Jennifer Sieg meets Joe McDonald, co-founder of renewable energy platform tem., to discuss what he believes can be done to save small businesses from high energy costs
Small businesses across the UK have had to face the wrath of rising energy costs and pressing economic uncertainties for years.
Just last week, a Cornwall Insights report warned businesses could face higher energy bills over the next few years, set to be hundreds of thousands of pounds higher than pre-crisis levels.
Entrepreneur Joe McDonald is just one of many who has found himself fed up with it.
McDonald, 35, co-founded AI-generated renewable energy platform tem. in 2021 in an effort to provide small businesses a fair playing field against big energy companies.
The entrepreneur has spent over a decade in the energy industry, first with the launch of his electric utility start-up Limejump in 2013, which was eventually snapped up by oil and gas giant Shell.
Following the acquisition, McDonald couldn’t help but question the future of technology in the clean energy space and whether there was potential for “generational” change.
This curiosity led him to curating a game plan for tem., which now eliminates the “middlemen and intermediary fees” causing a blow to businesses, allowing them to directly purchase, sell and track their energy from renewable sources.
“All we do is allow a buyer – such as a small business – to transact and purchase their energy directly from a renewable generator [and] in doing so they pay less,” he says.
Creating a balance
McDonald can still remember the lightbulb moment for tem. like it was yesterday.
A friend of his had just decided to shut down her catering business – after five years in operation – due to an unprecedented 600 per cent jump in electricity costs.
“I still remember the same week I went for dinner with my other friend who worked for an energy trading company [and] he had just been paid an £800,000 bonus.
It was just that moment for me [I realised] this power imbalance here is so unfair and so crippling for so many businesses that we’ve got to do something about it.
“It was just that moment for me [I realised] this power imbalance here is so unfair and so crippling for so many businesses that we’ve got to do something about it.”
The idea was a long time coming. McDonald had always found himself increasingly frustrated with the lack of options available to small businesses in the wholesale market.
“I knew that there was a huge amount being taken out of the energy transaction in intermediary fees,” he says.
“A small business was paying about 35 per cent more than the true cost that energy was being produced at, which is crazy in any market to have that efficiency loss.”
To date, tem. has saved a total of £4.5m in transaction costs and removed 3,141 tons of carbon emissions.
Chasing the next big thing
McDonald says the 32-person team at tem. has a clear “playbook” to follow when it comes to disrupting an industry that has “been unchanged for the last 50 years.”
From February to September this year, the firm saw revenue surge by 434 per cent, with business and customer energy matching up 2,800 per cent.
It now has a total of 398 customers, 296 businesses and 102 energy generators.
We have an incredible playbook already laid out in front of us of both how the market will ultimately go and the lessons to be learned from what happened with fintech.
“We have an incredible playbook already laid out in front of us of both how the market will ultimately go and the lessons to be learned from what happened with fintech,” he says.
He adds: “You had huge banks, huge institutions owning [and] setting prices. Customers had no other option, and then we had the rise of Transferwise… [and] we had the rise of the neobanks like Revolut – it’s going to happen in energy.
“I think the difference being is large trading companies can absolutely still make profits through trading, but they shouldn’t be doing that at the expense of customer volume that they’re using in order to de-risk their own positions.”
However, with a market already dominated by major key players, brand awareness remains one of the most pressing challenges for tem. yet.
“Our biggest problem today is – and it sounds like it’s one of those answers to an interview when you ask about your weakness and you give strength – but our biggest problem today is we get [perceived as] ‘too good to be true’,” he adds.
Is there more to be done?
Europe is in the lead when it comes to the potential of birthing “trillion pounds companies” in the clean energy tech space, McDonald says.
“You look at Germany and the UK, the most sophisticated energy markets probably in the world, and that opportunity base and knowledge base actually is an unfair advantage against Silicon Valley,” he adds.
That is, of course, if the focus on long-term goals remains clear.
Mid-to-long term, we just need to build more decentralised renewable energy and it does seem like the Labour government really stepped into that and understood that.
“Mid-to-long term, we just need to build more decentralised renewable energy and it does seem like the Labour government really stepped into that and understood that,” McDonald says.
He adds: “It’s almost like roads, you need to build the renewable energy low carbon infrastructure, because it is – literally on a unit economic base – cheaper.
“That benefit means, ultimately, long term, you can decouple from the fossil fuel wholesale market, which are driven by European gas prices and oil prices, that sets actually a falsehood on the baseline of the energy costs.”
In the meantime, the entrepreneur says it all comes down to figuring out how to also protect small businesses from market volatility.
“This can be done by perhaps a more dynamic energy based [price] cap programme that isn’t just quarter by quarter, because guess what we saw this quarter? Energy prices were pushed up before the energy cap was announced,” he says.
CV
Name: Joe McDonald
Company: tem.
Founded: 2021
Staff: 32
Title: Co-founder & CEO
Age: 35
Born: Bath
Lives: London
Studied: Law
Talents: Throwing a baseball at 80 mph
Motto: “all in, all the time”
Most known for: Dungeons and Dragons campaigns
First ambition: I wanted to be a tractor driver, badly!
Favourite book: Business book – 7 Powers; personal book – Norwegian Wood by Haruki Murakami
Best piece of advice: Don’t be greedy!