What does Spain’s blackout mean for the future of clean energy?

Greg Jackson, CEO of Octopus Energy, joins Azeem to discuss the Iberian blackout and how we can create a more stable, flexible, and resilient energy grid for the future.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Azeem Azhar?

  This week has been pretty bleak for energy transitioners. Prices are high in many parts of the world. Tens of millions of homes in Spain and Portugal lost power at the end of April. A lot of people will believe that we're going too fast.

• 0:11Speaker 01

  We're halfway across the road. Now, if you've ever seen anyone hesitate crossing a multi-lane highway, that is a very dangerous thing to do. The best thing is to get right across as quick as you can.

• 0:20Azeem Azhar?

  I think this gets us to the really meaty part of our discussion, which is about how you go and fix the grid.

• 0:25Speaker 01

  You can run a very high proportion renewable grid incredibly reliably, but you don't do it like you did the old ones. Markets have got to move at the same speed as technology and engineering innovation. At some point, you start saying, should we open up a debate that involves the demand side as well as the supply side?

• 0:41Azeem Azhar?

  And that's a real-life social science experiment that you weren't often conducted, right?

• 0:45Speaker 01

  1.6 million households signed up. All we had to do was text them saying, tonight, earn a little bit of money by shifting your demand by an hour. What we got was the equivalent of turning off all of the electricity in two major cities.

• 0:57Azeem Azhar?

  This message is different to a lot of the people who have talked about the renewable transition over the last 10 or 15 years. A number of the advocates are promoting it in a way that is very ideologically driven, that is probably not very persuasive, frankly.

• 1:11Speaker 01

  We'd signed deals in eight of the biggest house builders in the UK to build homes where there will never be an energy bill. We shouldn't try to convince people this. We should be able to show it because it's available right now, right here.

• 1:29Azeem Azhar?

  We're joined by Greg Jackson, the CEO of Octopus Energy. The company is only nine years old, but truly has enjoyed exponential growth. It's the largest electricity provider in the UK and it serves tens of millions of homes worldwide through its software platform. I'm a happy customer and I've been stalking Greg for several years, delighted to have him here. So today, we are going to try to make sense of the Iberian blackout. Tens of millions of homes in Spain and Portugal lost power at the end of April. And dig into how we future-proof our future grid. How can we make sure they deliver clean energy safely? Or is that not going to be possible? So Greg's an expert here.

• 2:13Azeem Azhar?

  Greg, the glass-jawed grid, like a boxer that just falls over at the sight of the opponent. What happened in Spain and Portugal?

• 2:21Speaker 01

  I mean, look, first of all, we should be clear that we don't know yet. Looking into major events like this, which have usually got multiple causes, takes time. And we have to let the orderly process of investigation go on. There was a major blackout that affected a very large region of the UK, including, you know, some of the southeast or most populous regions in, I think, 2019. Investigations to that, and it was a less serious event than the Spain of Portugal. Took many, many weeks and facts are still emerging down the road. So look, let's be really clear about that. But I think we can draw few generic lessons. And there have been kind of comparable events, especially one in the UK.

• 3:02Speaker 01

  We, I think in 2000, was it 2016? South Australia had a very major blackout with some very similar looking characteristics. In that case, caused by storms. There's some characteristics in common. And of course, we've seen them in Texas as well. And what they've got in common is an energy island with very little interconnection. So I think only about 3% of Spain's total capacity is available via interconnectors. And Texas famously, uh, caught the land of the free, does not connect to anyone. No, I think technically there is actually a little bit of connection, but it's very, very, very skinny.

• 3:40Azeem Azhar?

  Right.

• 3:41Speaker 01

  And Australia's got a similar thing, energy islands, because obviously the geography of Australia lends itself to that. So the first thing is energy islands. The second thing is lack of batteries. And I think this is really big. Essentially, you can run a very high proportion renewable grid incredibly reliably.

