The Carbon Brief Interview: Octopus Energy’s Greg Jackson 

Monday 13 May 2024

Carbon Brief Staff

Greg Jackson is the founder and CEO of Octopus Energy, a global energy and technology company headquartered in London.

Set up in 2016, it now has 7.7 million customers across 18 countries, as well as a portfolio of £7bn worth of renewable energy assets. The group’s proprietary technology platform, Kraken, is now used to run more than 54m customer accounts across the globe. 

The company’s energy supplier arm recently became the largest in Great Britain, surpassing legacy giant British Gas when it added 1.3 million customers after buying Shell Energy in late 2023. 

Jackson is a “serial tech entrepreneur”, having built and sold a number of start-ups before Octopus Energy. 

Carbon Brief sat down with him for an hour, to discuss the UK’s energy transition, the upcoming general election, misinformation in the media and much more.

Carbon Brief: What do you think should be the key priorities when it comes to energy and climate policy for the next [UK] government over its first six months or so?

Greg Jackson: I think the energy transition used to sound like quite a complicated process. The reality is that it just boils down to electrification. We need to electrify everything we can and then be generating as much electricity as we can from renewable resources. 

Now, underneath that, there may be a whole lot of policy priorities. But electrification has got to be the one word.

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CB: So, when the next government comes in, whenever the election is, are there specific things you really need to see, or that you’d like to see, to really ramp up this decarbonisation process?

GJ: So, again, I’m going to talk about, for me [its] electrification. Because even when we talk about decarbonisation you’re kind of weighing up loads of different things. If we talk about electrification, primarily, then we can say, OK, what does that take?

And I think the first thing we need to do is recognise that, even today, the electricity markets we’ve got are not fit for purpose. We spend billions a year balancing and curtailing renewables – that’s turning windfarms off when it’s windy. And we need a market that means that, at the times when we’re generating a lot of electricity, it’s super cheap for people. And we need to do that on a regional basis, or even more locally than that. 

So that, for example, if today we had regional pricing, every region would be cheaper than it is because we’ve been reducing waste. But, more than that, Scotland would be the cheapest electricity in Europe. These are important because as soon as people can see that renewables can lead to cheaper energy, we get public support for renewables – as we should – and it becomes a much more efficient system. We’re not putting a cost on everyone’s bills to pay for waste, which is what happens today. 

I think, alongside market reform, you then get the right investment signals. So we are going to be investing in the places that need the infrastructure. And that’s not just generation, it can be things like batteries. 

It’s kind of mad at the moment that a lot of people think we should put batteries next to windfarms. But, if you do that, then before anybody’s had a chance to make the most of cheap electricity, you’ve already eliminated the price signal. So the best places for batteries, for example, might be close to population centres. 

Take somewhere like the southeast [of England], where, obviously, it’s hard to build new generation. But we can build infrastructure that will make electricity cheaper by, for example, deploying batteries in places that have got peak time constraints [to] enable us to reduce peak issues and benefit more from the times it’s off peak and we can store that electricity. 

So I think market reform is absolutely number one. And that means the most dynamic pricing possible. 

By the way, it doesn’t mean that consumers will necessarily face dynamic prices, just to be really clear. Companies will be able to wrap-up that dynamic pricing in any number of tariffs. So, for those who want it, you’ll still have flat tariffs – and they’ll probably be cheaper than they are today, because the system is more efficient. But, for those who can shift demand, or want more dynamic stuff, it will enable them to benefit by using electricity more efficiently and that makes for a more efficient system for everyone. 

Obviously, we need reform of two sets of regulations. We critically need grid reform, so that you can actually connect stuff to the grid. We’ve spent years talking about this publicly because of the frustration that we’ve got enormous amounts of capital to build new generation. But you can’t. You literally have no way of connecting to the grid. I mean, there’s a project we’ve got to build a solar farm in County Durham, where I think there’s a 14-year wait to connect it.

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CB: So is that just planning reform?

GJ: That is grid reform. So, basically in the UK – and, by the way, this applies in many other countries as well – you’ve got a national monopoly grid and you can only build new generation if you can connect it to the grid. You haven’t got any alternative. So, if the grid tells you you’re going have to wait 14 years, you’re going to wait 14 years. 

