October 9, 2025 • 38 mins
The UK used to be a shining example of how to act on climate change. It created one of the world’s first climate laws in 2008, which bound the government to reduce emissions on tight deadlines. That law used to have cross-party support, but that’s no longer the case with politicians trying to make climate a wedge issue.
This week on Zero, Greg Jackson, chief executive officer of the UK’s largest energy retailer, Octopus Energy, joins Akshat Rathi to discuss his plan to bring down bills and keep the public on the green side.
Explore further:
- Octopus Energy Plans to Spin Off Technology Arm Kraken - Bloomberg
- Octopus Energy Opens Door for Chinese Wind Turbines in UK- Bloomberg
Zero is a production of Bloomberg Green. Our producer is Oscar Boyd. Special thanks to Eleanor Harrison Dengate, Sommer Saadi and Mohsis Andam, Laura Millan and Sharon Chen. Thoughts or suggestions? Email us at zeropod@bloomberg.net. For more coverage of climate change and solutions, visit https://www.bloomberg.com/green.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to zero. I am Akshatrati this week how to
make clean energy cheap. The UK, the country I now
call home, has been a shining example of how to
(00:21):
act on climate change. It created one of the world's
first climate laws back in two thousand and eight that
bound the government to reduce emissions on tight deadlines. The
country has succeeded in rapidly replacing coal with renewables, shutting
its last remaining coal power plant in twenty twenty four,
and the ruling Labor government now wants to reach carbon
free power by twenty thirty, but there's a risk that
(00:43):
the progress may be undone. The climate law used to
have cross party support. That's no longer the case. The
Conservative Party leader Kemy Badenock announced last week that her
party will repeal the climate law if it gets back
into power, and the Anti Immigration Party, which these days
ranks higher in some polls than the Conservatives or the
(01:04):
incumbent Labor Party, also wants to get rid of the
net zero by twenty fifty goal. The UK public still
widely supports climate action and another election won't take place
for nearly four years, but the cost of living crisis
and persistently high energy prices are opportunities that anti climate
politicians are ready to exploit. This is not just a
(01:27):
British story. Around the world there are politicians successfully pushing
back on climate policies, but how the UK deals with
the backlash will hold lessons for others. Today, I'm joined
by Greg Jackson, the CEO of Octopus Energy. Octopus was
founded in twenty fifteen and has now become the UK's
(01:47):
biggest energy retailer. Its software subsidiary, Crack and Technologies, serves
seventy million households in twenty seven countries. Greg also sits
on a board to support and challenge the UK government's
Cabinet Office, and he has made his name trying to
reform and restructure the UK energy market in ways that
he says, we'll bring down everyone's bills. So, ten years
(02:11):
into the rise of octoperc Energy, and with the energy
transition as contested as it has ever been, what is
Greg's plan to bring down bills and keep the public
on the green side and can he show that clean
energy is not only good for climate, but will also
make Western economies more competitive. Greg, Welcome to the show.
Speaker 2 (02:42):
Hey, thanks for having me.
Speaker 1 (02:44):
So octopercentergy has founded in twenty fifteen. Today it is
the largest retailer, serving about eight billion people.
Speaker 2 (02:51):
In the UK.
Speaker 1 (02:51):
Yeah, and full disclosure, I am one of those eight million.
Speaker 2 (02:55):
I hope we look after the UK.
Speaker 1 (02:57):
I've not had to call any customer care ever.
Speaker 2 (03:00):
That's a shame because you'd get a great experience of you.
Speaker 1 (03:03):
There's no problem so far.
Speaker 2 (03:05):
Honestly, it's one of the things by way, when we
first out building Octopus, people said, like, you know, service
doesn't matter, it's just a commodity. But the reality is
we never get a phone call about the commodity. No
one friends up about killer Watt's they found up about money.
Energy is the second or third biggest outgoing for most people.
It's kind of crazy that often it's confusing so giving
(03:25):
out standing service, whether it be through the app, but
if you want a phoneers or email, it's actually really important.
It's amazing to me that so many companies invest loads
of effort in not speaking to customers when every time
they do speak to us it's a chance to build
a relationship.
Speaker 1 (03:40):
And that probably speaks to some of the reason why
you went from being a startup in twenty fifteen to
being the largest retailer. But before we come to how
exactly you made that happen, help our global listeners understand
what makes the UK the place where such a success
story could happen.
Speaker 2 (04:01):
When we first started the company, the UK had a
very permissive regulatory regime enabling entrepreneurs and others to start
energy companies. When we started, I think there's about sixty
companies joining the market. My own view at the time
was most of them were kind of like corner shops.
They didn't really offer anything special. But we had a
(04:21):
vision of how you could transform energy to be dramatically
more customer centric and to use technology to drive down costs,
but also to for example, be able to make more
use of intermittent volatile renewables, be able to better manage
the optimization of batteries and electric vehicles, and so on.
So I guess the great thing about markets is you
(04:43):
get to see how different ideas and propositions, how successful
or non successful they are now interesting. Most of the companies,
by the way that we competed against, ended up going bust.
It didn't matter. I think that as a capitalist, as
an entrepreneur, you markets and the UK did have that
it's interesting on a global perspective that Europe, Australia, Japan,
(05:07):
and New Zealand have competitive energy retail markets, and outside
of Texas, the US doesn't. And I think it does
mean that you see more innovation in Europe and the
UK than you do, for example, in the US or
other monopoly markets.
Speaker 1 (05:23):
Yeah, and this is something that for people who don't
have open retail competitors, it's a bit hard to rub
their hand around because the cables and the power plants
are owned by a company that provides you electricity in
most of the world, and they send you a bill
and you pay them the bill. But in the UK
it's different. The owners of the assets can be different,
(05:45):
the service provider, the bill provider can be different. Why
is that beneficial?
Speaker 2 (05:50):
I think the way you should think about it is
like mobile phone contracts. So in the US you can
choose who your mobile phone provider is, and I think
in Europe and the UK and a few other geographies
you can choose who your energy provider is. So the
wires are owned by a monopoly company. But our job
as a retailer is to do what retailers do in
any market. We have to source the products, so we
(06:12):
will find the cheapest electricity and gas we can for you,
and then we'll work out the pricing and how you pay,
and we'll provide the service. In the old world, you
might say, well, look, you know, electricity is a commodity.
But the fascinating thing about electricity is, for example, among
other things, the price varies throughout the day, every half hour.
(06:35):
The cost price of what we're selling you is changing.
Now if we can essentially sell you more at the
cheapest times and you use a bit less the most
expensive times, we can bring your price down quite a lot.
Not everybody wants that, but enough people do that we
can make the whole system more efficient for everyone.
Speaker 1 (06:55):
Another core aspect of why you've become so big is
because of the software that powers Octopus, but also now
many other utility companies around the world, and it's called Crack,
and it's so valuable now that you're looking to spin
it out as its own company that could fetch maybe
fifteen billion dollars or more. Who knows what was the
(07:16):
missing piece in this ecosystem. And now we're not just
talking about the UK, but because you have customers in
tens of countries, what was it that you so successfully
exploited My co found.
Speaker 2 (07:27):
As I previously had a business that built enterprise software
where technologists at heart, and what we've seen in lots
of industries was that when you built the technology to
serve customers using modern cloud based, internet based AI based software,
you could transform everything. You could reduce the operating costs,
(07:48):
you could create a dramatically better customer experience, and you
could innovate in ways that no one had imagined. We
saw the opportunity to do that in utilities. Utilities globally
just energy utilities globally is a two or three trillion
dollar revenue sector and it runs mainly on mainframes and
software that's fifty years old. So we saw the opportunity
(08:11):
to build essentially an operating system, end to end software
shop be five for utilities that would enable utility to
be dramatically more customer centric and to operate much more efficiently.
We actually approach the utilities and said, hey, look, we
want to build this software, and utility is said to
us something along the lines of we need somebody to
(08:34):
do it first. It sounds good, but where risk averse.
