Axle Energy's sprint to decarbonize the grid lights up with $9M seed led by Accel

The challenge of integrating renewable energy sources into the grid is a fast-unfolding startup opportunity. U.K.-based Axle Energy jumped on the chance to accelerate grid decarbonization when the business was founded early last year.

The global spike in energy prices triggered by the Ukraine war had pushed the idea of building software to support the energy transition front of mind, says CEO and co-founder Karl Bach (pictured above left with co-founder and CTO Archy de Berker). Increasing uptake of renewables was their other big impetus to take the plunge. The pair had worked for energy suppliers and flexibility providers in the U.K. and abroad before making the switch to being entrepreneurs.

Their startup, Axle Energy, is a B2B, back-end infrastructure business. It's focused on connecting flexible assets, such as electric vehicles, home batteries and heat pumps, to energy markets that aren't otherwise available for consumers to dip into — so their users can be rewarded for balancing the volatility of wind and solar energy. So, for example, if a household delays charging up their EV or switches to using a home battery they can get rewarded for helping the grid balance supply and demand.

The more intermittent supply provided by renewables increases volatility in the grid's energy supply. This is typically balanced by the grid tapping into fossil-fuel-generated electricity -- and those back-up plants are compensated with a rebate. But Axle's software offers an alternative, non-fossil-fuel based way for the grid to balance supply and demand.

"Axle is an energy flexibility company," explains Bach over a Zoom call. "We connect distributed assets like electric vehicles and batteries to energy markets. So we exist to decarbonize the grid. Of course, that means we have to stop running fossil fuels, and part of the solution is renewables. But that doesn't get us all the way there, because the sun isn't always shining and the wind isn't always blowing."

Renewables being unable to provide a consistently reliable energy supply has been a long-running attack line from the fossil fuel industry. What's the point of building loads of wind and solar farms if you still need a gas-fired (or diesel) power plant on standby as a backup? The answer to that straw man argument is simple: think smarter.

As more industries and assets get electrified, it becomes possible to build demand control infrastructure that can be used to reshape energy demand dynamically through fine-grained control of various types of connected devices. This is what Axle means when it describes itself as an "energy flexibility company".

Typically, only large commercial and industrial energy users have been paid to shift their demand when the grid was strained. Axle’s software allows the owners of smaller assets (like EVs) to play a role by aggregating their collective electricity demand and, essentially, being able to reduce it on demand. Payments Axle receives from the grid operator for shifting energy demand in this way are passed on, via its partner device makers, to those EV and other device owners.

"Today, the grid is very manual, top down command and control. We literally have human engineers in a control room picking up a phone and calling a power plant and saying can you ramp down in the next 20 minutes because we have some sort of issue. That works when you have a few large sites in the grid that can all be monitored by humans and adjusted by humans. That doesn't work when you have distributed generation, distributed consumption, all of that happening in real time," Bach told TechCrunch.

"So we believe the grid of the future will need to be much different. It will need to be distributed. It will need to be dynamically operated, so that every node in that network can respond to price signals in real time. And that will be a revolution — probably the biggest revolution we've seen in electricity grids in 100 years — and that's what we're we're working on to help unlock that from software infrastructure perspective."

"We believe it is possible — and we will be able — to kick out fossil fuels in grid balancing by 2030," he added, underscoring the scale of Axle's ambition. "The U.K. grid will need something like 40 gigawatts of flexibility by the end of the decade, and the potential is there for all of that to come from zero carbon sources."

There's no down-side for the device users themselves, as Bach tells it. Not only do they get paid for helping with grid balancing, they have the ability to override the optimization if, say, they do really need their EV charging immediately. "We're not taking control away from them," he emphasized. "We're saying, if you let us help optimize your system, we can make some money. But if it ever doesn't work for you, you're still in control."

Since launching its platform last year Axle says it's connected more than 15,000 flexible assets to energy markets, totalling over 85 MW of capacity (with a reach, via its partners, of 500,000+ UK households; or 6M+ globally). Partner asset manufacturers include the likes of SolarEdge, myenergi, Pod Point and GivEnergy — though it's not disclosing how many customers it's signed up yet.

Device makers benefit by being able to offer their consumers rewards to participate in grid balancing, driving customer loyalty. Typically customers will get direct payments for their contribution, per Bach (although the specifics of the rewards provided are down to Axle's partners).

"By the end of the year, we should be able to offer end users, via our partners, savings of [up to £400 per EV or home battery per year]," he said, stipulating that the company expects to reach that level of pay-out by connecting into more of the available U.K. energy markets than it's currently accessing.

To achieve full coverage of the U.K. energy markets in this fast sprint timeframe, Axle will need to expand its engineering team; it's announcing a $9 million seed raise to do just that. The funding will also be used to expand into other markets in Europe. (Bach won't be drawn on where as he says they've not yet chosen the next targets.)

"We believe we're at an inflection point in this market, and within the next 12 to 18 months, we will see massive expansion in this market — not just in the U.K., but across countries and Europe and globally. And we want to build the complete software package to enable our customers to do so. So we raised a larger round so that we are able to scale to meet the need," he said. "And if you look at the broader climate challenge, of course we have no time to waste. This gives us the firepower to scale as as fast as needed to meet the market."

"We're scaling very quickly," he added. "Our existing clients … have sold more than 6 million of these distributed devices globally. And if you look at the growth rates of people buying EVs, people buying [home] batteries, that's going to increase substantially in the coming years. And what we're doing is we're improving this business case for the consumer — so we're also helping unlock further growth in that market."

Could Axle's model work further afield, too, such as in the U.S. energy market? Yes but not just yet is the short answer. "The U.S. is in our plans, likely not in the next 12 months, but hopefully not too far after that," he said.

"The U.S. market, from a regulatory structure, is a bit different from the U.K. and Europe, and encompasses many different regulatory structures. But we're already seeing, for instance, in Texas, there's some interesting innovation," he continues. "Tesla has an offering for its battery customers as well as EV customers, where Tesla optimizes those batteries to support the grid, and the customer gets paid for doing so. That's a great example of what we expect to see across more of the U.S., and particularly as the rates and EV adoption increases there as well."

On the competition front, Bach suggests Axle is seizing a "white space" opportunity, though he notes rising startup attention on the energy transition — including some competition on balancing rewards from neo energy suppliers like the U.K.'s Octupus Energy. Another consumer-facing play that's focused on redistributing revenue from grid balancing is Sweden's Greenely. But Axle doesn't directly compete with either, given it's taking a B2B route.

Some traditional players that have focused on larger-scale commercial industrial assets for grid balancing are starting to look at smaller scale assets, too, per Bach. But, again, he argues that its focus on building back-end infrastructure for distributed energy flexibility sets it apart.

The $9 million seed round is led by Accel, with participation from existing investors Eka Ventures and Picus Capital. Notable angel investors also participated, including Amit Gudka (founder and CEO of Field Energy); Sierra Peterson (founder of Voyager Ventures); Hanno Renner (founder and CEO of Personio); and Nico Rosberg (Formula 1 World Champion and sustainability entrepreneur).

The seed funding brings Axle's total raised since it was founded back in February 2023 to around $10M (£8M).

"If you look at the challenges grid operators are facing all over the world — in the U.S. and Australia and Japan, etc. — they're all trying to decarbonize. They're all facing quite similar challenges. So even if the exact regulatory structure is a bit different, they're all learning from each other in this new transition," he said. "We are going into a brave new world that nobody has has fully seen, and so we're working together to make that a reality."