And I contrast this with what has happened in gas. During the energy crisis, Germany alone built five liquified natural gas terminals in one year. Meanwhile, because of these grid connection issues, we can’t build new renewables. And I think that the reform for that is largely bureaucratic; the government and grid need to agree on a process to enable stuff to be connected faster. 

The second thing, of course, is planning. And I think, at the moment, I mean, famously, England built two onshore wind turbines in the time that Ukraine during a war built hundreds, because you can’t get planning permission. And that doesn’t just apply for wind turbines, there’s a real challenge building the infrastructure to transmit electricity around the country. 

And I think the reality with this is we need to find ways to enable communities to benefit when we build new infrastructure. Wherever you build it, you get NIMBYs [“not in my back yard”]. But we need to have IMBYs as well, people who will directly benefit and can see the direct benefit of building infrastructure. And so we need reform that enables us to deploy new electricity infrastructure, but in a way which embraces, to the maximum extent possible, local communities. 

Between those two priorities – i.e. market reform, planning and grid reform – we can unleash the forces that actually will mean that throughout most of the country – everywhere, in fact – consumers will be benefiting from clean energy. And the moment people are benefiting – it’s like when the new iPhone launched. The sudden demand for data meant that the mobile networks just had to build masts, because it had to meet consumer demand. And we can do that with energy, with clean energy, which is the more we enable people to benefit, the more demand there will be for rapid transition. And that’s what we need.

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CB: So, moving on to Labour’s now kind of quite high-profile pledge to get net-zero power by 2030…is that broadly achievable? Is that doable if what you laid out there gets implemented? Or are there extra things that, to hit that 2030 target, would need to happen?

GJ: It’s totally achievable. And, by the way, I mean, the government’s pledge [for 2035] is not that different, right? Everyone’s pledging net-zero carbon electricity by roughly then, I can’t remember all the details, but they’re all quite similar. 

But the reality is, what it does need is commitment. I was recently at a meeting of governments. Lots of industries were lobbying governments to say: we need to be technology neutral, everyone’s got to be given a chance to be part of this future. Which is all lovely, but this isn’t primary school, there are going to be winners and losers. And we need the commitments from governments that enable investors to invest in the stuff that’s going to be part of the future. 

So a really good example would be, there is still this kind of crazy suggestion that hydrogen might be used to heat homes. I mean, it might just be physically possible, but it’s like flushing our toilets with champagne. It might work, but it’s inordinately expensive and impractical. It’s just a delaying tactic from the companies who own the gas infrastructure. 

Now, of course, a transition that means that the gas infrastructure, over time, won’t be so valuable, or may even become entirely redundant, is not the future that they [the gas industry] want. But it’s not like we’re still running stuff down the canals. The technology changes already made [mean] that renewable electricity is the cheapest form of power we’ve ever had and is getting cheaper every year. Of course, there are minor blips like recent inflation in offshore wind, but even that was driven by the inflation and interest rates, which largely came from our addiction to fossil fuels. 

So, the path should be clear, and what we need from policymakers are those brave decisions that say: “Hey, look, there are going to be some losers in this process.” But…the quicker we’re clear about that, the more we can embrace, for example, the workers in those sectors and make sure that they’ve got a bright future, as we transition, and the more we can manage the transition in a way which will be good. Good for the people who were affected by it. 

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CB: Can the market do all of this? Or Labour’s talking of GB Energy, and you hear about nationalisation or quasi-nationalisation of the railways. What do you make of the ideas like GB Energy? 

GJ: Yeah. I don’t think there’s any read-across from railways. It’s an entirely different sector. And the reality when you look at energy, I mean, first of all, GB Energy isn’t the sort of nationalised energy supplier, which is good, by the way. I mean, energy retail is one of the most competitive sectors in the UK. Margins are 2%, if energy companies are lucky. 

The big problem in energy is the rest of the cost stack. It’s largely those kinds of very regulated, often monopoly parts of the system, which need reform. And so I think if GB Energy is about, for example, helping pioneer stuff that isn’t yet ready for market risk…I mean, take tidal as an example. Maybe we should have tidal power, maybe GB Energy would be a great way of kick-starting that, in the same way as government subsidies kick-started a lot of wind and solar. But, increasingly, we could run wind and solar on a merchant basis, i.e. an unsubsidised basis in many energy systems if you’ve had the market reform I talked about. So, if GB energy is helping kickstart stuff we need, that would be incredible.  