Someone's got to do it first, and we realized that
actually we would have to build our own utility, Octopus,
in order to be able to demonstrate and develop the
software Kraken. Now, over time Octopus went on to be
a very successful demo client. You know, became the biggest
energy utility in the UK for example, and operates in
(08:56):
very fast growing in a bunch of other countries. So
we were able to not only demonstrate that it worked
for us, but then start licensing it to others. And
today Kraken's licensed around the world. Got seventy five million
licenses from zero four years ago. Five years ago, it's
transformed utilities. What one utility used to employ ten thy
(09:17):
five hundred people and had a customer satisfaction rate of
two out of five. By the staff satisfaction rate of
two out of five they implematic Kraken headcamp fell from
ten thousand to three thousand. Wow, but the staff satisfaction
and the customer satisfaction both went from two five to
four out of five. And they went from losing hundreds
of millions of eurosper to making hundreds of millions. So,
(09:37):
you know, Krackan really does transform organizations.
Speaker 1 (09:40):
If we take the success that you've been able to
create not just in the UK, but through these ideas outside.
There is one aspect of the UK that has enabled it,
which is that the UK was committed to acting on
climate because it passed a Climate Change Act in two
thousand and eight. One of the very I wrote a
(10:01):
book called Climate Capitalism, which was about solutions to scaling
around the world, and the Climate Change Act is one
of those because it's now being copied around the world. Crucially,
though that was backed by a cross party consensus. We're
talking on October third. Earlier this week, the Conservative Party
(10:22):
leader Jimmy Bedenock said she wants to repeal the Climate
Change Act. The Reform Party, which is sometimes in polls
higher than Labor or the Conservatives, wants to get rid
of the net zero by twenty fifty target. What happened
to the cross party consensus because the public support for
climate action hasn't fallen that dramatically.
Speaker 2 (10:42):
Yes, I think you can't ignore what happened in the US.
You went from an administration that passed the IRA, you know,
one of the biggest commitments to government support for a
specific set of industries in history world changing, to an
administration that use the phrase drill baby drill. I think
(11:02):
that has really set the tone in a bunch of
European countries, including the UK, where there is now an
intense debate about our future of energy. But we can
step back a sec right. A lot of the policies
that have been pursued, that were set out with good
intent to drive clean energy have ended up putting bills
(11:24):
up now they don't need to. The technology to a
clean energy are getting cheaper every year, and there are
parts of the world where we can really see that now,
making for cheaper energy while getting cleaner, while improving energy abundance.
I think in the UK and parts of Europe, the
(11:45):
markets have not been reformed to enable clean energy to
bring bills down, which means that at the moment, for example,
in the UK, we've just passed a point where we
spent a billion pounds at one point three billion dollars
paying wind farms to turn off on windy days and
paying gas plants to generate instead. Because we've built the
(12:07):
wind farms in the wrong places. We haven't built the
grid to keep up, we haven't built the flexible market
to use that wind power when it's available. What we
should treat all this as as a wake up call
that we cannot pursue clean energy at any cost. We've
got to pursue the lowest cost energy whilst being clean,
(12:28):
and I think that would dramatically change policy. But you
also make the very good point public support has not
collapsed for clean energy. Our polling has shown that consistently
over forty percent of people in the UK support net
zero and fewer than around twenty percent don't support it,
but it's fragile. Our polling also shows that if energy
(12:49):
bills keep going up, support for clean energy for net
zero collapse US from forty percent to thirteen percent and
opposition increases. But if any bills come down, support for
net zero increases and opposition drops. If you care about
clean energy, you have to start caring about cost.
Speaker 1 (13:10):
And this is something you have thought about a lot.
You've recently been appointed to the UK's Cabinet Board, which
says on the website to support and challenge ministers. What
are three recommendations that I am assuming you've already given them,
that they must do to try and hit both clean
and cheap.
Speaker 2 (13:30):
So my government role specifically doesn't touch energy, because obviously
that way too much of a conflict of interest. I
hope that I can help the government with technology transformation,
but I think in energy, look, I've been pretty outspoken.
I spent the last year urging the UK government to
create a more granular energy market, essentially to have locational
(13:51):
pricing in the wholesale market. If I could very briefly
explain it, right it in most energy markets there's a
two stage process for seting the electricity price. First you
have an auction, and in the auction, every generator submits
their bids. The most expensive bid to make it through
sets the price that everybody will get paid.
Speaker 1 (14:11):
Yeah, marginal pricing is margin.
Speaker 2 (14:13):
Place, you know, that's the wholesale cost. In the old world,
that worked very well because all the generation was coal
and gas basically, so all the generation had broadly speaking,
the same input costs, so they have a very similar
cost curve in the auction. But today you've got generation
which you know, solar and wind have got no input cost.
(14:35):
So if it's sunny or windy, you've got an abundance
of cheap electricity, but you're still paying them the same
price that you pay people like gas plants who've got
a high input cost, which means you don't get the
benefits of the renewables at the good times, but then
worse than that, you typically have a second stage. In
the UK's called the balancing market. And what happens is
(14:55):
the energy system operator people in charge of the grid,
look at the auction results and like groundhog Day, they
are surprised to find that some of the generators are
in a location where the electricity won't get to market
because there's not enough grid. But they still pay them,
and then they pay somebody else to generate and the
cost of that is growing exponentially because we built our
(15:18):
renewables not in the places where we need the electricity,
but in the places where it was cheapest of whether
you've got the hight substances or whatever. Now that was
okay when renewables were a small part of the system.
Today in many countries in Europe you know the system's
outbreaking point because of the cost and the inefficiency of this.
(15:38):
If we introduce locational pricing, first of all, you'd eliminate
all the waste in that two stage auction, because in
the first stage you wouldn't have a load of generator's
bidding that can't actually supply, and over time you'd encourage
investment into the locations that need it. The highest price
locations would be the most attractive places to build. And
(16:01):
that stuff could be win farms. We also be solar farms.
It could be batteries and consumers. Like you know, in
the high price locations, it's more cost effective them to
put solar panels on their roofs and batches in the homes.
In the cheapest locations, they buy electric cars. That markets work.
We need more markets.
Speaker 1 (16:17):
I know you're very passionate about this, and I know
this not just because I've seen you in the news,
but you have been in my bills. My Octomus bills
had my bill at the top and then an image
of Greg Jackson with a big sign saying stop this,
and then click on it. It went to a video where
you explain all of this as a side note. No
(16:40):
bill that I get from a utility has that, and
so I was a little surprised. So I asked my
energy team and they ran it past Offchem and they
said off Jim said, there are no rules that restrict this.
If Octopus is doing it, nobody else is doing it.
I guess it's other people's lost opportunity to try and
lobby for what you're passionate about. But there is a
(17:00):
good reason why the UK has chosen not to do
locational pricing. You know, if I take the government's view
on this, they say, look, we've got a clean energy
mission to reach ninety five percent clean power by twenty thirty.
We have a whole set of transmission lines that we
know we are going to build, many of them are
in planning. If we suddenly shift to this new form
(17:21):
of pricing, there will be a problem because we'll have
to stop building a bunch of things that we were
planning to build, and it will create a rupture in
the market and market's like certainty. So that's the reason
they've decided right now not to have locational pricing. Is
there a way where both parties can come to a
point where locational pricing may be applied to the UK.
Speaker 2 (17:43):
I'm not going to be churlish and keep lobbying for
something that has been ruled out. The reason I explained that, though,
is I think it helps us see the problems we
need to solve in some way. You ask me for
three proposals. The first one was some form of more
granular market, so we can operate the system more effectively
in the attract investments of right places. But the second
one is we need to stop spending so much money
(18:04):
on infrastructure. You talked about the grid bill there, right.
If you can deliver people's electricity needs with less new grid,
that is a good thing. Right, Infrastructure costs a lot
of money, and we also know that in mature economies
it's increasingly hard to build infrastructure. I would say, find
ways to build less new infrastructure and get more out
(18:25):
of the existing infrastructure would be a very good thing. Yeah,
very briefly on that thing about bills. Look, when we
first started our company, I remember the incumbent said energy
bills are impenetrable because regulation defines what they look like.
