Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're inside the ICE House. Our podcast from Intercontinental Exchange on Markets leadership and vision and global business, the dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years. Each week we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism right here, right now at the NYSC and at ICE's exchanges and clearinghouses around the world. Now welcome inside the ICE House.
Jess Tatham:
Harvard Business School professor Clayton Christensen first introduced the theory of disruptive innovation in his 1997 book, The Innovator's Dilemma, which describes how new technology has the potential to transform a company and revolutionize an industry. Almost 30 years later, being a disruptor is now a term synonymous with innovators, change makers, or pioneers that push boundaries for the sake of progress. These disruptors are needed to take businesses, communities, and society to the next level.
We are no stranger to disruption here at ICE, especially in energy markets. Our founder and CEO, Jeff Sprecher, started with an entrepreneur's dream and $1000, that's what he paid to buy the Continental Power Exchange. ICE's energy business grew through acquisition, acquiring the International Petroleum Exchange and the Climate Exchange. Since then we've been collectively focused on bringing price transparency to energy markets through an analog to digital transformation. ICE is now home to some of the largest and most liquid markets to trade and clear energy and environmental products globally. From oil, natural gas and power to carbon markets and sustainability indices, our network of exchanges and data sit at the heart of the world's most important energy transition with stakeholders all around the world using our price and risk management tools to facilitate the efficient allocation of capital.
Embracing the transition to a new energy era is a global challenge for companies and investors alike. Our guest today, Octopus Energy founder and CEO, Greg Jackson, is focused on driving an affordable, tech-enabled green energy system of the future. Our conversation with Greg Jackson is coming up right after this.
Speaker 3:
When you think of investment risk, do you consider climate risk? Changing weather patterns are impacting the way we live and the value of businesses, large and small. This can mean disruption to supply chains, changing demand for products and shifting regulation. What does this mean for your business, your clients and your investments? ICE offers data and markets that can provide critical insight. Manage your climate risk with ICE.
Jess Tatham:
Our guest today, Greg Jackson is founder and CEO of Octopus Energy. Launched in 2015, Octopus is a global energy and technology company that supplies green energy and natural gas to over 7 million customers across 18 countries and operates a £6 billion portfolio of renewable energy assets across Europe, including; generating wind power, leasing electric cars, and installing heat pumps and solar panels. A serial tech entrepreneur, Greg, built and sold several successful businesses before starting Octopus. He's now a thought leader in the UK on the energy transition, energy costs and tech innovation.
Greg, thank you so much for joining us inside the ICE House.
Greg Jackson:
Honestly, it's a pleasure to be able to have this conversation with you.
Jess Tatham:
Awesome. It's great to be here at Octopus's London headquarters. Your pink Octopus logo is a big part of your branding. What's the story and creative process behind him?
Greg Jackson:
Well, there's a couple of bits. First of all, we were originally going to be called Positive Energy, but our first investors were a fund called Octopus. A week before they wrote the check, they asked us if we'd call it Octopus Energy. I've got to say we were like, "Oh, slimy, suckers, tentacles. This is a bad ..." Anyway, but in good spirit, we wanted to get off to a great start with our investors, so we worked out how we could make an octopus accessible and cute. The answer, by the way, was big eyes, big smile, small tentacles and bright pink.
With a day to go before they wrote the check, they actually said, "Actually, don't call it Octopus." We were like, "Too late. It's Octopus." I'm so glad because look, energy's intangible, you can't see it, and yet we're all using it all day every day. So to create a brand that is, in the countries you operate, incredibly visible and stands for something, enables us to not only really help customers understand more about energy, but enables us to be thought leaders and to discuss the very future of energy, which by the way, of course, is critical not only for industrial development, but crucially for what we do about climate change.
Jess Tatham:
Let's go back to where and when your interest in taking care of the planet started to develop. I know you joined Greenpeace when you were 16. What did that process entail and how do you think that sort of shaped your experience and perspective on environmental challenges today?
Greg Jackson:
Yeah. First of all, I'm not a sackcloth [inaudible 00:05:39] environmentalist. I kind of believe that we should be able to live the lives we want to live, the incredible lives that economic development has generated, and indeed that we should be able to use this economic development to help people around the world enjoy better lives, but that there are technologies and solutions that mean we can do that without trashing the planet.
I was just thinking the other day, isn't it interesting that in most sort of rich economies there are taxes for things like putting waste into landfill, but when we put waste into the atmosphere, it's kind of just treated as this open sewer that's free for all. The atmosphere is incredibly thin. If you could drive upwards, it's less than an hour's drive to get to the edge. Yet, we pump all of this waste into it. It is not only changing our climate rapidly, but it kills 10 million people a year through local air pollution. It's not a limitless pit. Maybe we'll talk about this shortly, but the technologies for energy now mean that we can bring down the cost of energy whilst we improve living standards without doing that to the environment.