If GB Energy helps get government backing for projects to enable them to, for example, overcome some of the planning and connections issues that I’ve described, that could be great. So it really depends on the role GB Energy is playing. 

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CB: Before we started speaking, I was looking at this Ladybird book from 1981, which I picked up from a charity shop, talking about energy conservation. Obviously, whatever that is, 40-odd years ago [and we’re now] talking about 2050 [for net-zero emissions]. What, in your view, does the UK energy system, EVs and all the rest of it look like then? What does the UK look like in 2050? And what does it need to look like?

GJ: So, first of all, I guess the question here is, if this [book] was roughly 30 years ago and 2050 is roughly 30 years away…how well did this predict where we are today? Or how dated does it look, right? 

Look, I think a real challenge with targets like 2050 is that almost everyone who sets those targets will be retired by then. They’re not responsible for it. Indeed, almost everyone who’s working for them will be retired by then. It’s incredibly easy to set a target that you’re not going to be around for. 

So, I’m much more of a believer in setting much shorter term targets. And given that we have the technologies we have available today, we can set really challenging targets. If you are talking about 2030, for example, net-zero electricity, that’s a much more tangible time. Because it tells us about the decisions we need to make right now. 

I think one of the interesting things about predicting the future, is how wrong we get it, especially in sectors like energy, where you’ve got very powerful incumbents who have very strong views about what the future will be, but are often wrong. I mean, Kodak’s view of the future was wrong, Nokia’s view of the future was wrong, Blockbusters’ view. They were all wrong. But they didn’t get to lobby for their view of the future, they just had to compete. And the market and technology made the decision for them. 

So I think if I look at energy, wind and solar, [they] have repeatedly beaten every target. They get cheaper, faster than anyone’s ever estimated. And it keeps on happening. It’s like Groundhog Day when you look at the revised forecasts, because every forecast that comes out, kind of looks back and goes: “Whoops, we underestimated how well solar would do or how well wind would do.” And then they make an estimate, and then they have to go and do the exact same process again because it keeps beating it. 

It’s been the same, by the way, with batteries. Battery prices keep on plummeting way ahead of expectation. And EV adoption has kept on accelerating ahead of expectation. So, all the clean-energy technologies beat the forecasts. 

By the way, the only ones that don’t are the dirty-energy technologies. No one forecast the horrific gas crisis we’ve just lived through. Nuclear keeps getting – and I’m not anti nuclear – but it keeps getting more expensive and slower than expected. And so I think the challenge with setting things like 2050 is, if we start building infrastructure based around our best guesses now, it’ll almost certainly under-deliver and it will cost too much. We’re far better off with the kind of things I talked about at the beginning, which were market reforms, so we can rapidly deploy the technologies we’ve already got.

An incredible thing that happens in technology is, each time you deploy something, it teaches you about what is possible. When the iPhone launched, no one foresaw that QR codes would get you out of a pandemic, or that Uber would change the global cab industry. 

In the same way, for example, we are already discovering that if we give people, if we integrate our technologies directly with people’s electric cars, we can charge them at three or four times less than grid cost, because we’re able to grab the electricity when it’s most abundant. That means that, today, for some of our customers, they can drive electric cars for £2.30 for 100 miles, whereas with a diesel car it would be £18. 

Now, no one forecast that kind of thing. It’s just what we discover, when we build out new technology. And that’s why, you know, I really believe we need the reforms to let us build the technology. And we will discover it gets cheaper, faster, easier and better for consumers, far more quickly than anyone realised.

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CB: What do you make of the current mood in certain sections of the media, which is very negative, relentlessly attacking EVs, electrification, solar? What’s your view on that? It’s almost like organised misinformation, it sometimes feels like. 

GJ: I think there are two layers to it. I think some of it is organised and some of it is cultural.