And it does. You've got a two page PDF that
is absolutely laid down. This applies almost every country, applies
(18:45):
and the regulated markets the US, it applies all over
the world. But you know, nobody understands what that bill means.
And I think blaming the regulation was an excuse. We
identified that you could attach that PDF to a plain
text email that explains in English, makes it really simple
to know what's going on. I think it's our duty
to explain to people why energy bills at the level
(19:07):
they are, and so the videos you describe and not
to used for lobbying, you know, I use them to
tell people why bills are high, but I also tell
them about the support we can give them, about ways
you can save money increasingly by the way, you know,
we do things like on sunny days and windy days,
we can give people free electricity over and above their
normal usage because it's abundant, and I tell them about
that in those videos. In the twenty first century, it's
(19:29):
kind of crazy that we still expect to bill to
be the same as it was when you had a
bunch of clerks manually typing them out fifty years ago.
Speaker 1 (19:39):
Yeah, I think it is very important that people actually
engage with the energy system. I think for do long
people have just become familiar with, well, turn the button on,
you'll get power, and you're good to go. We are
going through a change in our energy system, and the
(20:01):
more people engage with it, the better.
Speaker 2 (20:02):
Just on that very briefly right, energy consumption has been
treated as exogenous. That is, it's been treated that people
just use what they're going to use and then they'll
get a bill, and it's a sort of de facto
outcome of their choice. And the only way you could
save money was by using less. Imagine if we did
that with food. If the only way you could save
money on your food was by eating less food, that
(20:24):
would be a bad thing. However, you can save money
on your food by buying special offers, by buying their
own label beans instead of the branded and someone right,
and you make your choices. If we do the same
in energy, people can save a fortune without using less.
In fact, they can use more, and that's a good thing.
Speaker 1 (20:44):
Join us after the break for more of my conversation
with Greg Jackson, CEO of Octoperc Energy. And thank you
to everyone who has written a review of zero recently.
We appreciate all of them and please keep them coming. Recently,
Tom Key Bowman said this is one of the best
environment great clarity and practical ideas. Thank you, Tom. Going
(21:16):
back to bills, there's the fuel costs or whatever the
cost the power producer is providing you, But there is
the fixed cost that comes from the infrastructure that is
maintained to keep you know, at least in western countries
power running all the time. I grew up in India,
blackouts used to happen all the time. They still happen,
not as frequently, but they still happen and people are
kind of used to it. But here in the West,
(21:37):
oh my god, there's a blackout. There's a political crisis
on your hand. So you're saying, spend less on infrastructure.
What do you do to try and reduce infrastructure costs?
Because we've been told so many times that we need
to build out the grid to enable all this clean infrastructure,
this clean power to move from places where it's being
(21:59):
produced to where it needs it's to be consumed or
to be stored in expensive batteries or some new technology
that will be cheaper than batteries, but it's not ready yet.
How exactly do you reduce the infrastructure price?
Speaker 2 (22:11):
In the old days, when all the powers from coal,
you essentially had massive coal five power stations near the
coal fields because it's expensive to move coal around. In
today's world, solar farms can be anywhere, including on people's rooftops,
industrial rooftops. Increasingly, things like electric vehicles five percent of
the fleet today in the UK, but a third of
(22:31):
new sales. Over time, most economies are going to end
up being majority electric cars. Just give you some UK data.
The UK electricity system is fifty gigawatts. When we've all
got electric cars, the seventy five gigawatts a battery available.
The entire system is going to change and become more decentralized.
You mentioned expensive batteries. Ten years ago, batteries cost one
(22:53):
thousand dollars. Perticular hour last year was one hundred dollars.
The cheapest auction in China is years fifty two dollars.
The world's biggest batter com is now it's a ten
dollar battery. Something you end up with batteries. You don't
just need grid scale batteries. You can have them at
the end of a street, in individual houses, and of
course the batteries that come for free in electric vehicles,
actually cars, buses, everything. If you're building for that distributed system,
(23:16):
you need dramatically less grid because, for example, you can
store the electricity closer to the point of consumption. It's
something to get your head around in the world of electricity,
which it kind of bonkers, is every bit of grid
is designed for the peak load. It has to be
able to carry the peak load. The peak load might
only be a few seconds a year. But at the moment,
(23:38):
we will spend billions building a power line to handle
those few seconds. If instead we can shave those seconds
off by storing them at a battery and not having
to transmit the electricity avoid the peak, you can save
billions in grid build. We should be building for that system.
And you mentioned that, you know, these are all fixed
cost on the bills of households and businesses. The fixed
(23:59):
cost are brutal because once we've incurred that cost, there
is nothing you can do about it. You can't consume less,
you can't consume differently. You can generate as much as
like on your own rooftop, you still got to pay
those fixed costs. Minimizing the fixed costs should be a
mission for everyone in energy policy.
Speaker 1 (24:18):
And this idea of having infrastructure that is more distributed,
so there might still be more infrastructure, but they are
not the kinds of infrastructure that people opposed, right, you know,
the opposition for transmission lines is massive, and it's there
around the world, especially they're an anglosphere, but definitely there
(24:39):
in most rich countries. And this opposition is not new.
There was a famous book written by a senator in
Minnesota in the seventies about a power line that was
going from North Dakota to Minnesota that was going to
bring coal power to Minnesotans, and they didn't want it.
It wasn't a green opposition, it was didn't want power
(25:01):
lines because it was call power at that time that
was coming. So it was an environmental opposition. And now
you have the desire that the only way green energy
is going to be built is if you have also
these transmission lines. If you know that there isn't political
support for transmission lines, is it politicians just trying to
(25:24):
hit on a solution that's never going to work.
Speaker 2 (25:27):
Yeah, So I think what's happened is we've got stuck
on a path where the consequence of every decision made
so far is that you need more power lines. The
technology has changed, right, No one new batch is going
to get this cheap. No one new solar was going
to be three hundred times cheap, and it was forty
years ago three hundred times. We didn't know these things.
(25:48):
That's okay. Now we know these things, we are mad
to stay stuck on the path that we had previously chosen.
You mentioned earlier that you know, investors like policy certainty.
Of course they do, but you know, the investors in
I don't know, retailers didn't get policy certainty when Amazon
turned up. They just had to reform their business models
(26:10):
because technology changed. We need that thinking in energy, and
we really need it now in western countries because you
and I've spoken a lot here about essentially, you know,
euro at, the US, the UK, you mentioned India, you know,
but if we look at, for example, what's going on
in China. Right, seventy four percent of all the renewables
being built in the world today are being built in China.
(26:31):
China became famous for its coal plants, but coal power
plants in China have slowed down to a trickle. Their
utilization rate's dropped from sixty percent to fifty percent. They're
not building this renewables just to look pretty. They're building
because it's going to give them cheaper energy, plus energy
security and tackle their own concerns about environment, pollution and climate.
They're building so much of this infrastructure, so much of
(26:54):
this cheap infrastructure, that they're driving down. The cost a
wind turbin in China is one third the cost to
win tiebound in the UK. Solar panels that in some
countries now generating at one point two cents per unit.
Americans are typically paying fifteen to twenty cents a unit
for the electricity. In Britain they're paying thirty cents, and
yet we can generate not much more than a cent
(27:14):
in many parts of the world, and batteries are coming
down so much that you can use that solar nearly
twenty four to seven in two thirds of the world.
If we're not looking at what's happening in other countries
and we're sticking to the conversations in the sort of
the West, what we really are doing is kind of
locking in on landlines, just as the rest of the
world is building mobiles.
Speaker 1 (27:35):
Yeah, I mean, the China model is one that is
so tempting for people who think about climate change and
who think about the future of energy. There is a
risk with that model that is not replicable in the
West because the politics. It's an authoritarian state decides something,
does it. But you know, it's not socialists, it's capitalists.