Jess Tatham:
You've said that your mom has been a significant source of inspiration as a single parent raising three kids, and that sometimes the family faced challenges paying energy bills. Tell us about her.
Greg Jackson:
Yeah. Look, my mom's incredible. I mean, by the way, she's four feet, eight inches tall. She's tiny. She's a bundle of energy though. Yeah. When my parents split up, I was eight, my sister was seven, my little brother was a year old and she had no job. So she started working in the evenings, going to college by day, and she spent her spare time, incredible that she had any, campaigning for the stuff she believed in. I think the inspiration to me there was for those of us who've got kids but are lucky enough to have some money or to have two parents or whatever, it's hard enough to do it as a single parent in those scenarios and then do all that other stuff, mind-blowing. We can achieve incredible amounts with our lives. That's the inspiration.
But when it comes to the financial side, I remember time and again, the most stressful thing that would happen was my mom would get bills and couldn't pay them. I mean, more than once we actually had our energy cut off. I think that left me with this deep sense that energy is so critical for everybody, but for low-income households, it's the difference between being able to buy a school uniform for your kids or get them presents, just the very quality of life. For me, there's this kind of incredible opportunity and imperative to bring down energy costs, whilst we reduce the damage energy does to the environment. Today Octopus is doing that.
Jess Tatham:
Yeah. So speaking about growing up, you grew up in Halifax, which for our non-UK listeners is in West Yorkshire in northern England. Halifax boomed in the Industrial Revolution as a factory town for textile manufacturing. Some of the first businesses you managed or own were manufacturing factories for goods like mirrors. What led you from that background into tech?
Greg Jackson:
Yeah. Well long before that, actually, when I was very young, one way my mum made things work was she'd delegate responsibility to us as kids. She said, "Look, there's this bit of money I get from the government. I was supposed to use it to buy clothes and food for you guys, so I'm going to give you the money directly and you can buy your clothes and food yourself."
Jess Tatham:
Lot's of responsibility, isn't that?
Greg Jackson:
Yeah, but the interesting thing was once you got a choice, I basically ... I don't care about clothes. I used to be able to darn my socks and stitch up my trousers so I didn't have to buy any. Instead, I used the money to buy little bits of electronics. I learned technology when I was 12, 13 years old. Learned to write software and ended up leaving school early to write video games. I'm really more of a techie at heart than anything else. The thing you learn in technology is the opportunity to change industries through far more efficient processes to, not only make them more efficient, but to create whole new products and services. I think, combine that with the desire as an entrepreneur with someone that always thinks there's a better way. I've always wanted to do my own thing. Yeah. I'm probably more of a techie than anything else.
Jess Tatham:
Part of that technology experience included working with Octopus's now chief technology officer, James Edison, for example, on software for the UK's National Health Service called Consultant Connect, which reduces patient waitlist times to see specialist doctors. Can you give us some background on those experiences, pre Octopus, and sort of building and scaling businesses?
Greg Jackson:
First of all, I think there's this sort of fearlessness, which is take any industry, if you know a lot about tech, you can look at that industry and think, "Hey. Look, I think we can make this better," and not being afraid that incumbents understand it all, because the reality is they're all locked into the existing processes, but through tech, you can just do it totally differently. I love the fact that, for example, take Consultant Connect that business ...
In the UK, if you go and see your doctor and they think you might need to see a hospital specialist, it's a 14-week wait. They literally write to the hospital and 14 weeks later you see the specialist. What Consultant Connect did was let the doctor phone up the specialist while you're in the surgery. The doctor immediately gets special specialty advice. 40% of those calls mean you don't need to see the specialist at all. If you need to see them sooner, they'll fast track you. If a specialist knows the treatment the doctor should give you or the test they should run, they can do it there and then. You get better patient care, you don't waste specialist time on unnecessary appointments and the doctors get, it's actually, training and feedback from the specialists. It all costs so much less than the old way of doing it.
Now that product, that company, Consultant Connect, we ended up serving more than half of the UK health system; driving down costs, improving outcomes, and making people's jobs better. By the way, that got bought by the US listed Teladoc and now forms the basis of Teladoc UK.
Jess Tatham:
Very cool. I didn't know that. Your vision, you've said, for Octopus comes from being a customer of traditional utility or energy providers yourself and getting frustrated at the lack of bill transparency and subpar customer service. How did these frustrations propel you towards establishing Octopus?
Greg Jackson:
I think good ideas come at you multiple times from different angles. The idea for Octopus came to me, I got a bill from an energy company. By the way, in Europe and the UK, and by the way, big chunks of Asia and Australia energy is like a retail business. Just like you can choose which supermarket you shop at, you choose which energy company you're with. They provide all of the customer service. They've all got different programs and rates, tariffs. Anyway, so I'd moved into a house. I finally got round to opening an energy bill and it was astonishingly high, so I phoned up the energy company and the guy just halved it there and then. I was like, "Well, how can you do that? Why have you charged me so much before?"
