Energy supply and demand don't always align. When they don't, the cost of that gap gets passed straight down the bill.

Today, we're changing how that works.

The problem

Renewable energy is now the UK's biggest source of electricity. That's a good thing. But it comes with a challenge: renewable output varies. When supply falls short of what was forecast, suppliers need to cover the gap - fast.

Right now, most do this through the wholesale market. They buy whatever power is available at whatever price the market sets at that moment. Those are usually the most expensive moments to buy. And that cost doesn't disappear: it ends up on customer bills.

The way the market is currently structured, this is the default response to imbalance. It's how the system was designed.

What is hedging?

In energy markets, hedging is a way to manage uncertainty. It's about protecting yourself from prices you can't predict in advance.

Most suppliers do this financially. They take out contracts in advance - essentially bets on where prices are heading - so that if the wholesale price spikes, the contract pays out and offsets some of the damage.

Think of it like travel insurance. Before your trip, you take out a policy. If your flight gets cancelled and you have to book a new one last minute, the insurance pays out - and that helps. But you still have to go and buy that new flight at whatever price is available that day. The payout softens the blow, but you're still exposed to whatever the market charges in that moment.

Financial hedging in energy works the same way. The hedge pays out when prices are high. But suppliers still have to buy the actual electricity from the wholesale market when they need it - at that moment's price, which is often extremely high because everyone else is scrambling for power too.

The money flows: pay the high wholesale price, get some back from the hedge. The net cost is still elevated. And those costs still flow through to customers.

What is physical hedging - and why is it different?

Physical hedging is how you truly protect yourself against a price you don't know yet. Think of it like booking a hotel in advance: you lock in a rate rather than paying whatever's available the night you turn up. There are no additional costs when you arrive - you've paid for what you get, and what you get already exists and is waiting for you.

In energy, that means reserving real power in advance from real assets - like batteries. It's already contracted and ready to go before you need it. So when the gap between supply and demand appears, you're not scrambling to buy power at whatever the market charges in that moment. You've already secured it.

You're not reacting to the market. You've already moved before the gap appears.

What tem and Electron built

Electron runs one of the UK's biggest flexibility marketplaces. They work with battery storage operators across the country - assets that can respond quickly and deliver power when it's needed.

tem and Electron have combined that infrastructure with tem's transaction model to create the UK's first physical-hedging market.

Through Electron's marketplace, tem agrees deals with battery storage operators in advance. Those operators keep ownership and control of their assets, but commit a portion of their capacity under short-, medium- and long-term contracts.

When renewable output falls short, tem calls on that reserved capacity through Electron's platform instead of going to the wholesale market. The gap is filled. Without the last-minute premium.

For battery storage operators, this creates a new, reliable revenue stream - reservation payments for committing capacity, and utilisation payments when that capacity is called upon. These sit alongside existing revenue routes, not instead of them.

Why this matters

As Joe McDonald, tem's CEO, puts it: "The result is a more complete, end-to-end transaction model for electricity — one that reallocates value away from intermediaries and back towards the assets and participants that actually keep the system running."

Jo-Jo Hubbard, CEO of Electron, adds: "tem is introducing new revenue streams for asset operators, and the factors that make today's capacity market better suited to gas than low-carbon technologies don't apply here."

For businesses: more stable costs, less exposure to the wholesale spikes that push bills up without warning.

For battery storage operators: a new, secured revenue stream that works alongside existing market participation.

For the grid: a more cost-efficient way to stay balanced as variable generation grows.

The UK's first physical-hedging market is live.

Power, as it should be.