(27:57):
There are real markets there, and there's hypercompetent among many
of the companies that build many of these solutions, but
there is a level of inefficiency that the government is
willing to take on to try and make a bet,
and that bet pays off. In August twenty twenty five,
China exported if you take just for that month, they're
(28:21):
green tech exports more than twenty billion US dollars in
twenty twenty four. For the entire year, the total sum
of US allergy exports was about twenty billion dollars. So
China is already doing on clean energy exports what the
US would have loved to have done on fossil fuels,
(28:42):
but can't even come close to match. And so there
is clear success story there, but to try and replicate
them in the West is really hard. UK is a
small economy, has been a de industrializing country for the
last fifty years. What do you think the UK can
do well?
Speaker 2 (28:58):
First of all, it's a great data point you had there,
contrasting Chinese exports of clean energy tech with US exports
of LERG. The bit that you didn't mention there makes
it even more powerful is the clean energy exports are
typically selling solar panels, winter mines, and batteries. It's hardware
(29:19):
which once the country has bought it will generate electricity
for a decade or two to come. Whereas with LNG,
the day you buy it, you use it is gone forever,
and so you know you can actually contrast the Essentially
it's a stop versus a flow, and that makes it
an even more powerful contrast. You mentioned the extent to which,
(29:39):
for example, the UK is de industrizing. We can't produce
cheap solar panels here. We can't produce cheap batteries probably,
but you don't need to. Cheap energy underlies every industry
you know, whether it be AI, data centers or clean manufacturing. Typically,
the value in a solar panel manufactured for China is
five dollars, essentially the gross profit whether they make the
(30:03):
value for an installer is two hundred dollars, and the
value for the consumer might be five hundred in terms
of the electricity generated over its lifetime. It doesn't matter
where you make them. What matters is using them. Already,
you talked about their twenty billion dollars of exports in
a single month. At the moment, China is soaking up
the vast majority of manufactures for itself deploying them in
(30:26):
the domestic market. But once its domestic market approaches saturation,
the salespeople for those companies are going to be all
over the world and will be a tidal wave of
clean energy products that will be you talk about politics,
the whole of East Age will be happy with them,
South As will be happy with them. Latin America to extend,
(30:48):
anybody wants that. You're going to have abundant, cheap power available.
And should the West really tie itself in knots on
the politics and end up becoming a declining economy when
everyone else will benefit from this stuff.
Speaker 1 (31:02):
Well, you are putting some of that to action, right.
You have built manufacturing for heat pumps here in the UK,
but some of the parts come from China because China
makes those parts and they make them cheap, and so
you take it from them. You've got a partnership with
BYD now to try and take the battery that is
sitting in a car but use it not just for
(31:23):
the car but also to try and charge the grid,
which is something that people thought one day we'll do,
but you are starting to do that now with Octopus.
This idea of using more distributed infrastructure has been there
for a long time. This idea of using demand flexibility
where people consume at the time and it's cheapest and
(31:44):
you encourage them to and they can has been around
as an idea for a long time, but Octopus is
putting many of those in action. What have you learned
from doing that?
Speaker 2 (31:55):
If you're as old as may, you remember Appay around
the ear two thousand when there was a form of
mobile incende called WAP Wireless Access Protocol and if you
tried that, he said, like, okay, the wilds intet doesn't work.
And then two thousand and seven Apple brought a bunch
of technologies together, so you know, batteries that were just
about good enough, multi touch screens that were just about
good enough, processes were just about good enough. Of wild connectivity,
(32:19):
it was just about good and so on to show
that while was not only possible, but it was transformative
for the world. And in the same way, you know,
people have tried this kind of flexible approach to energy
in the past, but we didn't have the technologies. You
need a lot of smart metering, You need a highly
dynamic electricity grid so there's enough variability to actually make
it worthwhile. You need technologies like batteries and APIs interfaces
(32:45):
to manage them, and you need a different form of
consumer relationship because they need to trust and benefit from this.
But once all those come together, this is huge. So
you mentioned that BYD deal that what we did with
BYD was worked with them on a specification for batteries
that can discharge into your house or the grid as
well as be charged for driving. Enabled us to launch
(33:06):
a product earlier this year, which was for a fixed
monthly fee, you lease a car and then get twelve
thousand miles of free driving year. And you get the
free driving because essentially, when your car is parked, we
will fill the battery with electricity at the cheapest times
and the most expensive times, will sell a little bit
of actuality back to the grid, and with the money
(33:28):
we make from that, we buy back some more cheap
electricity for driving. Collectively, we can give you free driving
and it makes money for us. I mean, what incredible offer.
You can't do that with petrol. And so I think
we do the same for houses. We now work with
house builders to build houses that don't have energy bills
because again in the same way, we've got solar pals,
battery heat pump and we will fill the battery when
(33:49):
it's sunny and then sell some of the electricity back
to the grid at the expensive times and across the year,
we'll use the money we've made from that to buy
you back electricity to run your heat pumpky house one,
and we guarantee no bills for five or even ten years.
Sometimes that's kind of flexibility in action at scale using technology.
You do have this crazy world now where on the
(34:10):
one hand we can be told that renewable energies putting
bills up, and then the other just give the two
examples essentially eliminates them. What we really need to do
is make these technologies more abundant and have the markets
we talked about earlier so that we can operate them
in the interests of consumers.
Speaker 1 (34:28):
If you take a really big step back, there is
something that is happening here in the UK that we
are seeing in many parts of the world tied to
high energy prices, tied to politicians learning from either Donald
Trump or trying and testing out anti climate policies and
whether somebody would buy them. For a long time, the
conversation among energy people has been about an energy transition
(34:53):
that we'll move away from the fossil system big we've
built over one hundred years spend trillions, tens of trillions
dollars to another system that's going to be clean, will
require tens of trillions of dollars in investment. But it's
also a moment where there is a trade war, there
are real wars, the norms of diplomacy are are being
(35:13):
blown apart. More leaders are talking about a rupture in
just the fabric of how things used to operate. But
the conversation and energy is still about the transition. If
you had to imagine a rupture in the energy world,
what would that look like.
Speaker 2 (35:32):
Well, first of all, I think just one quick word
on the transition. The reality in the West is that
twenty percent of our primary energy use is electricity and
eighty percent is fossil fuels. China has gone from ten
percent electricity to more than a third and growing in
the last twenty years. In the last twenty years, right,
and that's why chime is often now described increasing as
(35:54):
an electro state. And the focus we've had in the
West on the transition has all been on the generation side,
moving our electrics generation from coal to renewables, maybe a
bit of gas and nuclear. We haven't focused anywhere near
enough on the consumption side, so electric vehicles, which China
has now really begun to dominate batteries, increasing electric heating
(36:19):
and HVAC. So I think that electrication of end use
is actually, for example, in capital terms, there will be
six times more expenditure on the capital for end use
than there is on the generation of electricity. So the
reality is we've been focusing on that's quite a small
slice the pie, and we need to change that. In
(36:39):
terms of the rupture, I'm really struck by a conversation
I had with the CEO of DTech company that provide
electricity in Ukraine, and he said, it takes one Russian
missile to take out a gas power station, but it
will take fifty to take out the equivalent generation capacity
in wind turbines. I asked the Ukrainian member of our
(37:02):
team what we can do to help Ukraine, as you said,
build more wind turbites. The reality is the distributed energy
of wind and solar batteries is naturally more resilient, dramatically
more resilient and secure than being dependent on the flow
of gas every single day to keep your lights on,
(37:25):
empower you're heating, And I think the big rupture here
is emulating the Internet. Prior to the Internet, networks were
built with a sort of a central server and everyone
hung off it. And then the Internet's design criteria from
the US defense sector was to make a network that
(37:46):
couldn't be taken down because it didn't have a central
point of failure. We should think about it electricity the
same way.