He said, "Well, you didn't have a contract with us." I was like, "Okay, cool." That kind made sense. I moved in, I didn't know, so I got a contract with them. Anyway, a couple of years later, I opened a bill again and it was really high, and I phoned up and they halved it. I was like, "Hang on, how could you do that?" He said, "Oh, well you didn't have a contract with us." I said, "Mo, I did. I phoned up before. He said, "It was a one-year contract." I was like, "Well, I have to phone you every year to get a fair price?" This just seemed completely wrong. It struck me that that was just a deceptive tactic to charge me massive rates. It turns out across Europe and other countries, this is very normal, which I thought was outrageous.
The second thing was one day they were meant to come around and check something on my meter. Now, I'd forgotten about this and so I happened to be skiing. I got the phone call from the guy on the doorstep, obviously it was a bit embarrassing because I was up a mountain. I said to the guy, "Look, I'm so sorry. I'm not there, but I can get one of my neighbors to come around in 10 minutes and let you in." He said, "I'm so sorry, I can't wait 10 minutes." He disappeared. I'd been waiting six months for that appointment and then it was another six months to get the next one. I was like, "Why are your guys' system so bad? This is shocking." It's a bad systems, it's got bad processes and didn't value their customers. Instead, they were trying to extract.
For a whole pile of the reasons I just thought through technology, we can improve this sector. The other bit was during the 2010s in the UK energy bills were being raised a lot. Every time you heard the companies being interviewed, they would say It's because of green energy. That's the reason you're paying more. I looked at it and I was like, look, green energy might have added at the time, I don't know, $100 to the bill, but their margins and their huge bloated overheads ad many hundreds of dollars. It's literally immoral to be telling people that saving the environment is the problem when actually it was their bloated organizations. For me, I thought I can solve all these problems by starting an energy company. That's what we did.
Jess Tatham:
And here you are today. To take a step back, before you launched Octopus, you realized you needed capital to get the idea off the ground. I understand you pitched your idea to Simon Rogerson, chief financial officer of the wider Octopus Group, which includes Octopus investments, ventures and real estate businesses. What did that pitch sound like?
Greg Jackson:
I think Simon Rogerson's backed a whole load of entrepreneurs. He really knew how to back an entrepreneur and to give us supportive capital, but the freedom to just grow as fast and as hard as we could. Now, the original pitch was that the global energy system is like this $2 trillion snow globe that is about to be shaken up by the energy transition and that the companies that can start creating the new system, the one that replaces our inherited world of fossil fuels with a clean system that's cheaper and more reliable and using technology to do that, those companies are going to be the energy majors of the future, we wanted to be the leader in that process. We got great backing to begin with. Our initial seed funding was 10 times more than anyone else. Since then we've gone on to raise $2 billion of capital into our balance sheet. We've raised nearly $10 billion for asset funding, and we're only just beginning.
Jess Tatham:
Last weekend, the FT, Financial Times, reported that Octopus delivered its first annual profit since launch. Congratulations. Going back to 2022, Octopus said it chose to turn down making annual profit in order to drive down bills for your customers. The company, instead, absorbed roughly £150 million. Walk us through making this decision and then, I guess, from an operational standpoint how you were able to do it.
Greg Jackson:
One of the great benefits of having the kind of capital we've got is that we can invest to create long-term value for our shareholders as well as for our team members and for society. The energy crisis in Europe was extreme. The UK government committed over $100 billion to helping people through it. Now, for us to be able to commit a couple of hundred million dollars to help our customers was the least we could do. By the way, we did a whole ton of other initiatives too. To go one year without profit in return for looking after people when they need it most, I think that that will pay back dividends for years to come, because I think everyone remembers companies that do the right thing in the tough times and the ones that will win your loyalty for the long term.
By the way, that's really the case. Certainly, in the UK when an energy company announces a profit there's a lot of people get angry about it. It's like how can they make a profit out of it, particularly at times when we put prices up, but for Octopus, when we announced a profit, our customers supported it. They were glad to see that the company that had looked after them is going to do well as well. I think this kind of ability for companies to do well for their customers, whilst doing well for their shareholders ... You can't just say this, you have to commit, and that's what we were able to do.
Jess Tatham:
In terms of your internal employees, you've highlighted recently that all Octopus Energy employees receive shares in the company. What's the thinking behind this and why is its implementation so important to you?