Let’s talk about the cultural first. Let’s look at EVs. EVs are not just an electric version of petrol cars, they are a fundamentally different creation. So, the assumption that, for example, the long-standing car makers, the manufacturers of Europe and elsewhere, were going to be able to just start making EVs, is kind of wrong. Right? They spent 100 years becoming unbelievably good at complex transmission and drive shafts and all of the engineering required to take what is actually a remarkably complex thing, a petrol or diesel engine, and turn it into a consumer device. 

Meanwhile, for the last 20 years a bunch of Chinese companies that just set out to build EVs from the beginning, or Tesla, which has only ever done EVs, have re-engineered cars, built around the fundamentals of an EV, in which things like transmission becomes much simpler, but your ability to build really smart battery management, really smart software is actually a competitive edge. 

Now, what we’re seeing at the moment is EVs emerging that traditional automakers find very, very difficult to compete with. And, so, their answer is: “Hang on, we can’t make money in EVs. Therefore, something’s wrong with EVs.” Because no company ever says there’s something wrong with us. 

Now, that means that everyone in those companies, there’s huge numbers of people there, good people, but that are genuinely thinking EVs are too hard, they are too challenging, they’re not going to work. And they’re the people that have a 20-year relationship with motoring journalists. Their lobbyists have had the 20-year relationships with the political correspondents, their CEOs are the ones that have the relationships with the business journalists and with the editors. So, this isn’t a conspiracy, it’s just that those companies are facing existential threat from something that is really challenging for them. And that means that all the conversations these people have are about the problems with EVs, right? 

Now, actually, I have lived with an EV for seven years. There are very, very few problems with an EV. And, you know, for example, the latest generation of EVs are getting cheaper and cheaper and cheaper, as all the technology scales up. And we get these great cost curves as batteries come down. But those automakers are not seeing it, in fact, this is a threat to them. 

So, I think the primary layer here is simply that the influential people in the motoring industry, simply don’t get EVs. 

I think the second thing is, of course, there is a backlash from the fossil fuel industry, including some car companies, because, even today, I think EVs have taken 1.8m barrels of oil off the road per day. Right? That’s enough that the global oil industry is suddenly seeing what used to look like a minor inconvenience in the future is suddenly a real and present danger. Now, we saw the ability of the tobacco industry to lobby against tobacco restrictions. The oil industry is vastly more powerful than tobacco ever was. And so, on top of the sort of cultural thing that I’ve described, you have then got a genuine concern and lobbying efforts. 

And I guess the last part of that is cultural wars. There are organisations who deny climate change, who are combining anti-climate change with anti-EV, with anti-renewables and a whole load of other social topics to try and create political divides. That’s why when I talk about the market reforms that will make, for example, clean energy cheaper, it’s so critical, because if we can show people this transition is good for them, we kind of undermine that attempt at a culture war. 

I spend a lot of time talking to, for example, people on the political right, because they are free marketers. They believe in entrepreneurship, they believe in efficiency and talking to them about the way in which renewables and EVs can lead to a more efficient competitive world. Actually, we make the culture war go away and we talk about the economics instead. And then we can align people’s self-interest with that industry, with that of the climate.

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CB: Talking about a culture war, we obviously got an election here in the UK looming, but we’ve obviously got a US election looming too and a very, very stark choice between a Biden versus Trump presidency. In that context, given what the Trump 1.0 presidency did, what do you make of the Paris Agreement? Obviously, Trump tried to pull, or did pull the US out of it and then Biden reinstated it. Do you think the Paris Agreement has achieved things to date? Is it the international framework system that we need, or not?

GJ: I’m generally impressed that most governments really do take the commitments they’ve made seriously. And, even, while on a political level, I’ll often hear these kind of culture-war discussions, underneath that, you see the real actions. 

Now, the US has obviously swung massively because you had the Trump rowbacks, but then you had, under Biden, the IRA [Inflation Reduction Act], which, by the way, is a very bipartisan programme. I speak to people from the US administration and, just yesterday, [we talked] about the kind of risk of a rowback depending on what happens in November and their view is, of course, there is a very real risk. 

But a lot of what the IRA has done has been in red [Republican] states. The Biden officials talk about touring America and meeting all these mayors, Republican mayors and governors in red states, who have seen the benefits of jobs and the industrial regeneration created by it. And so you hope that a lot of that will mean that the underlying programmes survive any political change. 