• 3:59Speaker 01

  But you don't do it like you did the old ones. And we should talk here about market structures as well. But one key feature of Spain's grid is, I can't remember how, it's got like a fraction of a gigawatt of batteries. And actually, very little planned in the pipeline. If I compare that to, for example, the UK at the moment, the UK's got five, six gigawatts of batteries. And it's got plans to get to, you know, ten or twenty times that. And the last bit, I think, is a lack of digitization. And I think it's shocking around the world how undigital grids are. You know, we put smart meters in people's homes, but most major substations that compose the grid are not metered in real time. There's not much telemetry.

• 4:41Speaker 01

  And then we rely upon sort of manual control rooms rather than automated systems to balance the grid.

• 4:47Azeem Azhar?

  Can you step back there? Let's step back to Spain and Portugal, right? So I think, as you say, we don't know the the original cause of the incident that that day. We know the proximate cause, which the proximate cause was that over the course of a couple of seconds, there was a frequency wobble and that caused things to trip and then power to be shut down. And that frequency wobble, I found fascinating as I started to dig into this a little bit. So, you know, grids in the US run at sixty hertz, that's sixty cycles a second. In Europe, it's roughly fifty hertz, maybe forty nine in some cases. And the grid is this massive machine where you have dozens, sometimes hundreds, of traditional fossil fuel turbines spinning.

• 5:30Azeem Azhar?

  These turbines are enormous, three hundred to four hundred tonnes, some of them. And they build this inertial kinetic energy within them. And if there's a spike in demand or there's some problem with supply, the inertial energy in those rotating turbines is enough to smooth the grid out. And so you rely on the fact these massive machines are spinning. And I found it fascinating that a point one five hertz deviation, we don't know exactly what was the cause of the cause of that, was enough to bring the Spanish grid down. And what it seems to be that in other grids that are not as renewable as Spain, I think when we started recording this, Spain is seventy three percent renewables. It's a hot sunny day in May and there's probably a bit of wind going on.

• 6:15Azeem Azhar?

  You don't have so many turbines spinning, right? That seems to be the the kind of proximate issue.

• 6:21Speaker 01

  So around the world. The frequency of the grid, it was kind of, it was served for many purposes. It was, it was an artefact, a product of the fact, you know, we had these big spinning generators. Now, part of the physics is when there's a very high load on a grid, the rotational speed of those generators slows down. And that's a signal that you need to put more generators on the system, right? So essentially.

• 6:49Azeem Azhar?

  It, it, you're sort of bleeding energy, the inertial energy off to kind of keep the grid running, is that?

• 6:54Speaker 01

  So basically, so physics is when you've got a high load on a generator, then that high load, it essentially acts as magnetism and stuff, right? But acts as drag on the speed.

• 7:04Azeem Azhar?

  Right.

• 7:04Speaker 01

  When you see your generator slowing down, well, when you see the, the grid frequency dropping, you know, you need to put more electricity onto the grid. To reduce the load per generator, right? Essentially, so that was the feedback loop you could literally use to control the grid in the old days. Um.

• 7:22Azeem Azhar?

  So can I just, that sounds very odd. I'm going to give an analogy here. That's a bit like, if you go into a traditional car, there's a speedometer and you can tell how fast you're going. In this version, you don't have a speedometer, you drive the car into a person. And then you work out after the fact that you were doing more than twenty five miles an hour.

• 7:41Speaker 01

  But you know what?

• 7:42Azeem Azhar?

  It's sort of a bit like that, right? Cause you're not actually measuring, you're measuring the actual thing, not the thing that tells you what's happening.

• 7:49Speaker 01

  Yeah, I think it's complicated, right? The simple thing is if you keep an eye on frequency in a traditional grid, you know whether you've got excess load or indeed insufficient load, right?

• 7:57Azeem Azhar?

  Right.

• 7:58Speaker 01

  It's an automatic feedback loop.

• 8:00Azeem Azhar?