Greg Jackson:
Whenever you read about human motivation or look at stories about where corporations go wrong, you discover that a lot of the short-term mechanisms, for example, a strong bonus culture can create a real short-term incentive. Now, that might work, by the way, in some organizations, but we're trying to create long-term value. The alignment you get when every single employee is a shareholder means that different departments, different functions, they work together because everyone's success depends on the whole company and they take long-term decisions. For us, I want to deliver long-term value to my shareholders. I want to create an extraordinary company that's incredibly valuable for shareholders. By having staff that want to do that as well, we can devolve decision-making, we can move at incredible pace, and I know that our team make the best decisions.
Jess Tatham:
We touched on the energy crisis a little bit earlier, but just to go back to that for our listeners, as the energy [inaudible 00:19:32] crisis unfolded in Europe in 2021, 2022, particularly intensifying after Russia's invasion of Ukraine, which impacted energy supplies already strained post-COVID in industrial production rebound. Many competitors face challenges with some forced to shut their doors. Octopus on the other hand, not only weathered the difficulties, but went on to acquire some of those struggling businesses like Bulb Energy. How did Octopus emerge from this fertility and then continue to grow?
Greg Jackson:
Yeah. I mean, look, Octopus job has not been to play on the pitch, it's been to define the pitch. We always said our job was to build the new energy system. That energy crisis was a symptom of the old one. The cause of it was Europe's dependence on gas from Russia. Now, we'd raised capital and we built a business that's all about what happens in a world where we increasingly have local and distributed renewable energy. For us, what happened in the crisis was playing out our thesis and that gave our shareholders the confidence to back us to grow in the crisis.
I remember this decision moment at the beginning of the energy crisis when the wholesale price of energy had gone up 6X. By the way, at one point it went to 15. You looked at that, I mean, this is brutal for us as a company. We buy billions a year of energy, and suddenly we are looking at those kind of cost increases. I thought, look, every one of our rivals is going to be looking at this and work out how they get through this storm. They're going to be battening down the hatches and just hoping they survive, and a lot of them won't. In crisis lays opportunity, so we're going to double down. Our long-term vision is aligned with making sure these crises don't happen. That means we'll have the strength to, instead of hope we survive it, to grow our business and build our brand. We came out with a stronger brand, our business was twice as big and with an enormous amount of support, because people need the solutions we're creating.
Jess Tatham:
Right. Since then you've gone on to acquire Shell's household energy supply division in the UK and Germany. Talking about that question of when an acquisition is necessary or when you want to do it, do you see the company continuing to grow through M&A?
Greg Jackson:
First of all, underlying all of this, we've got our technology platform, Kraken. We're the most efficient business in the sector. Where other companies can't make money, we can, which means that our natural kind of inclination is when there's the opportunity for M&A, we can make it work when others can't. We've proven this at scale. Time and again we've taken on loss making companies, taken on their customers, dramatically reduced the operating costs and driven higher customer satisfaction. Whereas, our rivals would be losing money and then doing everything they can to try and keep customers. For us, customers stay with us, we can give them lower prices and yet make more money, because our operating costs and a whole pile of other initiatives.
Here in the UK, we've done a lot of M&A in energy supply. We now have the largest power company in the UK and probably on revenue, actually, the largest provider of energy to households. Across Europe and other geographies we can now grow in the same way through M&A. I think it's going to be a really exciting period for us as we grow all of our businesses, in all of our countries to the same scale as here. That's just in energy supply.
Look, the new energy system is seeing people moving into electric cars. Well, we fit smart electric vehicle charges. We provide smart tires for charging them. We provide the ability to charge at 600,000 charge points in public and we lease electric cars to customers. It's going to require heat pumps. Heat pumps are increasingly going to be the cheapest way to heat your home, and by the way, better than gas furnaces. As the cost of solar and battery comes down, it makes sense for more and more households to have these technologies. Our job now is to keep growing all of these businesses. We've only just scratched the surface and they'll be a big part, as will organic development.
Jess Tatham:
The New Stock Exchange is one of the exchanges that ICE operates and is home to the largest share of international companies listed in the US; Flutter, ticker symbol FLUT listed at the New York Stock Exchange last week. Likewise, Ferguson, BP and Shell are UK companies duly listed transatlantically. Any IPO thoughts on the horizon?
Greg Jackson:
I think we really benefited from the kind of private capital we've had. We're backed by some of the biggest energy companies around the world and some huge funds. Look, our job has been to build the biggest, most valuable business we can; quickly, robustly and sustainably. At some point public markets are going to be an option. I think for us it's really about choosing when that time is right. In a way, it's kind of like the longer we stay private, the more valuable we'll be and the more exciting we'll be if we ever do go public. I'm loving this stage of our journey and I think it can make the next one only better.
Jess Tatham:
Looking at the broader market, we spoke to Rishi Khosla on the podcast in 2022. He's the CEO of OakNorth, a UK-based challenger bank focused on disrupting commercial debt financing about entrepreneurship culture in the US versus the UK. Do you think the British government needs to do more to support startups and business innovation? If so, how would you like to see that done?