I think in terms of the global picture, we’ve also got to be a bit honest about this. Paris was about 1.5C. I think last year we exceeded 1.5C. Now, climate comes and goes, it’s very important we all recognise that, but, we’ve got to accept that we’re facing an accelerating challenge and we’ve got all the tools to solve it. 

I think the place that we really need political leadership now is to be able to look at industries and say: “Look, some industries are going to be the future. And their success is not only going to benefit the climate, it’s going to create more economic opportunity than we lose as we allow some industries to start declining.” And they’ve just got to be brave about this. 

I saw that G7 has just agreed to phase-out coal by 2035. [Laughs] I mean, you can be proud to be British on this one, because this is our last coal year, and even then it’s miniscule. The idea that we somehow need these forms of energy for another 11 years is mad. And, so, I’m simultaneously pleased that governments really do take these commitments seriously. But I’m also worried that they fail to grasp the opportunity that a far more rapid change could deliver greater economic growth, greater outcomes for their citizens, than in their current shape.

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CB: Obviously, looking at this [Ladybird] book, and looking back over previous decades, I’m interested in your own personal epiphany, if you like, on climate change. What was the thing, that moment…was it a book, TV programme, film, a lecture, a conversation with a colleague or family member, where the penny really dropped and you thought: “OK, climate change is a thing and it’s pretty damn serious”?

GJ: I was a child in the 70s and I joined Greenpeace when I was 15. And the thing that first got me into it was actually local air pollution more than climate. Because back then you could literally see the diesel fumes belching out the back of buses, out of car exhausts, often very visible, and you could really smell and feel it in the air. And I thought it was completely unacceptable, that one person’s choice to drive a car that did that created this huge negative impact on the people behind them. 

And you remember that when leaded petrol was banned, which was done almost overnight, it was because of the impact on kids’ brains in dense urban areas with a lot of vehicles. It’s just unconscionable. And I think back then what you could see was that there were clean alternatives. This wasn’t about sackcloth and ashes. It wasn’t asking people to give up the huge benefits of industrial progress. It was just we needed ways to enable people to choose better solutions at the same or lower cost. 

And so that was always my philosophy and I think, as I became more and more aware of climate change, exactly the same applied. 

Now, I think the real two points of epiphany for me on climate were, first of all, realising there’s a solution. I think for a long time, you kind of feel like, how can we power our society without burning stuff? And then you look at the cost curves for solar and wind and all the other technologies. And, honestly, it’s going to be cheaper to stop burning stuff. That was an amazing moment, when I realised that we didn’t have to arrange the forces for saving the planet against the force of economics, because they actually lined up. 

I think the second thing was Al Gore’s movie, An Inconvenient Sequel. We’d actually started this company, we started the company in 2015-16. In 2018, it looked like we were doing quite well. And we went away for a couple of days for a management off-site. And, after a hard day slaving over clipboards or whatever you do, I arranged for everyone to watch a movie and they all came in and I think they thought that we’re going to get something fun. And when An Inconvenient Sequel opened up, all the people in the room, you could see their faces drop, because I was forcing them to watch something worthy. 

But you know what, five minutes in, everyone’s WhatsApp messages start pinging, and it was like, “wow, we have to do more”. Because it was showing the very real effects of climate change, which, by the way, are only worse now. And then at the end of the movie it had hope, it ended with a deal on solar for India. And, of course, it was for dramatic effect, but the reality of this is that we do have hope. 

After the movie finished, we all just sat down and said how can we accelerate the ability our company has to do something about this? And so, I think, hope is as important, knowing there is a solution, is as important as knowing there’s a problem.

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CB: You have talked very confidently about the cost benefits of wind and solar and you mentioned earlier how, a couple of years ago, government auctions made offshore wind look incredibly appealing. And then we had a failed auction and now it looks like quite a different picture. Heat pump installations in the UK are still very slow, costs are high. The cost of electricity versus gas makes them probably cheaper to run, but not definitely. How would you respond to lots of people saying: “Is it actually cheaper? It’s going to be more expensive, we need to consider perhaps using boilers?” How do you respond to those very serious concerns? 