  Mm hmm.

• 8:01Speaker 01

  In a renewable grid, the electricity is not generated by things that are spinning. So what happens is you can't any longer rely on the old analog system that the frequency is the signal for what you need to do. Instead, you need digitalization and access to, you know, you need to be reading what is the load digitally. And you need to be able to respond digitally, you know, for example, by using batteries to be able to either soak up power or dump some onto the grid quickly. To maintain that kind of supply and demand balance of which the frequency is an indicator.

• 8:36Azeem Azhar?

  I've met a couple of grid people in my life. I mean, I'm proud of this. The grid operators in the UK and I've met some involved in the US. They seem to me to be incredibly smart and thoughtful, methodical people who are thinking quite hard about grid resilience, specifically grid stability. How do you get into a situation where everybody understands the physics, they understand the engineering physics, they understand what the amount of inertial energy there is in the system, it's measured in gigawatts, seconds or something? How do you get to a stage where you allow that resilience report resource, that dampening resource that exists, to disappear without putting systems in place to make up for it?

• 9:21Speaker 01

  So first of all, we should say that, yeah, look, some of the most committed, dedicated, smart people I know include grid engineers. The sense of mission, of professionalism and dedication, plus absolute technical expertise is off the charts. Let's note that. I think there are a couple of features of any transition. The first one, by the way, is the assumption that we need a grid of, say, 50 hertz, the European figure, right? Because if you're like in the traditional grid, where the frequency was a by-product power we were generating, it was where we should control it, everyone's alarm clocks used to run off the grid frequency. Obviously, these days they don't, they've all got microprocessors and use internet signals and stuff like that. On the whole, the equipment that relies

• 10:05Speaker 01

  on the grid frequency now is going to be things with big motors, especially a large industrial equipment. And at some point, you start saying, you know, should we open up a debate that involves the demand side as well as the supply side? And this applies to so much stuff in the world of energy, by the way, and I'd love to talk about some more of that. And saying like, over time, rather than having this kind of religious dedication to extremely tight grid frequency, heavily synchronized, a considered higher system, are we going to open ourselves up to a grid which has flexibility in that world as well?

• 10:39Azeem Azhar?

  Can I just say that is that is super fascinating and it reminds me slightly about why the the old apocryphal story about why train tracks are as wide as they are. And the joke is it's the width of two horses backsides dating back to the the Roman Empire. Right. So we engineered engineered around a particular engineering configuration and path dependence has kept us there. But I think this gets us to the really sort of meaty part of our discussion, which is about how you go and fix the grid. Right. Is it software? Is it markets? Or is it just going to be more steel? And I think this week has been pretty bleak for energy transitioners. Out there, of course, we had this situation that in Spain and in Portugal.

• 11:22Azeem Azhar?

  Tony Blair, the former UK Prime Minister, came out and said, look, net zero strategies are going to be a real problem because they've got quite ideological and politics won't support it. Consumers won't support it. And in a way, the energy transition and net zero have become deeply interlinked. Right. Prices are really high in many parts of the world, typically in the UK. A lot of people will believe that we're going too fast, that this is happening hell to skeleton. You can understand why why that is.

• 11:49Speaker 01

  Okay. So first of all, the last thing on that grid issue I was gonna say was I didn't really answer your question about the engineering.

• 11:56Azeem Azhar?

  I'm sorry. Yes.

• 11:57Speaker 01

  Yeah, no, I was gonna say is we've got to remember all these things are run by markets. And so, for example, one key feature of the Spanish market was that with batteries, you couldn't stack different revenue sources for a battery. So you only had one revenue source, whereas in the UK you stack different revenue sources. You get paid, you make money by arbitrage in the grid, you make money by balancing the grid, by responding, by reacting to frequency issues. And because you can stack the revenue in all these different ways, batteries are much more financially attractive here, which means the engineers have got more tools in their box.

• 12:29Azeem Azhar?

  Right.