Greg Jackson:
Look, actually, I think the UK is an amazing place for early stage businesses. There's a bunch of tax incentives that really encourage investment into real startups. By the way, they particularly encourage that investment from successful entrepreneurs. What you've got in the UK is this thriving scene of great young businesses, typically backed by great entrepreneurs. Whether you look on a sort of global scale, at ones that we've seen have made a real difference, companies like Arm, which their chips are present in virtually every mobile device in the world and a whole bunch of laptops and other pieces of equipment. I think the UK is great for innovation. It's also got great universities. The concentration of universities, Oxford, Cambridge, Imperial, all within a hundred miles of each other and so many more by the way. You've got really great talent coming out of universities, great research being done in them, and a great startup environment with recycled entrepreneurs.
I think the challenge in the UK is actually much later stage, and it's really that, I think, for a bunch of regulatory reasons and maybe some cultural ones, large scale capital is harder to deploy in UK growth companies. UK capital prefers to go into established, dividend-paying incumbents. I think there's regulatory changes that can help with that. But until then, we're a typical example. Our capital has come from Australia, Japan, Canada, and Transatlantic. By the way, when I speak to the kind of people that want to keep investing in us, again, it's a global picture. There is one huge benefit of course here, which is I think a lot of the really big US companies started with a very American perspective. It's great fun as a techie that ... I don't really know this. When Facebook was going global, it had a time zone set in California, which makes all calculations to do with dates and times really, really difficult for everyone else in the world.
I think an interesting thing you do get from the UK, although that capital is global, it does also mean you have companies that have got a global outlook from the beginning. This is a small market. It's big enough to get going, but it ain't big enough to build a truly exciting business, which means we have to think globally. I'm very conscious that in the UK we're famous. If you come to Britain, everyone knows us even though we're a young company and we're really driving change here. Across Europe, even Asia and Australia we're pretty well known, but in the US, because of the different market structures, we're a lot less well known. I think when we talk about the global perspective currently for us there is quite a big gap called America.
Jess Tatham:
One more question before we dive into Octopus's products and what you offer. You were talking earlier about how one of your first jobs was writing code for a video game company. You had spent months on a project only to see it never go to market, which you've spoken about before, as teaching you an important lesson about creating products that customers really want. Can you tell us about that experience and how it's kind of formed your customer ethos today?
Greg Jackson:
Look, I was really proud when I was young and writing video games. I wrote some of the best code you could imagine, but the first game I wrote as a freelancer, I'd spent months on it and it just wasn't very fun to play and it didn't get published. I'd done all this work for no reward and I realized it doesn't matter what your processes are internally, it doesn't matter how well run your ... What matters is are you producing something customers really want? It's really important for companies. Often you'll speak to people in a company [inaudible 00:29:24] technology or whatever, and they'll be focused on internal stuff and we have to have everybody thinking about are we building what customers want?
Jess Tatham:
Let's take a quick break and we'll be back in a minute to continue our conversation with founder and CEO of Octopus Energy, Greg Jackson.
Speaker 5:
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Jess Tatham:
Welcome back. If you are enjoying this conversation and want to hear more from guests like Greg Jackson, remember to subscribe to Inside The ICE House Podcast wherever you listen and give us a five-star rating and review on Apple Podcasts.
Before the break, Greg and I were talking about his career, experience creating and scaling businesses, keeping the lights on during the energy crisis and his customer-first approach. Let's get into the Octaverse and break down what products you offer. Your big ticket item is Kraken, your cloud-based energy robot, that uses data and machine learning to automate much of the energy supply chain. You have over 50 million customer accounts now including Tokyo Gas, Australia's Origin Energy, and the UK's EDF. How does the platform work and why let direct competitors use it?
Greg Jackson:
I mean, before we do this, let's just say people should definitely go and give you a five-star rating.
Jess Tatham:
Thank you.
Greg Jackson:
This is a great podcast. Anyway.
Kraken, it's like an operating system for energy in the way that on your phone you've got Android or iOS that carries on all the processes that are needed to make phone calls and send messages and join all the different apps together. That's what Kraken does for an energy company. It kind of replaces all the bits of software that legacy companies run on. They'll typically have 10 or 20 or 30 different platforms. That means every department in the company is speaking a different language, they've got a different data set. Even as a customer, if you phone up, you'll get handed from one department to another, because each department underneath it all is using different systems. It makes it hard to run those companies. It gives terrible service, it makes them expensive and inefficient. Crucially, it makes them a lot less agile.