GJ: The first thing we’re going to do is recognise that today’s markets don’t reflect the underlying physics and economics, which is why I talk about market reform all the time. The second thing we need to do is recognise that there’s always going be short-term blips, those auction failures were driven simply by short-term inflation and interest rates, both of which were largely the consequence of the gas crisis, i.e, our addiction to fossil fuel is so damaging, it even makes the solutions to fossil fuels more expensive. 

And then we talk about things like adoption of heat pumps and so on. A year ago, two years ago, no one had heard of a heat pump. Now, the climate change denying parts of the media have made heat pumps famous. Thank you very much. We’ve got to remember that we’ve got long-term transitions and almost everything we talked about there are short-term issues. 

So, if we break it down a bit, we can generate electricity from renewable sources in the UK, for between 4p and 8p a kilowatt hour (kWh). New generation in solar and wind can do that. 

Consumers traditionally in the UK have paid 17p/kWh. During the energy crisis our bills were paid for by the government, but they went to 40p/kWh or 50p/kWh, right? I.e. the generating cost, the cost to generate electricity, is way below what people pay. We’ve just got a crazily inefficient system for getting it from generation to consumption. We need to fix that. Which is why that was literally the first set of policies that I talked to you about.  

Just by way of example, electricity roughly trebles in price in the UK between the point it’s generated and the point you consume it. Milk, which is much harder to transmit, gets schlepped about in diesel lorries, it has to be bottled and pasteurised, is stored on refrigerated shelves in supermarkets with really expensive real estate. I think milk goes up by 50% between the farm and the point you buy it. Our electricity system is just fundamentally far too inefficient. And we have to fix that. And that’s the market reforms. 

But then in terms of, for example, running costs of heat pumps…on a smart tariff they’re almost certainly cheaper for the vast majority of homes than a gas boiler to run. And that’s in today’s crazy world where all of the climate and social levies are sitting on electricity. If you take away that distortion, running heat pumps on electricity is dramatically cheaper than a gas boiler. 

We’ve still got to make heat pumps cheaper to buy and install. That’s why, again, going back to first principles, I was inspired here by Michael Dell, of Dell Computers. When he was doing his MBA, he sat in his dorm room and he read an article that said that a $3,000 IBM PC only had $1,000 of components. But, you know, you had an inefficient supply chain, loads of wholesalers and, when you look at heat pumps, it’s just the same. So we’ve started making our own, so we can be a bit like Dell, by going direct to make them cheaper. And already we’re seeing a big cost benefit. But the more we invest, the more we scale up, the more we’ll see that, and other companies are doing the same. 

So what we’ve got is a situation where we’re at the beginning of a technology change. And if you look at the first iPhones, they cost £435 and today you would feel like you’re holding a brick that barely performed. But they were enough to kick start the smartphone revolution and that’s just the process we’re going through with the heat pumps. 

The UK has very specific needs for heating, not only do we have poorly insulated homes, but we’ve got a very temperate climate. We also heat our homes with wet radiators, whereas most countries that use heat pumps have used air to heat the home. And so we’ve needed to make heat pumps that are UK specific. All of this is happening at the moment and it just gives me huge optimism. 

And if I compare this to the alternative, by the way – the idea of, for example, piping hydrogen into people’s homes – I don’t know where to start.

We can start with engineering. Hydrogen is the smallest molecule in the universe. When a rocket launch is delayed by a fuel leak, which they are, that’s hydrogen. Rocket scientists can’t keep it in a very closed and carefully designed system. You know, there are bits of our gas network that are unmapped, that are 100 years old, I think there are bits of the piping that have got wood in them! Anywhere you’ve got a leak, hydrogen can get out. And so, before you can pipe hydrogen [into homes], you’ve got to make sure that every single home, every single inch of every pipe in every home, every valve and every joint, every appliance is going to be able to keep the hydrogen in. And this is unbelievably complex.

I saw the other day a hydrogen cooking hob, with an invisible flame, literally invisible flame. I don’t know why you’d want one of those in your kitchen, so you’ve got an explosive leaky substance with an invisible flame, or you could have an electric induction hob for roughly the same amount. The same cost to run, wipe clean, totally safe, incredibly controllable and you don’t need all this stuff piped into your home. 