Speaker 1 (37:52):
Greg, thank you for joining the show. Thank you very much, indeed,
and thank you for listening to zero. And now for
the sound of the week. That's the soundtrack to Octonauts,
a British cartoon that's pretty fun and not just for
(38:14):
the kids. If you liked this episode, please take a
moment to rate and review the show on Apple Podcasts
and Spotify. Share this episode with a friend or with
someone who celebrated the end of British goal. This episode
was produced by Oscar Boyd and Somersadi. Our theme music
is composed by Wonderly Special Thanks to Will Mathis, Eleanor
Harrison Dungate, Moses Andim Laura Milan and Sharon chen i'm
(38:36):
Akshatrati back soon.
Welcome to zero. I am Akshatrati this week how to
make clean energy cheap. The UK, the country I now
call home, has been a shining example of how to
(00:21):
act on climate change. It created one of the world's
first climate laws back in two thousand and eight that
bound the government to reduce emissions on tight deadlines. The
country has succeeded in rapidly replacing coal with renewables, shutting
its last remaining coal power plant in twenty twenty four,
and the ruling Labor government now wants to reach carbon
free power by twenty thirty, but there's a risk that
(00:43):
the progress may be undone. The climate law used to
have cross party support. That's no longer the case. The
Conservative Party leader Kemy Badenock announced last week that her
party will repeal the climate law if it gets back
into power, and the Anti Immigration Party, which these days
ranks higher in some polls than the Conservatives or the
(01:04):
incumbent Labor Party, also wants to get rid of the
net zero by twenty fifty goal. The UK public still
widely supports climate action and another election won't take place
for nearly four years, but the cost of living crisis
and persistently high energy prices are opportunities that anti climate
politicians are ready to exploit. This is not just a
(01:27):
British story. Around the world there are politicians successfully pushing
back on climate policies, but how the UK deals with
the backlash will hold lessons for others. Today, I'm joined
by Greg Jackson, the CEO of Octopus Energy. Octopus was
founded in twenty fifteen and has now become the UK's
(01:47):
biggest energy retailer. Its software subsidiary, Crack and Technologies, serves
seventy million households in twenty seven countries. Greg also sits
on a board to support and challenge the UK government's
Cabinet Office, and he has made his name trying to
reform and restructure the UK energy market in ways that
he says, we'll bring down everyone's bills. So, ten years
(02:11):
into the rise of octoperc Energy, and with the energy
transition as contested as it has ever been, what is
Greg's plan to bring down bills and keep the public
on the green side and can he show that clean
energy is not only good for climate, but will also
make Western economies more competitive. Greg, Welcome to the show.
Speaker 2 (02:42):
Hey, thanks for having me.
Speaker 1 (02:44):
So octopercentergy has founded in twenty fifteen. Today it is
the largest retailer, serving about eight billion people.
Speaker 2 (02:51):
In the UK.
Speaker 1 (02:51):
Yeah, and full disclosure, I am one of those eight million.
Speaker 2 (02:55):
I hope we look after the UK.
Speaker 1 (02:57):
I've not had to call any customer care ever.
Speaker 2 (03:00):
That's a shame because you'd get a great experience of you.
Speaker 1 (03:03):
There's no problem so far.
Speaker 2 (03:05):
Honestly, it's one of the things by way, when we
first out building Octopus, people said, like, you know, service
doesn't matter, it's just a commodity. But the reality is
we never get a phone call about the commodity. No
one friends up about killer Watt's they found up about money.
Energy is the second or third biggest outgoing for most people.
It's kind of crazy that often it's confusing so giving
(03:25):
out standing service, whether it be through the app, but
if you want a phoneers or email, it's actually really important.
It's amazing to me that so many companies invest loads
of effort in not speaking to customers when every time
they do speak to us it's a chance to build
a relationship.
Speaker 1 (03:40):
And that probably speaks to some of the reason why
you went from being a startup in twenty fifteen to
being the largest retailer. But before we come to how
exactly you made that happen, help our global listeners understand
what makes the UK the place where such a success
story could happen.
Speaker 2 (04:01):
When we first started the company, the UK had a
very permissive regulatory regime enabling entrepreneurs and others to start
energy companies. When we started, I think there's about sixty
companies joining the market. My own view at the time
was most of them were kind of like corner shops.
They didn't really offer anything special. But we had a
(04:21):
vision of how you could transform energy to be dramatically
more customer centric and to use technology to drive down costs,
but also to for example, be able to make more
use of intermittent volatile renewables, be able to better manage
the optimization of batteries and electric vehicles, and so on.
So I guess the great thing about markets is you
(04:43):
get to see how different ideas and propositions, how successful
or non successful they are now interesting. Most of the companies,
by the way that we competed against, ended up going bust.
It didn't matter. I think that as a capitalist, as
an entrepreneur, you markets and the UK did have that
it's interesting on a global perspective that Europe, Australia, Japan,
(05:07):
and New Zealand have competitive energy retail markets, and outside
of Texas, the US doesn't. And I think it does
mean that you see more innovation in Europe and the
UK than you do, for example, in the US or
other monopoly markets.
Speaker 1 (05:23):
Yeah, and this is something that for people who don't
have open retail competitors, it's a bit hard to rub
their hand around because the cables and the power plants
are owned by a company that provides you electricity in
most of the world, and they send you a bill
and you pay them the bill. But in the UK
it's different. The owners of the assets can be different,
(05:45):
the service provider, the bill provider can be different. Why
is that beneficial?
Speaker 2 (05:50):
I think the way you should think about it is
like mobile phone contracts. So in the US you can
choose who your mobile phone provider is, and I think
in Europe and the UK and a few other geographies
you can choose who your energy provider is. So the
wires are owned by a monopoly company. But our job
as a retailer is to do what retailers do in
any market. We have to source the products, so we
(06:12):
will find the cheapest electricity and gas we can for you,
and then we'll work out the pricing and how you pay,
and we'll provide the service. In the old world, you
might say, well, look, you know, electricity is a commodity.
But the fascinating thing about electricity is, for example, among
other things, the price varies throughout the day, every half hour.
(06:35):
The cost price of what we're selling you is changing.
Now if we can essentially sell you more at the
cheapest times and you use a bit less the most
expensive times, we can bring your price down quite a lot.
Not everybody wants that, but enough people do that we
can make the whole system more efficient for everyone.
Speaker 1 (06:55):
Another core aspect of why you've become so big is
because of the software that powers Octopus, but also now
many other utility companies around the world, and it's called Crack,
and it's so valuable now that you're looking to spin
it out as its own company that could fetch maybe
fifteen billion dollars or more. Who knows what was the
(07:16):
missing piece in this ecosystem. And now we're not just
talking about the UK, but because you have customers in
tens of countries, what was it that you so successfully
exploited My co found.
Speaker 2 (07:27):
As I previously had a business that built enterprise software
where technologists at heart, and what we've seen in lots
of industries was that when you built the technology to
serve customers using modern cloud based, internet based AI based software,
you could transform everything. You could reduce the operating costs,
(07:48):
you could create a dramatically better customer experience, and you
could innovate in ways that no one had imagined. We
saw the opportunity to do that in utilities. Utilities globally
just energy utilities globally is a two or three trillion
dollar revenue sector and it runs mainly on mainframes and
software that's fifty years old. So we saw the opportunity
(08:11):
to build essentially an operating system, end to end software
shop be five for utilities that would enable utility to
be dramatically more customer centric and to operate much more efficiently.
We actually approach the utilities and said, hey, look, we
want to build this software, and utility is said to
us something along the lines of we need somebody to
(08:34):
do it first. It sounds good, but where risk averse.
Someone's got to do it first, and we realized that
actually we would have to build our own utility, Octopus,
in order to be able to demonstrate and develop the
software Kraken. Now, over time Octopus went on to be
a very successful demo client. You know, became the biggest
energy utility in the UK for example, and operates in
(08:56):
very fast growing in a bunch of other countries. So
we were able to not only demonstrate that it worked
for us, but then start licensing it to others. And
today Kraken's licensed around the world. Got seventy five million
licenses from zero four years ago. Five years ago, it's
transformed utilities. What one utility used to employ ten thy
(09:17):
five hundred people and had a customer satisfaction rate of
two out of five. By the staff satisfaction rate of
two out of five they implematic Kraken headcamp fell from
ten thousand to three thousand. Wow, but the staff satisfaction
and the customer satisfaction both went from two five to
four out of five. And they went from losing hundreds
of millions of eurosper to making hundreds of millions. So,
(09:37):
you know, Krackan really does transform organizations.
