Energy companies around the world still maintain that natural gas (perhaps cleaned up with a puff of hydrogen) is the “transition fuel” that will take us to net zero. Despite the current crisis of price and supply in the gas market, it’s described by BP as “resilient” and by Centrica as “more affordable than other energy sources”.
“It’s bollocks,” Greg Jackson, the founder and CEO of Octopus Energy, replies, when I ask what he makes of this idea. “Everyone wants to talk about the transition fuel – maybe a 20 per cent hydrogen mix in our gas supplies, that kind of thing… Even if the hydrogen was zero-carbon – which, by the way, the creation of hydrogen so far in the UK at scale is definitely not – it would only reduce the carbon emissions of gas by 6-8 per cent because of the lower energy density, [and] it would put bills up dramatically, because hydrogen is a lot more expensive.
“There are companies whose entire asset base [is] in gas,” he continues, “and they will relentlessly try to tell us gas is the solution, or hydrogen is the solution. They’re not doing it because they care about the planet, and they’re not doing it because they care about bills.”
The UK’s biggest energy companies might shrug off such strident criticism from a campaigner, but Octopus has rapidly ascended to challenge what Jackson, 50, calls the “lazy oligopoly” of the big six.
On 26 September, it was announced that Octopus would be taking on the 580,000 former customers of Avro Energy, which had ceased trading the previous week. A day later, Generation Investment Management, a fund chaired by Al Gore, committed to a $600m investment in Octopus. In 72 hours, the six-year-old company had swelled to accommodate more customers than Scottish Power (to 3.1 million in total) and a higher valuation (approaching $5bn) than Centrica, the owner of British Gas.
Octopus began talking to Gore’s team two years ago. The current energy crisis emerged towards the end of the legal work and due diligence that is needed for such a deal to happen, and provided a dramatic test of the company’s ability to handle a large, rapidly developing challenge: “We had to demonstrate to the investors that taking on Avro wouldn’t get in the way of the long-term mission.”
This long-term mission is not only to supply renewable energy – all of Octopus’s tariffs are advertised as “100 per cent green”, and power either comes directly from renewable sources or is certified as renewable using the “Rego” certificates that Ofgem uses to match power sourced from the open market to renewable supply – but to disrupt the UK’s dysfunctional energy market.
Jackson’s career has been far from typical for the energy business. He began developing software (in the form of video games) at 16, then studied economics at Cambridge before running a mirror factory, then founding a number of technology-led businesses. He refers to Octopus as an “en-tech” business rather than an energy company, and uses an unusual management structure, dividing its 1,600 employees into highly independent teams, obviating the need for a formal HR department.
Octopus is also unusual in that, as well as selling to consumers, it derives more than half its value from the technology it licenses to other businesses in the UK and around the world (a model reminiscent of Amazon). Its Kraken platform was designed to take the traditional worry about renewable energy – that wind and sunlight vary in availability – and turn it into a virtue, by forecasting and monitoring the output of wind turbines and solar panels, and deciding where the energy should be used or stored when it is abundant. Among the companies using Kraken is E.On, the second-largest electricity supplier in the UK.
Jackson accuses the management of the UK energy grid as being stuck in the past, describing the National Grid as a “monopoly” and its control room as “like a minicab office. There’s some blokes with phones, and what they’ve always done is phoned up coal and gas power stations and told them to turn on and off. What we have to do now is… a million times more complicated.”
The result of this simplified central planning could be seen the previous week, when “electricity prices were colossally high, we were having to use lots of back-up supplies… [and] we were literally paying wind generators in Scotland to turn off, because there weren’t enough cables connecting Scotland, where the electricity was being generated, to England, where we needed it.”
The solution, he says, is for the energy grid to become more like the internet. “It is truly bonkers,” he says, that the UK persists with a system in which “central planners decide what cables are going to go where… you can centrally plan a system that’s got 100 power stations. You can’t centrally plan a system that’s got 20 million electric cars, two million houses with solar panels, a million houses with batteries, and 5,000 large-scale wind and solar farms.”
Jackson applauds Boris Johnson’s aspiration to make the UK “the Saudi Arabia of wind”, and believes such a project could transform our economy: “If we build enough wind generation to meet our winter needs, nine months of the year we’re going to have unbelievably cheap electricity. You’ll be able to fuel your car for free, make steel for free, do indoor farming with virtually zero energy costs.” But the current reality is that in government, too, the pace of change is frustratingly slow: a wind farm can be built in 12 months, and an undersea cable between the UK and France can be laid in ten days, but approval and grid connections can take years.
“We need to learn from the pandemic,” Jackson says. “We’re in a double crisis now: a cost crisis, and a carbon crisis. With the pandemic, we took the 15 years it usually takes to make a vaccine, and did it in less than a year. We need to work like that now on the clean energy system.”
This article appears in the 13 Oct 2021 issue of the New Statesman, Perfect Storm