• 12:29Speaker 01

  Whereas in Spain, the engineers don't have access to that tool because the market hasn't provided the incentive. And so very often, this critical moment of transition, which you're kind of referring to, we have a world where markets have got to move at the same speed as technology and engineering innovation, and it's not happening. And then you get consequences like this.

• 12:52Azeem Azhar?

  I'll come into that point about markets, because I think it is a really fundamental observation, right? So the old electrical system was incredibly expensive to get into. You needed a billion pounds or the equivalent. You needed to be friends with the Secretary of State or a Cabinet Minister to get the permit, and then you had to connect into the grid. And then the market was sort of designed in this, a whole academic discipline on the design of electrical markets. And it does seem like there's a whole set of new assets that are emerging. For example, couldn't frequency reserve, right, be a tradable asset that becomes like a financial product that you can invest in, you can get a rate of return on by saying, look, I'm going to be there, and I'm going to ensure at these moments

• 13:34Azeem Azhar?

  that the frequency will always be met, and that will turn into some physical asset, which might be, you know, a battery or something else.

• 13:41Speaker 01

  Yeah. And essentially, by the way, that is what some grids have. You get paid for helping, for example, sort out frequency issues. And, you know, there was an interesting thing we had in the UK where we've got this technology platform, Kraken, that drives octopus, but manages, I mean, by the way, to give an idea about the amount of data in the modern grid, today, in the UK alone, Kraken processes 300,000 rows of data per second. That is 30 times more than Visa, the payments network, globally. And so energy's very rapidly moving from a world where you had very little of this kind of real time data to a world that is astonishingly data centric. And that's the way in which you

• 14:25Speaker 01

  can sort of manage a lot of problems we're talking about. You can manage the physical problems that would help reduce the risk of something, as happened in France, in Spain and Portugal. But it's also how you deal with the economic problems that Tony Blair rightly highlights. The biggest offshore wind farm in the UK is paid to turn off 71% of the time it could be operating. And what that means is because we don't have a dynamic way of managing to use the electricity that's available in a renewable world when it's available. The kind of theoretical, the sticker price for electricity from that is about seven or eight pence a kilowatt hour. But the effective price per unit delivered Is more like twenty seven or twenty eight pence.

• 15:08Azeem Azhar?

  Right, because it's turned off two thirds of the time essentially.

• 15:11Speaker 01

  Yeah, and it's getting paid to be turned off. So not only you've got an idle asset, you're literally paying for the units you didn't get, and then you have to pay someone else to generate them. We're at a stage in the energy transition when a lot of the kind of rigidities of the old world are causing the physical problems you described, in this case the Albeir Peninsula, and also the economic problems that Tony highlights, Tony Blair. And so I think what we, what we need to do now is not row back, like we're halfway across the road. Now, if you've ever seen anyone hesitate crossing a multi-lane highway, that is a very dangerous thing to do. The best thing is to get right across as quick as you can, and that's what we have to do in the transition now.

• 15:49Speaker 01

  And to do that, we need to be taking sometimes hard decisions and driving sort of really important change in how we manage the system. And so this digitalisation, it's quite interesting actually, I mentioned earlier the South Australia grid. After their very, very major twenty sixteen blackout, they actually had this question, can we deliver a reliable grid as we're becoming more renewable?

• 16:14Azeem Azhar?

  Didn't they build that massive battery with Elon Musk down?

• 16:18Speaker 01

  Exactly, built massive batteries.

• 16:19Azeem Azhar?

  Yeah.

• 16:20Speaker 01

  Um, but they've doubled down on renewables. They're now a seventy percent renewable system. And I think it's something one of the teams in Australia, from having been one of the most expensive. By embracing this change and investing in the technologies for it, you end up in a cheaper and more resilient, reliable world.

• 16:37Azeem Azhar?