Speaker 1 (09:40):
If we take the success that you've been able to
create not just in the UK, but through these ideas outside.
There is one aspect of the UK that has enabled it,
which is that the UK was committed to acting on
climate because it passed a Climate Change Act in two
thousand and eight. One of the very I wrote a
(10:01):
book called Climate Capitalism, which was about solutions to scaling
around the world, and the Climate Change Act is one
of those because it's now being copied around the world. Crucially,
though that was backed by a cross party consensus. We're
talking on October third. Earlier this week, the Conservative Party
(10:22):
leader Jimmy Bedenock said she wants to repeal the Climate
Change Act. The Reform Party, which is sometimes in polls
higher than Labor or the Conservatives, wants to get rid
of the net zero by twenty fifty target. What happened
to the cross party consensus because the public support for
climate action hasn't fallen that dramatically.
Speaker 2 (10:42):
Yes, I think you can't ignore what happened in the US.
You went from an administration that passed the IRA, you know,
one of the biggest commitments to government support for a
specific set of industries in history world changing, to an
administration that use the phrase drill baby drill. I think
(11:02):
that has really set the tone in a bunch of
European countries, including the UK, where there is now an
intense debate about our future of energy. But we can
step back a sec right. A lot of the policies
that have been pursued, that were set out with good
intent to drive clean energy have ended up putting bills
(11:24):
up now they don't need to. The technology to a
clean energy are getting cheaper every year, and there are
parts of the world where we can really see that now,
making for cheaper energy while getting cleaner, while improving energy abundance.
I think in the UK and parts of Europe, the
(11:45):
markets have not been reformed to enable clean energy to
bring bills down, which means that at the moment, for example,
in the UK, we've just passed a point where we
spent a billion pounds at one point three billion dollars
paying wind farms to turn off on windy days and
paying gas plants to generate instead. Because we've built the
(12:07):
wind farms in the wrong places. We haven't built the
grid to keep up, we haven't built the flexible market
to use that wind power when it's available. What we
should treat all this as as a wake up call
that we cannot pursue clean energy at any cost. We've
got to pursue the lowest cost energy whilst being clean,
(12:28):
and I think that would dramatically change policy. But you
also make the very good point public support has not
collapsed for clean energy. Our polling has shown that consistently
over forty percent of people in the UK support net
zero and fewer than around twenty percent don't support it,
but it's fragile. Our polling also shows that if energy
(12:49):
bills keep going up, support for clean energy for net
zero collapse US from forty percent to thirteen percent and
opposition increases. But if any bills come down, support for
net zero increases and opposition drops. If you care about
clean energy, you have to start caring about cost.
Speaker 1 (13:10):
And this is something you have thought about a lot.
You've recently been appointed to the UK's Cabinet Board, which
says on the website to support and challenge ministers. What
are three recommendations that I am assuming you've already given them,
that they must do to try and hit both clean
and cheap.
Speaker 2 (13:30):
So my government role specifically doesn't touch energy, because obviously
that way too much of a conflict of interest. I
hope that I can help the government with technology transformation,
but I think in energy, look, I've been pretty outspoken.
I spent the last year urging the UK government to
create a more granular energy market, essentially to have locational
(13:51):
pricing in the wholesale market. If I could very briefly
explain it, right it in most energy markets there's a
two stage process for seting the electricity price. First you
have an auction, and in the auction, every generator submits
their bids. The most expensive bid to make it through
sets the price that everybody will get paid.
Speaker 1 (14:11):
Yeah, marginal pricing is margin.
Speaker 2 (14:13):
Place, you know, that's the wholesale cost. In the old world,
that worked very well because all the generation was coal
and gas basically, so all the generation had broadly speaking,
the same input costs, so they have a very similar
cost curve in the auction. But today you've got generation
which you know, solar and wind have got no input cost.
(14:35):
So if it's sunny or windy, you've got an abundance
of cheap electricity, but you're still paying them the same
price that you pay people like gas plants who've got
a high input cost, which means you don't get the
benefits of the renewables at the good times, but then
worse than that, you typically have a second stage. In
the UK's called the balancing market. And what happens is
(14:55):
the energy system operator people in charge of the grid,
look at the auction results and like groundhog Day, they
are surprised to find that some of the generators are
in a location where the electricity won't get to market
because there's not enough grid. But they still pay them,
and then they pay somebody else to generate and the
cost of that is growing exponentially because we built our
(15:18):
renewables not in the places where we need the electricity,
but in the places where it was cheapest of whether
you've got the hight substances or whatever. Now that was
okay when renewables were a small part of the system.
Today in many countries in Europe you know the system's
outbreaking point because of the cost and the inefficiency of this.
(15:38):
If we introduce locational pricing, first of all, you'd eliminate
all the waste in that two stage auction, because in
the first stage you wouldn't have a load of generator's
bidding that can't actually supply, and over time you'd encourage
investment into the locations that need it. The highest price
locations would be the most attractive places to build. And
(16:01):
that stuff could be win farms. We also be solar farms.
It could be batteries and consumers. Like you know, in
the high price locations, it's more cost effective them to
put solar panels on their roofs and batches in the homes.
In the cheapest locations, they buy electric cars. That markets work.
We need more markets.
Speaker 1 (16:17):
I know you're very passionate about this, and I know
this not just because I've seen you in the news,
but you have been in my bills. My Octomus bills
had my bill at the top and then an image
of Greg Jackson with a big sign saying stop this,
and then click on it. It went to a video where
you explain all of this as a side note. No
(16:40):
bill that I get from a utility has that, and
so I was a little surprised. So I asked my
energy team and they ran it past Offchem and they
said off Jim said, there are no rules that restrict this.
If Octopus is doing it, nobody else is doing it.
I guess it's other people's lost opportunity to try and
lobby for what you're passionate about. But there is a
(17:00):
good reason why the UK has chosen not to do
locational pricing. You know, if I take the government's view
on this, they say, look, we've got a clean energy
mission to reach ninety five percent clean power by twenty thirty.
We have a whole set of transmission lines that we
know we are going to build, many of them are
in planning. If we suddenly shift to this new form
(17:21):
of pricing, there will be a problem because we'll have
to stop building a bunch of things that we were
planning to build, and it will create a rupture in
the market and market's like certainty. So that's the reason
they've decided right now not to have locational pricing. Is
there a way where both parties can come to a
point where locational pricing may be applied to the UK.
Speaker 2 (17:43):
I'm not going to be churlish and keep lobbying for
something that has been ruled out. The reason I explained that, though,
is I think it helps us see the problems we
need to solve in some way. You ask me for
three proposals. The first one was some form of more
granular market, so we can operate the system more effectively
in the attract investments of right places. But the second
one is we need to stop spending so much money
(18:04):
on infrastructure. You talked about the grid bill there, right.
If you can deliver people's electricity needs with less new grid,
that is a good thing. Right, Infrastructure costs a lot
of money, and we also know that in mature economies
it's increasingly hard to build infrastructure. I would say, find
ways to build less new infrastructure and get more out
(18:25):
of the existing infrastructure would be a very good thing. Yeah,
very briefly on that thing about bills. Look, when we
first started our company, I remember the incumbent said energy
bills are impenetrable because regulation defines what they look like.
And it does. You've got a two page PDF that
is absolutely laid down. This applies almost every country, applies
(18:45):
and the regulated markets the US, it applies all over
the world. But you know, nobody understands what that bill means.
