As Japan deregulates electricity, this startup lets consumers compare suppliers

Yohei Kiguchi, CEO of Enechange

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This article is part of Tech in Asia’s partnership with Disrupting Japan where we publish the revised transcripts from the show’s podcast interviews with Japanese entrepreneurs. This is heavily revised from the original transcripts. For the full interview, go here.

While power regulation gets most of the press, most of the market disruption is happening on the retail side, with hundreds of companies entering the market and offering steep discounts. Around the world, electricity consumers have never had this much choice.

This is where Enechange comes in. It is an energy-switching website that allows consumers and businesses to shop for the best-priced energy supplier. It’s one of the innovative startups in the newly deregulated energy market in Japan.

Yohei Kiguchi, CEO of Enechange, talks about the company and the market.

nWhat attracted you to the business?n

Energy deregulation was happening all over the world. When the market gets deregulated, this kind of business model—which did not exist in Japan yet—was set to happen anyway.

We intentionally started the company in April 2015, exactly one year before the market deregulation, so we could prepare well.

nTell us about the other companies you’ve started.
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I started to have an entrepreneurial experience at 21, running a company in Japan for three years. Then, I went to the UK in 2012 as a Cambridge student, getting my master’s degree and then a PhD in energy technologies.

In 2013, my friends and I started Cambridge Energy Data Lab, of which Enechange and SMAP Energy are spin-offs.

nWhat is Enechange’s business model?n

There are around 70 million potential customers in Japan, and we get around 2 million average monthly visitors on the site. Just like in every energy comparison website, our service is free for customers but we get commissions from our suppliers.

nAre people mostly switching based on price?n

Yes. We were actually hoping that people switch energy suppliers because they want a greener company or home. But we found that around 95 percent of customers say they’ve switched because they found something cheaper.

They’re not necessarily after the cheapest supplier, though. When the market was opened one and a half years ago, there were just 10 companies supplying electricity in Japan. But all of a sudden, the market became really crowded, though it’s starting to shrink now with mergers and acquisitions. So now, there’s probably a maximum of 100 players in the market. Seventy of those are listed on our site.

nHow do you select suppliers?n

First, they need to agree with our commission model. Second, we interview them to see the company’s quality. If the company doesn’t have any kind of experience or a good criteria to be an energy supplier, we would not put them on.

nDo you view shopping comparison site Kakaku as a major competitor?n

We are actually in an official partnership with them. They’re basically under the umbrella of the energy-switch network.

So, it means that we dominate the market for industrial customers and compete with Kakaku for the residential sector. And I like that because it’s fair that consumers have two price comparison websites in a US$100 billion industry.

We are actually looking at this business as just an entrance to a huge energy industrial revolution. We are looking to provide much deeper solutions for energy companies, especially in terms of helping them acquire more customers. Right now, we help them manage their customers through smart meter data.

nWhat kind of analysis do you want to provide them with?n

The sole answer is profitability. Before the deregulation, profitability didn’t matter to energy companies, so they didn’t know how much they are earning or losing. But now that the market is deregulated, these companies are forced to compete. They started caring about profitability, so they now need to analyze some data.

Energy companies are also rushing to adopt new technologies and know more about their customers. So, we are kind of monopolizing customer analysis for businesses in Japan.

nWho do you think will win the market: low-cost providers or big brands?n

I think a company with high operational efficiency can win by analyzing data. As you know, a regional energy company with 50 years of legacy is naturally very slow and reluctant to adopt. It’s the same with huge organizations in other industries. But the energy business is all about data.

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There are now over 400 companies in Japan’s new deregulated retail energy market, but startups are having a hard time competing in the main markets of generation, transmission, and retailing. So far, almost all of the winners there have been the big familiar names.

However, startups like Enechange are succeeding at the margins, but not by trying to take business away from the large established players. Instead, they create entirely new business models and take advantage of the niches opened up by the large regulatory shifts.