  Can I just, can I take us to Texas for a second? Because I think Texas is really interesting, you know, it's the home of J R Ewing and Dallas and big oil. But it is also the most dynamic renewables market in the US and really, really allows for quite a lot of competition. And I remember you telling me something about a product that you had in Texas, which allowed you to manage the demand of people's homes, which feels like it fits into exactly what we're talking about. That story to me is super, super interesting and really granular for people to understand what that future looks like.

• 17:15Speaker 01

  Yeah, it's honestly a great example. And first of all, by the way, what Texas has is relentless competition and the ability to build stuff. And I think that latter point is what's enabled them to really benefit from building out, you know, wind and solar in terms of electricity costs. And by those low electricity costs have then changed the economy of Texas because they're attracting massive manufacturing because, among other things, they've got really cheap electricity. And so one of the interesting things is you can get into virtuous circles once you've crossed this road. Now, the product you're talking about there, I should set the scene really.

• 17:52Azeem Azhar?

  Yeah, please do.

• 17:53Speaker 01

  Because the inspiration for so much of the way we think about this is sort of conversations I have with my mom. By the way, I don't actually have them. I have them in my head and I think what my mom's saying. And it started in the UK. And the UK's got a half hour electricity market. So every half hour, the national price of electricity is set by the most expensive generator anywhere in the country that's needed to meet demand.

• 18:16Azeem Azhar?

  Yeah.

• 18:16Speaker 01

  And.

• 18:17Azeem Azhar?

  And can I just just just build on that for a second? So that's a really important part of the market design, which is every thirty minutes, you figure out how much electricity is needed and people file in the cheapest first. And right at the end, for that last watt you need, is someone who's really, really expensive and that sets a price for the whole, whole of the market. It's worked for years. It feels a bit odd now.

• 18:41Speaker 01

  Yeah, exactly. Well, it used to work very well when essentially you had coal power stations and maybe a few oil and gas, where the input cost was very similar between all of them. So they would all bid in a very, very similar price, which meant even though you were paying everyone the most expensive price, it wasn't that much more than the cheapest. Whereas in today's world, when you have renewable energy, there is no input cost. So you can achieve a very, very low price for energy from those units. But in a market where the price is still set by the final unit generator, which will be gas, and has a very, very high input cost. Uh typically in in recent times, um you're paying a fortune for stuff that should be cheap.

• 19:24Speaker 01

  That's the kind of broad issue. I think really getting your head around why the system used to work and now it doesn't is so key. And it's because there's much more heterogeneity, much more diversity of generation than there ever used to be. Um by the way, I guess your geography as well, because you know, in the old days, you've got a coal power station in a particular county. Whenever you want electricity in that county, you fire it up. Whereas in today's world, it might be windy in one part of the country, not another. It might be sunny in one time and one part and so on. And you and we've got to handle that much more dynamic backend. But but actually, this is my mum, right? It was a cold winter's evening. And um National Grid in the UK, who balanced the system, were going to be firing up very, very expensive diesel generators

• 20:07Speaker 01

  in order to meet the the high level of demand on a cold winter's evening. And I thought, you know, most of that usage at the peak time is for things like cooking. Everyone's putting that oven on at the same time, a very big consumer. Um and then they're putting their dishwashers on straight after they've done their cooking. They've got their hot water going for. Right, for the shower and everything else. Everything, right? And I thought there's no signal to tell people that, you know, um they could benefit if they shifted their time. So nobody bothers shifting their time. And so if I said to my mum, hey mum, tonight, and and it's not because you're an environmentalist, by the way, I mean, I don't know actually, when I don't, I don't know where she is. But um because she is definitely a bargain hunter, if I said to my mum, tonight, they're turning on diesel generators to meet your needs.