And I think blaming the regulation was an excuse. We
identified that you could attach that PDF to a plain
text email that explains in English, makes it really simple
to know what's going on. I think it's our duty
to explain to people why energy bills at the level
(19:07):
they are, and so the videos you describe and not
to used for lobbying, you know, I use them to
tell people why bills are high, but I also tell
them about the support we can give them, about ways
you can save money increasingly by the way, you know,
we do things like on sunny days and windy days,
we can give people free electricity over and above their
normal usage because it's abundant, and I tell them about
that in those videos. In the twenty first century, it's
(19:29):
kind of crazy that we still expect to bill to
be the same as it was when you had a
bunch of clerks manually typing them out fifty years ago.
Speaker 1 (19:39):
Yeah, I think it is very important that people actually
engage with the energy system. I think for do long
people have just become familiar with, well, turn the button on,
you'll get power, and you're good to go. We are
going through a change in our energy system, and the
(20:01):
more people engage with it, the better.
Speaker 2 (20:02):
Just on that very briefly right, energy consumption has been
treated as exogenous. That is, it's been treated that people
just use what they're going to use and then they'll
get a bill, and it's a sort of de facto
outcome of their choice. And the only way you could
save money was by using less. Imagine if we did
that with food. If the only way you could save
money on your food was by eating less food, that
(20:24):
would be a bad thing. However, you can save money
on your food by buying special offers, by buying their
own label beans instead of the branded and someone right,
and you make your choices. If we do the same
in energy, people can save a fortune without using less.
In fact, they can use more, and that's a good thing.
Speaker 1 (20:44):
Join us after the break for more of my conversation
with Greg Jackson, CEO of Octoperc Energy. And thank you
to everyone who has written a review of zero recently.
We appreciate all of them and please keep them coming. Recently,
Tom Key Bowman said this is one of the best
environment great clarity and practical ideas. Thank you, Tom. Going
(21:16):
back to bills, there's the fuel costs or whatever the
cost the power producer is providing you, But there is
the fixed cost that comes from the infrastructure that is
maintained to keep you know, at least in western countries
power running all the time. I grew up in India,
blackouts used to happen all the time. They still happen,
not as frequently, but they still happen and people are
kind of used to it. But here in the West,
(21:37):
oh my god, there's a blackout. There's a political crisis
on your hand. So you're saying, spend less on infrastructure.
What do you do to try and reduce infrastructure costs?
Because we've been told so many times that we need
to build out the grid to enable all this clean infrastructure,
this clean power to move from places where it's being
(21:59):
produced to where it needs it's to be consumed or
to be stored in expensive batteries or some new technology
that will be cheaper than batteries, but it's not ready yet.
How exactly do you reduce the infrastructure price?
Speaker 2 (22:11):
In the old days, when all the powers from coal,
you essentially had massive coal five power stations near the
coal fields because it's expensive to move coal around. In
today's world, solar farms can be anywhere, including on people's rooftops,
industrial rooftops. Increasingly, things like electric vehicles five percent of
the fleet today in the UK, but a third of
(22:31):
new sales. Over time, most economies are going to end
up being majority electric cars. Just give you some UK data.
The UK electricity system is fifty gigawatts. When we've all
got electric cars, the seventy five gigawatts a battery available.
The entire system is going to change and become more decentralized.
You mentioned expensive batteries. Ten years ago, batteries cost one
(22:53):
thousand dollars. Perticular hour last year was one hundred dollars.
The cheapest auction in China is years fifty two dollars.
The world's biggest batter com is now it's a ten
dollar battery. Something you end up with batteries. You don't
just need grid scale batteries. You can have them at
the end of a street, in individual houses, and of
course the batteries that come for free in electric vehicles,
actually cars, buses, everything. If you're building for that distributed system,
(23:16):
you need dramatically less grid because, for example, you can
store the electricity closer to the point of consumption. It's
something to get your head around in the world of electricity,
which it kind of bonkers, is every bit of grid
is designed for the peak load. It has to be
able to carry the peak load. The peak load might
only be a few seconds a year. But at the moment,
(23:38):
we will spend billions building a power line to handle
those few seconds. If instead we can shave those seconds
off by storing them at a battery and not having
to transmit the electricity avoid the peak, you can save
billions in grid build. We should be building for that system.
And you mentioned that, you know, these are all fixed
cost on the bills of households and businesses. The fixed
(23:59):
cost are brutal because once we've incurred that cost, there
is nothing you can do about it. You can't consume less,
you can't consume differently. You can generate as much as
like on your own rooftop, you still got to pay
those fixed costs. Minimizing the fixed costs should be a
mission for everyone in energy policy.
Speaker 1 (24:18):
And this idea of having infrastructure that is more distributed,
so there might still be more infrastructure, but they are
not the kinds of infrastructure that people opposed, right, you know,
the opposition for transmission lines is massive, and it's there
around the world, especially they're an anglosphere, but definitely there
(24:39):
in most rich countries. And this opposition is not new.
There was a famous book written by a senator in
Minnesota in the seventies about a power line that was
going from North Dakota to Minnesota that was going to
bring coal power to Minnesotans, and they didn't want it.
It wasn't a green opposition, it was didn't want power
(25:01):
lines because it was call power at that time that
was coming. So it was an environmental opposition. And now
you have the desire that the only way green energy
is going to be built is if you have also
these transmission lines. If you know that there isn't political
support for transmission lines, is it politicians just trying to
(25:24):
hit on a solution that's never going to work.
Speaker 2 (25:27):
Yeah, So I think what's happened is we've got stuck
on a path where the consequence of every decision made
so far is that you need more power lines. The
technology has changed, right, No one new batch is going
to get this cheap. No one new solar was going
to be three hundred times cheap, and it was forty
years ago three hundred times. We didn't know these things.
(25:48):
That's okay. Now we know these things, we are mad
to stay stuck on the path that we had previously chosen.
You mentioned earlier that you know, investors like policy certainty.
Of course they do, but you know, the investors in
I don't know, retailers didn't get policy certainty when Amazon
turned up. They just had to reform their business models
(26:10):
because technology changed. We need that thinking in energy, and
we really need it now in western countries because you
and I've spoken a lot here about essentially, you know,
euro at, the US, the UK, you mentioned India, you know,
but if we look at, for example, what's going on
in China. Right, seventy four percent of all the renewables
being built in the world today are being built in China.
(26:31):
China became famous for its coal plants, but coal power
plants in China have slowed down to a trickle. Their
utilization rate's dropped from sixty percent to fifty percent. They're
not building this renewables just to look pretty. They're building
because it's going to give them cheaper energy, plus energy
security and tackle their own concerns about environment, pollution and climate.
They're building so much of this infrastructure, so much of
(26:54):
this cheap infrastructure, that they're driving down. The cost a
wind turbin in China is one third the cost to
win tiebound in the UK. Solar panels that in some
countries now generating at one point two cents per unit.
Americans are typically paying fifteen to twenty cents a unit
for the electricity. In Britain they're paying thirty cents, and
yet we can generate not much more than a cent
(27:14):
in many parts of the world, and batteries are coming
down so much that you can use that solar nearly
twenty four to seven in two thirds of the world.
If we're not looking at what's happening in other countries
and we're sticking to the conversations in the sort of
the West, what we really are doing is kind of
locking in on landlines, just as the rest of the
world is building mobiles.
Speaker 1 (27:35):
Yeah, I mean, the China model is one that is
so tempting for people who think about climate change and
who think about the future of energy. There is a
risk with that model that is not replicable in the
West because the politics. It's an authoritarian state decides something,
does it. But you know, it's not socialists, it's capitalists.
(27:57):
There are real markets there, and there's hypercompetent among many
of the companies that build many of these solutions, but
there is a level of inefficiency that the government is
willing to take on to try and make a bet,
and that bet pays off. In August twenty twenty five,
China exported if you take just for that month, they're
(28:21):
green tech exports more than twenty billion US dollars in
twenty twenty four. For the entire year, the total sum
of US allergy exports was about twenty billion dollars. So
China is already doing on clean energy exports what the
US would have loved to have done on fossil fuels,
(28:42):
but can't even come close to match. And so there
is clear success story there, but to try and replicate
them in the West is really hard. UK is a
small economy, has been a de industrializing country for the
last fifty years. What do you think the UK can
do well?
