply of and demand for electricity.

Axle Energy, a London-based start-up, is one of the fastest-growing companies in the UK's VPP market.

Having recently raised US$25m in a funding round led by Energize Capital, the firm is set to expand its virtual network far wider across the country.

Inside Axle's network

Before this latest cash injection, Axle had already coordinated more than 300,000 connected assets in its network.

Together, these assets represent more than 2GW of flexible capacity. For context, the UK's demand for electricity over the past year was an average of 30.7GW, according to the National Grid.

Axle likens its the power of its VPP to the output of a single nuclear power plant, giving some sense of scale to what might otherwise seem an abstract figure.

But how exactly does it work?

During periods of peak energy consumption, VPPs are able to draw power from their network of assets to cater to demand. This can manifest as the discharging of home batteries in the local area, or slightly adjusting smart thermostats.

These adjustments are imperceptible to homeowners, but they make a big difference to the network when thousands of energy networks are coordinated together.

What's more, people who choose to be a part of Axle's network will be paid to participate, earning around £10 (US$13.44) a month on average. Collectively participants earned millions of pounds last year according to the company.

Karl Bach, the CEO and Co-Founder of Axle Energy, believes that this kind of model could be the future.

"Millions of EV chargers, home batteries and heat pumps already contain flexible capacity, but most of it sits unused," he says.

"Virtual power plants unlock that capacity, allowing those devices to support the grid when demand is highest and reduce exposure to volatile fossil-fuel markets.

"That creates value across the whole energy system. It lowers the cost of balancing the grid, rewards consumers for participating and makes better use of infrastructure that already exists.”

The US$25m in funding will go towards expanding Axle's platform further across the UK and into international markets, while it will also support the building of deeper partnerships with vehicle manufacturers, utilities and fleet operators.

Axle estimates there are 75 million eligible energy assets across Europe and the US.

Together these could represent around 375GW of potential capacity, though converting that theoretical pool into usable flexibility will require far wider adoption than the company has so far achieved.

The value of flexibility and the question of energy security

The pitch behind Axle's business rests on a problem that is familiar to grid operators the world over.

Simply put, electrification and the growth of data centres are pushing up electricity demand at a pace that many power systems were not built for.

At the same time a growing share of generation comes from variable renewable sources such as wind and solar, which do not produce power on demand in the way gas or coal plants do.

Karl argues that flexibility offers a quicker fix than building entirely new infrastructure.

"Virtual power plants unlock capacity from infrastructure that already exists, bringing flexible capacity online in weeks rather than years and reducing the need to rely on expensive fossil-fuel generation when demand spikes," he explains.

Karl also believes that these kinds of solutions can boost energy security and resilience at a time when the world is still reeling from the energy crisis engendered by the conflict in the Middle East.

"Energy security is no longer just about where our energy comes from," he says.

"Recent geopolitical events have highlighted the risks of relying on international commodity markets, while new generation and grid infrastructure can take years to build."

Inspiring confidence in investors

Tyler Lancaster is a Partner at Energize Capital, the firm that led this latest funding round. He has spent years observing the VPP sector, looking for the right company to invest in. In his eyes, Axle ticks all the right boxes.

"As energy software investors, we have researched the VPP market for a decade, watching for the right team to scale this technology," he says.

"Axle brings the most comprehensive vision, experienced and agile team, and customer-aligned, scalable business model we’ve seen.

"As US and European markets face a watershed moment for grid strain due to AI power demand, we believe Axle can be a blueprint for what can become a global solution."

Accel was among the companies to invest in Axle. Zhenya Loginov, who is a Partner at the firm, is enthusiastic about the project's future.

"We believe flexibility will become one of the most important layers of the modern energy stack," he explains.

"Karl, Archy and the Axle team have built an impressive platform that helps energy companies unlock and monetize flexibility from assets that already exist.

"With more than 300,000 connected devices and over 2GW of capacity already under management, they have established themselves as one of the leaders in this category, and we’re excited to continue supporting their growth."

The VPP market

Axle is not the only company chasing this opportunity right now. Grid flexibility and demand response have attracted a wave of investment globally as operators search for cheaper alternatives to peaking plants.

Looking to the future, Karl sees VPPs like Axle's playing a major part in decarbonisation, affordability and energy security.

“Virtual power plants will play an increasingly important role alongside traditional infrastructure, helping to create a more connected and flexible grid," he suggests.

"As more people adopt EVs, home batteries, heat pumps and other smart energy devices, the amount of flexible capacity available will continue to grow.

"We estimate there are around 75 million eligible energy assets across Europe and the US, representing approximately 375GW of potential capacity.

"As electricity demand continues to rise with AI and electrification, virtual power plants could help modern grids make better use of the infrastructure that already exists and reduce the need to build expensive new capacity.”