Now, look, we're going through this incredible transformation in the energy system. It's going to change more over the next 10 or 15 years than over the last a hundred. That rate of change is going to need entirely different technologies. Kraken is increasingly proven as the world leader for this next-gen software for running utilities. I can give you a couple examples. I mean, look, take your electric cars, I don't know the figures for other countries, but in Europe, a household with an electric car uses twice as much electricity as a household without. As we go electric, you're going to double the consumption of electricity. All of that consumption is shiftable. You don't care whether your car charges at 6:00 Pm or midnight or 6:00 AM, as long as it's got enough in the battery to meet your needs. By the way, for a lot of people, they don't care whether it charges on Sunday or Monday or Tuesday because if your commute is 10 or 20 miles and you've got a battery that'll do 300, there's a lot of flex there.
Now, at the same time as we're getting electric cars, we're also building renewable generation. The times when it's windy and sunny, we've got the cheapest power we've ever had. Prices keep going negative on grids around the world now, and that's when only less than half our electricity is renewable. As we move to more electricity from renewables and more electricity in the system, we're going to have these times of abundance. See, what you want to do is match, as an example, the time your car's charging, to those times of abundance.
Traditional energy platforms just can't do that. They're used to a monthly bill and a monthly meter read to do this stuff. We've got one product here in the UK that just two and a half billion readings per day. Now, that's what's needed to match this kind of [inaudible 00:34:35], to forecast every solar panel, every wind turbine, and to know which cars you can shift and when they're going to get home and plug in and meet all the customer needs. That's just for cars. We can do the same with heat pumps, with home batteries, with industrial processes. Kraken enables you to do all of that seamlessly whilst giving the best service and the lowest operating costs.
Jess Tatham:
In addition to supplying energy to over 5 million UK homes, you also generate energy and are now one of Europe's largest investors in renewables, operating £4 billion worth of green generators across seven countries. Wind and solar farms are a key part of that portfolio. Are you purely investing in renewables like a fund manager? Are you also building the infrastructure as well?
Greg Jackson:
Yeah. I mean, first of all, a great thing about our business is the rate of growth. You mentioned there 5 million homes in the UK, I think we're now at 6.8 million. By the way, honestly, no one can keep up. The growth rate is incredible, not only through M&A, but for example, 800,000 homes joined us in the last year, with no CPA by the way, they're just joining because they love what we do. Our business outside the UK is nearly a million households now, and a year ago it was at 400,000. The rate of growth everywhere is incredibly exciting.
Now, when it comes to generation, today we mainly do generation through fund management. We raise funds, we have raised many billions of dollars into our fund management businesses, and then we deploy that. Traditionally, we were buying existing solar farms and then we started buying wind farms. Now we're developing solar, we're developing wind. Really our goal, our mission, is to be generating as much energy as our customers use. The secret sauce of our business is that what we really want to be doing is getting our customers to use it at the exact time it's being generated and being generated as locally as possible. That means we need less grid, less transmission to shift the energy long distances. Instead of trading energy on the market, the more we can match our own supply and demand, the more we can drive the cost down. There is no cheaper energy than electricity from wind and solar at the time it is being generated.
As I said, through Kraken and through the incredible relationships we have customers, we can shift demand better than anybody else. In the heart of Octopus is this great big robot that is automatically trying to work out, at any given moment, where we're going to be generating electricity and then getting our customers to use it there and then. It's like Uber, by the way, right?
Jess Tatham:
Yes.
Greg Jackson:
Just matching supply and demand on this ultra local level, but doing it with electrons rather than cars.
Jess Tatham:
Well, that was actually one of my questions. You were interviewed by The Guardian in 2021. I'm going to quote you here, you said, "A big cab company used to be one with more than one office. Today Uber operates in thousands of cities across the world, so why hasn't anyone taken a global view of energy?" I mean, I guess you kind of already addressed this, but how do you think energy retailers can learn from big tech? You're kind of saying that Octopus is a tech company at heart.
Greg Jackson:
Yeah. Often when I talk about these global pictures on energy, energy incumbents will talk to me about, "Well, yeah, but you've got different regulation, not only in every country, but for example, in every state or even in every municipality." That's just like Uber. There is no more localized regulation done for cabs. Every city's got different regulation. Yet, Uber have created a global platform where the customer experience and the underlying economics of matching supply and demand are the same. We're doing exactly the same in energy.
I think the prize in energy is bigger, I mean not even because of climate change stuff, but actually if you look at grid prices at the moment, on a typical grid in the world, they might vary from any moment in time from minus 10 to plus 200. Everyone's doing all their energy trading basically assuming an average in between that. If we match supply and demand, the aim is how can we be buying at minus 10 and selling at a higher price, sharing the benefits of that smart move with our customers, they're paying less than they would anywhere else, but we can do it at a better margin. The opportunity to Uberize energy is a once in a generation opportunity for energy companies, but also for energy customers, for governments and regulators to drive down the cost whilst going green.