Speaker 2 (28:58):
First of all, it's a great data point you had there,
contrasting Chinese exports of clean energy tech with US exports
of LERG. The bit that you didn't mention there makes
it even more powerful is the clean energy exports are
typically selling solar panels, winter mines, and batteries. It's hardware
(29:19):
which once the country has bought it will generate electricity
for a decade or two to come. Whereas with LNG,
the day you buy it, you use it is gone forever,
and so you know you can actually contrast the Essentially
it's a stop versus a flow, and that makes it
an even more powerful contrast. You mentioned the extent to which,
(29:39):
for example, the UK is de industrizing. We can't produce
cheap solar panels here. We can't produce cheap batteries probably,
but you don't need to. Cheap energy underlies every industry
you know, whether it be AI, data centers or clean manufacturing. Typically,
the value in a solar panel manufactured for China is
five dollars, essentially the gross profit whether they make the
(30:03):
value for an installer is two hundred dollars, and the
value for the consumer might be five hundred in terms
of the electricity generated over its lifetime. It doesn't matter
where you make them. What matters is using them. Already,
you talked about their twenty billion dollars of exports in
a single month. At the moment, China is soaking up
the vast majority of manufactures for itself deploying them in
(30:26):
the domestic market. But once its domestic market approaches saturation,
the salespeople for those companies are going to be all
over the world and will be a tidal wave of
clean energy products that will be you talk about politics,
the whole of East Age will be happy with them,
South As will be happy with them. Latin America to extend,
(30:48):
anybody wants that. You're going to have abundant, cheap power available.
And should the West really tie itself in knots on
the politics and end up becoming a declining economy when
everyone else will benefit from this stuff.
Speaker 1 (31:02):
Well, you are putting some of that to action, right.
You have built manufacturing for heat pumps here in the UK,
but some of the parts come from China because China
makes those parts and they make them cheap, and so
you take it from them. You've got a partnership with
BYD now to try and take the battery that is
sitting in a car but use it not just for
(31:23):
the car but also to try and charge the grid,
which is something that people thought one day we'll do,
but you are starting to do that now with Octopus.
This idea of using more distributed infrastructure has been there
for a long time. This idea of using demand flexibility
where people consume at the time and it's cheapest and
(31:44):
you encourage them to and they can has been around
as an idea for a long time, but Octopus is
putting many of those in action. What have you learned
from doing that?
Speaker 2 (31:55):
If you're as old as may, you remember Appay around
the ear two thousand when there was a form of
mobile incende called WAP Wireless Access Protocol and if you
tried that, he said, like, okay, the wilds intet doesn't work.
And then two thousand and seven Apple brought a bunch
of technologies together, so you know, batteries that were just
about good enough, multi touch screens that were just about
good enough, processes were just about good enough. Of wild connectivity,
(32:19):
it was just about good and so on to show
that while was not only possible, but it was transformative
for the world. And in the same way, you know,
people have tried this kind of flexible approach to energy
in the past, but we didn't have the technologies. You
need a lot of smart metering, You need a highly
dynamic electricity grid so there's enough variability to actually make
it worthwhile. You need technologies like batteries and APIs interfaces
(32:45):
to manage them, and you need a different form of
consumer relationship because they need to trust and benefit from this.
But once all those come together, this is huge. So
you mentioned that BYD deal that what we did with
BYD was worked with them on a specification for batteries
that can discharge into your house or the grid as
well as be charged for driving. Enabled us to launch
(33:06):
a product earlier this year, which was for a fixed
monthly fee, you lease a car and then get twelve
thousand miles of free driving year. And you get the
free driving because essentially, when your car is parked, we
will fill the battery with electricity at the cheapest times
and the most expensive times, will sell a little bit
of actuality back to the grid, and with the money
(33:28):
we make from that, we buy back some more cheap
electricity for driving. Collectively, we can give you free driving
and it makes money for us. I mean, what incredible offer.
You can't do that with petrol. And so I think
we do the same for houses. We now work with
house builders to build houses that don't have energy bills
because again in the same way, we've got solar pals,
battery heat pump and we will fill the battery when
(33:49):
it's sunny and then sell some of the electricity back
to the grid at the expensive times and across the year,
we'll use the money we've made from that to buy
you back electricity to run your heat pumpky house one,
and we guarantee no bills for five or even ten years.
Sometimes that's kind of flexibility in action at scale using technology.
You do have this crazy world now where on the
(34:10):
one hand we can be told that renewable energies putting
bills up, and then the other just give the two
examples essentially eliminates them. What we really need to do
is make these technologies more abundant and have the markets
we talked about earlier so that we can operate them
in the interests of consumers.
Speaker 1 (34:28):
If you take a really big step back, there is
something that is happening here in the UK that we
are seeing in many parts of the world tied to
high energy prices, tied to politicians learning from either Donald
Trump or trying and testing out anti climate policies and
whether somebody would buy them. For a long time, the
conversation among energy people has been about an energy transition
(34:53):
that we'll move away from the fossil system big we've
built over one hundred years spend trillions, tens of trillions
dollars to another system that's going to be clean, will
require tens of trillions of dollars in investment. But it's
also a moment where there is a trade war, there
are real wars, the norms of diplomacy are are being
(35:13):
blown apart. More leaders are talking about a rupture in
just the fabric of how things used to operate. But
the conversation and energy is still about the transition. If
you had to imagine a rupture in the energy world,
what would that look like.
Speaker 2 (35:32):
Well, first of all, I think just one quick word
on the transition. The reality in the West is that
twenty percent of our primary energy use is electricity and
eighty percent is fossil fuels. China has gone from ten
percent electricity to more than a third and growing in
the last twenty years. In the last twenty years, right,
and that's why chime is often now described increasing as
(35:54):
an electro state. And the focus we've had in the
West on the transition has all been on the generation side,
moving our electrics generation from coal to renewables, maybe a
bit of gas and nuclear. We haven't focused anywhere near
enough on the consumption side, so electric vehicles, which China
has now really begun to dominate batteries, increasing electric heating
(36:19):
and HVAC. So I think that electrication of end use
is actually, for example, in capital terms, there will be
six times more expenditure on the capital for end use
than there is on the generation of electricity. So the
reality is we've been focusing on that's quite a small
slice the pie, and we need to change that. In
(36:39):
terms of the rupture, I'm really struck by a conversation
I had with the CEO of DTech company that provide
electricity in Ukraine, and he said, it takes one Russian
missile to take out a gas power station, but it
will take fifty to take out the equivalent generation capacity
in wind turbines. I asked the Ukrainian member of our
(37:02):
team what we can do to help Ukraine, as you said,
build more wind turbites. The reality is the distributed energy
of wind and solar batteries is naturally more resilient, dramatically
more resilient and secure than being dependent on the flow
of gas every single day to keep your lights on,
(37:25):
empower you're heating, And I think the big rupture here
is emulating the Internet. Prior to the Internet, networks were
built with a sort of a central server and everyone
hung off it. And then the Internet's design criteria from
the US defense sector was to make a network that
(37:46):
couldn't be taken down because it didn't have a central
point of failure. We should think about it electricity the
same way.
Speaker 1 (37:52):
Greg, thank you for joining the show. Thank you very much, indeed,
and thank you for listening to zero. And now for
the sound of the week. That's the soundtrack to Octonauts,
a British cartoon that's pretty fun and not just for
(38:14):
the kids. If you liked this episode, please take a
moment to rate and review the show on Apple Podcasts
and Spotify. Share this episode with a friend or with
someone who celebrated the end of British goal. This episode
was produced by Oscar Boyd and Somersadi. Our theme music
is composed by Wonderly Special Thanks to Will Mathis, Eleanor
Harrison Dungate, Moses Andim Laura Milan and Sharon chen i'm
(38:36):
Akshatrati back soon.
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