And that’s just looking at the piping, nevermind where’s the hydrogen coming from! 97% of the hydrogen in the world at the moment is unabated carbon emitting hydrogen. And this is years after we were told we’d be starting to get green hydrogen available. And then, if you’re going to use hydrogen to heat a home, if it’s green hydrogen, you’ve got to create renewable electricity, you then use that to power electrolysers, you then have to compress the hydrogen, pump it into the home and burn it. End-to-end, 40% efficient at turning the electricity you started with into heat. And, meanwhile, the heat pump is end-to-end 250% to 400% efficient. 

There we go. I’m very optimistic because all you ever have to do is go back to the physics of this stuff. 

Oh sorry, the other thing you mentioned, you know…is electricity more expensive than gas? Well, of course electricity is about three times more expensive per unit, maybe four times with the distorting taxes that need to be taken away. But electricity is so much more efficient. An EV turns 80% of the energy and electricity into motion, a petrol engine is 25%. A heat pump, you get 300% efficiency efficiency, a gas boiler gives you 85%. So electricity is so much more efficient. 

And then the real magic with electricity is that it’s fungible. If you’ve got an EV, it can store the electricity at the cheapest times, you can’t do that kind of thing with gas. In fact, increasingly, some EVs can put that energy back into your house at peak times, reducing your energy costs. 

Fundamentally, I think there is one thing here which is that electricity puts consumers far more in control. If they choose to, they can get solar panels and largely eliminate their dependence on anyone else. But with fossil fuels, we’re totally dependent on the countries and, to a degree, corporations that provide that molecule. One reason they don’t want to let go is that control gives them power and it gives them money. And we saw that during the gas crisis. 

Any comparison of gas costs versus electricity costs has to remember that, from time to time, we experience these fossil fuel crises, because we’re dependent on people in control. And during the worst of the gas crisis, the price of gas went up to 30-fold. There was a very real chance that Europe was not going to have enough gas. In fact, it is potentially the case that we were saved from a gas crisis by a mild winter. 

So we should never allow anyone to get away with this idea that electricity is more expensive than gas, because they cherry-pick the times that gas is cheap and they forget about the times that gas or other fossil fuels brutalise our economies. I think it cost the UK £100bn, the government paid two-thirds of our energy bills during the crisis. That’s how bad fossil fuels are. 

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CB: You’ve talked already about market reform and how important you think it is. One of the key arguments from people who are in favour of this transition that the economy is going through, is that dramatic reform of the electricity markets puts at risk the investments we need to get 2030, 2035 or whatever our targets are, which currently relies on the system as it is today. How do you respond to that?

GJ: It’s just not true. Of course, investors quite rightly, when investors write a large cheque, they are making a huge commitment and they need to know it’s got a good chance of delivering a return. And, so, whenever investors have got comfortable with one way of doing things, they of course want to see that carry on. 

But, first of all, there are plenty of other investors available. Whilst in electricity, investors have long had these kind of guaranteed returns through different mechanisms, oil and gas investors make their colossal investments against enormous technology risk, enormous political risk and enormous market risk. When they decide to start extracting or to buy the licences for an oil or gas field and then make a huge investment required to extract the stuff. And then huge investments in LNG tankers and terminals. They have no idea what the future price of oil or gas will be. And they can still make those investments. So you can make massive investments against degrees of uncertainty. 

And what we’ve seen already in electricity in the past was, for example, when we moved to the CfD [contracts for difference] regime, from the RO [renewable obligations] or FiTs [feed in tariffs] or whatever. A lot of investors said: “Well, that will kill investment.” It all [still] happened. 

Similarly, when we’ve seen, for example, a number of states in the US have introduced dynamic zonal pricing, the investments carried on unaffected. So, at the end of the day, people need electricity. In fact, the demand for electricity is only going to go up. And when there’s demand for a product, you can invest in producing it.

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CB: One of the things that Octopus has been quite involved in is the demand flexibility service being run by the electricity system operator. And that’s obviously encouraging customers to cut their use at peak times. How much importance do you put on that kind of system as we transition to a net-zero power system? 

GJ: First of all I’d say Octopus was pioneering that for four years before the ESO brilliantly introduced it. Because the sort of legacy energy system said: “Customers won’t do this stuff.” Everything we’d invested in, in trials and experiments with customers showed that they loved that. 