Jess Tatham:
Yesterday Bloomberg published an article saying that dozens of British wind farms have routinely overestimated how much power they'll produce adding millions of pounds to consumer electricity bills. That's what they reported. You said that the UK electricity system, and I'm quoting you, "is outdated." Why is it outdated and how would you design it?
Greg Jackson:
Yeah. By the way, I think electricity systems in every country are outdated. The reason they're outdated is they were built for a world in which you had a small number of central generating facilities, mainly fossil fuel plants, mainly coal power stations, maybe some nuclear and a bit of gas. There'd be some people in a central control room that would turn these on and off to meet demand. In the world we're building, it's not a small number of generating facilities. You have, instead of a smaller number of coal power stations, it might be hundreds of wind and solar farms. You can't turn them on and off. They operate when the weather's there. On top of that, you have hundreds of thousands, or millions, of homes that have solar panels on them, farms that have got a wind farm or rooftop solar in industry and batteries and electric vehicles. Things shift around.
The electricity system's fundamentally changing to one where you change supply to meet demand, to one where you change demand to meet supply. The existing systems just don't know how to handle it. That's why technologies like Kraken, companies with a customer-facing ethos like Octopus, enable us to see how the system can now be changed and what we need to do.
I'll give you an example in the UK. There's a single, national wholesale price for electricity across the whole UK every half hour. It's set by an auction run by the grid authority. Whatever is the most expensive unit generated in the whole UK sets the price for the whole UK. If we break that up and do it on a regional or local basis, then instead of everybody paying this same super high price, every other region will pay less. Now, in a world where we're generating in every region and we can shift consumption through batteries and electric cars and everything else in every region, that makes so much more sense. Look, we need to decentralize it. We need to use huge amounts of data and pricing to get investment in the right places. The prize is huge.
Again a UK example, but honestly the same applies everywhere. At the moment, there's a ten-year moratorium to build data centers in certain parts of West London because we can't get the power there. Meanwhile, in Scotland, when it's windy, we pay generators billions per year to throw away green energy, because we've got nowhere to send it. Wouldn't it make sense to just drop the price of energy at those times? The data centers would move to Scotland, maybe not all of them, but loads of them would move there. Instead of building vast amounts of new infrastructure to shift the power from where it's windy to these constrained places, instead we just shift the consumption to where we need it. It's what's happened with every other industrial revolution. There's a reason that steel mills are built near coal and iron ore, because it's easier to shift the industry than to shift the resources. We now need the same in power.
Jess Tatham:
Are you taking on the national grid in terms of some of that infrastructure building like electricity pylons?
Greg Jackson:
First of all, for example, in the UK, the national grid is run by National Grid. I mean they are doing incredible stuff over the last, I think they've got to build 20 times more new infrastructure over the next 10 years than over the last 30. It's a fundamentally enormous job. I think, first of all, the pace at which they're moving is remarkable for organizations and industries that have traditionally not had to do that. But I think there's also room for a lot of other solutions. Working with people like National Grid to build our infrastructure can speed it up for everyone. Yeah. I mean we're excited about the opportunity to say, "Hey. Look, all this new infrastructure and indeed the demand shift and the ability to move industries are part of the solution."
Jess Tatham:
Talking about regulators, or in that vein, a huge part of what we do at ICE is helping to keep markets running with integrity, ultimately benefiting the end consumer. You've been vocal about working with Ofgem, the UK's energy regulator, on the UK energy price cap, which limits the amount an energy supplier can charge for units of gas and electricity. At the World Economic Forum in Davos last year you said that the new energy cap will be hundreds of pounds lower than at current levels. Can you explain how that consumer price cap works, especially for our non-UK listeners?
Greg Jackson:
By the way, it's worth saying that I think there are price regulations in energy in most markets around the world. Now, the UK version is that traditionally in the UK's free market for energy, an energy company would use a loss-leading price to attract a customer. Then as soon as possibly, in fact, as I described earlier, hike the price to make a big margin. What you had was this crazy world in which a small number of customers would be continually changing company, and all kind of playing hide and seat with each other and everyone else would be paying the price for it. Look, in a well functioning market, take supermarkets, I don't buy flour very often. I have no idea what flour should cost, but there are avid bakers that when they get to the supermarket, if the flour is expensive, they'll literally choose a different supermarket. The avid shoppers keep supermarkets honest and we all benefit. We need the energy prices to be the same.
So instead of the avid bargain hunter getting a bargain, but everyone else paying for that, we need a world in which someone who's getting a bargain is driving the cost down for everyone else as well. The energy price cap in the UK essentially reduces the ability for a company to use loss-leaders to attract the avid bargain hunters and then rip everyone else off to pay for it. This is a far more efficient economic system and it forces companies to innovate, not by working out how do you exploit your loyal customers the maximum, but instead you innovate to say, "How do I drive down costs in the supply chain? How do I reduce the fundamental costs of energy?" That's exactly what happens in other markets.
I used to work at Procter & Gamble many years ago. The big retailers worked so hard on logistics to push down system costs. We now need the same in energy. That's why early on, by the way, I was talking about how do we build less infrastructure, but instead use pricing [inaudible 00:45:50] to get investment in the right places and to move demand around. All of this is how do you create a lower cost energy system? The UK energy price cap has forced energy companies to do this. I think I saw somewhere there was a 16% improvement in productivity in energy companies once they introduced the price cap. Wow. We're forcing companies to compete on what really matters, which is efficiency. Some companies kind of didn't like the price cap originally, but they've all discovered these incredible degrees of efficiency and there's so much more to go.
Jess Tatham:
Very cool. To take the conversation global, as we wrap up here, one of your latest ventures includes your first wind and solar farm in Africa via partnership with Idris Elba, who I love. What other international pursuits do you have in progress as you expand?
Greg Jackson:
Well first of all, you're right to love Idris Elba. I've had the privilege of getting to know a little during this process and his commitment to helping bring development and, in this case, energy to people in countries where they don't have it, is so deep and heartfelt. For us, motivating. There are 600 million people who don't have energy access. The answer to that, there's abundant solar and wind power, by the way, in most of the countries where this is the case. Solar power is the cheapest power we've ever had, and it's getting cheaper every year. Solar is now 200 times cheaper than it was 40 years ago. We expect solar energy costs to fall by another 40% over the next year or two.
We now have the opportunity to tackle that poverty and injustice through clean energy in the same way as mobile phones enable poor countries to leapfrog landlines. Distributed renewables enable them to leapfrog expensive grids and fossil fuels and go straight to clean, truly affordable energy that will really help improve quality of life and development. I'm proud to be part of that. It's an astonishing privilege to work with someone like Idris Elba.
In terms of our continued global expansion, Octopus has created this global brand and global product offering that is as meaningful to people in Japan as it is to people in the UK, where we started. Our rate of growth in France, Italy, Germany, Spain, Japan is basically the same as it has been in the UK. I've learned this from some of the great American brands that span the globe over the last few decades, that by appealing to the most fundamental human needs, we can create a brand and a set of products that I think will transform the energy system globally. We're going to keep investing in the countries we're already present in, we're launching more countries. In all of them it's about how do we use renewable energy to drive down costs for consumers and create a better energy system for everyone.
Jess Tatham:
One final question. As we've talked about, throughout the podcast, with all your products, excellent customer service seems paramount. We had the pleasure of hosting Time at the NYC last year, and the podcast spoke to CEO Jess Sibley about the unveiling of Time's 2023 Person Of The Year, Taylor Swift. In 2021, you were also recognized by Time on their 100 Most Influential People In The World list. Last year Octopus was named by Time as one of 100 Most Influential Companies. How does it feel to be included in such iconic lists and how does that sort of gauge for the future?
Greg Jackson:
I'm incredibly proud and humbled by that, but at the same time, I think it's not down to me or us, as a company. I think what we've recognized, is something that's incredibly important, which is if we're not constrained by incumbent thinking and incumbent assets, it's that the new energy system is capable, not only of hugely reducing humanity's impact on the climate, but it's going to drive down costs and create better products and services. Nine out of 10 people driving an electric car consider it an upgrade versus a petrol car, which in the survey among our customers with heat pumps, heat pumps had an eight out of 10 satisfaction rating. Gas furnaces, seven out of 10.
The products and services of the new energy system are an improvement. We're in a privileged position to be able to talk about this with everyone, because we don't have that kind of legacy asset base. Instead, we can just focus on building the new world. If you think about Internet Revolution, all those companies that we're building, they're great companies that have defined the world we live in today, were able to bring better products and services, better ways of consuming media, better ways of connecting, better ways of running companies. Most of the time they didn't have to displace incumbency, they were creating something new. That's the difference in energy, but it's also the great privilege we have is to be the flag carriers for that message.
Jess Tatham:
Fantastic. Thank you so much for joining us, Greg, inside the ICE House.
That's our conversation for this week. Our guest was Greg Jackson, founder and CEO of Octopus Energy. If you like what you heard, please rate us on Apple Podcasts so others know where to find us. Got a comment or question you'd like one of our experts to tackle on a feature show? Please make sure to leave us a review, email us at [email protected] or Tweet us @icehousepodcast. Our show was produced by Lance Flynn with production assistants, editing and engineering from Ken Abel. Pete Ash is the director of Programming and Production at ICE. I'm Jess Tatham, your host, signing off from the City of London. Josh King, will be back next week. Thank you so much for listening.
Speaker 1:
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