It was brilliant the way the ESO introduced it. And Octopus Saving Sessions accounts for 50% of all of the participation. Because we’d nurtured relationships with customers. 

These are not energy geeks, by the way. Energy geeks were already on dynamic tariffs and smart tariffs, which meant, actually, it was kind of hard for them to participate in the Saving Sessions, because they were already fully optimised. This was one and a half million for us, one and a half million ordinary households that finally had the opportunity to shop for bargain electricity the way that they already do with supermarkets. 

And giving people the opportunity to cut costs, especially in a crisis, but also to have agency, to be able to make decisions, is so critically important. And I think that this isn’t about renewables, this is just about the way the energy system has treated customers as dumb offtakers, rather than them being the very reason we exist. And as soon as we truly embraced customers, we discover all these ways in which we simultaneously provide them with better service and better value through a more efficient system. It’s just the equivalent of supermarkets pricing goods to clear, rather than letting them go off. 

I think the big challenge for the energy sector now – and there’s a real risk that legacy thinking kills this – but the real opportunity and challenge is to make this the norm. It shouldn’t be a weird add-on in one winter in a crisis. It’s like every day, there are a bunch of people, turning electric generation on and off. There’s a whole bunch of companies investing heavily in things like batteries. And the ability to shift demand around is just as big, a potential contributor to an efficient system. In fact, it’s better because you don’t have to buy any assets. And so I think we shouldn’t be thinking this has been an add-on system, it is the system.

It’s insanely popular, too, just be really clear. We got 100,000 customers asking for smart meters during that programme just to participate.

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CB: The last question neatly segues into this. Technology is a key part of being able to do that, but also your broader pitch to customers. A big part of this transition to EVs requires integrating very well with your technology. But how do you deal with customers that aren’t up to date? Who don’t necessarily have smartphones, who aren’t digitally savvy? How do you ensure that they’re not left behind? 

GJ: I tell you what, those customers were being brutalised in the old energy industry. If they’re calling a legacy energy company that has got a 45-minute wait on the phones and then you get through to someone and they can’t help you, because it’s got to be a different department, so they promise to call you back and they don’t call me back, and then they hand me through to another department, and you just do all of the security questions, just as they’re closing the line, that was the experience those people had in energy. 

So the first thing is great technology enables you to provide everybody with a better service. Octopus’s magic is that when you phone us up, 95% of the time, the person you are speaking to can sort out your problem there and then, because of technology [which is known as Kraken]. Fewer things go wrong, because of technology. 

Second thing is, I’m so sorry, I can’t remember the number, but, actually, there are relatively few people in the UK that don’t have access to a smartphone. And if we think about things like everything from universal credit to the ability to buy an enormous range of products and  services, it requires a smartphone. And the most important thing is making sure that wherever someone has got the access, we enable them to become part of an efficient system. 

For the very small number of people that don’t have those technologies, it’s very unlikely you’d have an EV and not have a smartphone. And so a lot of the technologies we really need to optimise to make the system efficient for everyone, like EVs, naturally you are going to find the people that have the kit. 

So I think the most important thing is you look at everybody, regardless of where they are, but you don’t get held back by saying that everything’s universal, right? After all, Aldi and Lidl, great supermarkets, but we don’t prevent them from rolling out because some people might not be able to get there. In fact, the more they’ve rolled out, the more they’ve been able to become closer to being universally accessible anyway. 

You know, things like when the iPhone launched it was £435 plus I think about minimum £35 a month. It was a super premium product. But, within five years, it paved the way to the $50 Android, $20 Android, the ubiquitous Android that has transformed not only the lives of people in wealthy countries, but many developing countries, too. 

People who try to hold new technology to the bar of universality are typically protecting some sort of legacy against the technology improvements that benefit consumers and we should not have much patience for that. 

For example, someone recently wrote to me because their 700-year old house had a heat pump that didn’t always work efficiently – by the way, I think it was badly installed and we can fix that – but there’s not that many 700-year old houses, and I’d love to serve them. But 20% of households don’t have gas in the UK, so heat pumps are held to this idea that they have got to work for everyone in all situations, which, by the way, they are better than gas because every house has got electricity and only 80% have got gas. So even when we talk about universality, we are usually using it for a false comparison anyway.

CB: Thank you.

GJ: Thank you.

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