• 20:50Speaker 01

  She'd say, well, I'll just cook later, right? For her, that is a no, it's no effort. Absolutely. And so we introduced this program in the UK where, you know, we uh paid people a small sum of money to shift their consumption at peak times. And I think a hundred, no, one point six million households signed up. And on an average, more than half of them would would participate. All we had to do was text them, sometimes just a few hours beforehand, saying, "Tonight, earn a little bit of money," I mean, literally, I don't know, fifty cents, by shifting your demand by an hour. And what we got was the equivalent of turning off all of the electricity in two major cities.

• 21:31Azeem Azhar?

  Right. I mean, it's remarkable. And just to give you a sense, I mean, that's a real-life social science experiment that you weren't often conducted, right? This question about can you shape demand? And there was a lot of umming and ahing in the press in the last ten years, saying, "Well, people won't do that." You know, people make their tea when they make their tea. And what you demonstrated was actually, people are willing to do that. I get those emails, Greg, and I charged my car two days ago fifty percent off the already discounted overnight rate. So, yes, thank you very much. I probably owe you a beer for that.

• 22:03Speaker 01

  I mean, you can afford to buy with the money you save. Yeah, there's one customer tweeted me, he said that he charged his car for one pound ninety.

• 22:10Azeem Azhar?

  It's like two dollars fifty or something, right?

• 22:12Speaker 01

  Yeah, exactly. And we'll be able to do two or three hundred miles on it. I mean, it's mind-blowing. The reason I mention this is just the thing we're doing in tech. What we found is every time we come up with a way of helping people save money by using electricity differently, some people do it. And sometimes it's a lot. In the UK, we've got seven and a half million household customers, and about sixty percent of them have got a smart meter. So, only six million can do it. So, we've only got about four million can do this. Two and a half million of our customers do these things. And it shouldn't be a surprise, because it works in every other market. Like, when you go into a supermarket, they will reduce the price of stuff if it's close to use by date, or if they want you to try it for the first time, or if, you know, one brand is introducing a new variant.

• 22:54Speaker 01

  Simple price offers are everywhere in our life, and it is mad that they're so absent in electricity. In a world where electricity is now so dynamic, what we find, like, literally on sunny days, there's a whole pile of customers in regions of the UK where the grid can't handle the amount of solar being generated. There's not his capacity to put it on some national grid, he has to use locally. So we give people free electricity on sunny afternoons. Their consumption increases four hundred percent.

• 23:18Azeem Azhar?

  Yeah.

• 23:18Speaker 01

  Because they save their washing for those days, right?

• 23:21Azeem Azhar?

  I'm thinking about buying one of those synthetic diamond presses. And on those sunny days, they take require a lot of electricity. I'm going to mint artificial diamonds and then sell them on, sell them on eBay.

• 23:33Speaker 01

  I certainly know people who talk about doing Bitcoin mining at these times.

• 23:37Azeem Azhar?

  Or train your large language model on the sunny days in July. So there's another bit of technology that we talked about a lot within Exponential View. I had it in my, I discussed it in my last book, which was the idea of the virtual power plant, right? So every, people have got cars, cars got sixty to a hundred kilowatt hour batteries. You could use ten kilowatt hours and power your, your house and three of your neighbors, four of your neighbors overnight. And you wouldn't notice the range. And this notion that you could string these car batteries together and all be in it together and contribute a little bit to providing some storage and some supply of electricity overnight or some resilience.

• 24:17Azeem Azhar?

  It looked great on paper, but I, I would just wonder whether, has it been a bit like the metaverse? So it looked great on paper, but we didn't really deliver on it and I just got too excited in my book.

• 24:28Speaker 01

  It is the new normal. So among our customers, we've got nearly quarter of a million people who, who've got an electric car and use a specific point. But we've got another quarter of a million electric cars that don't do this. But there are a quarter of a million who, they're signed up to a program where they get exceptionally cheap electricity for their cars. But all they have to do is when they get home, well, first of all, when they get their car, they pair it with us. So they use the Cars app to pair it with Oxopus. And that enables us to control when the car's charging. They set some very basic preferences, like a typical default would be, I want ninety percent battery at seven AM.

• 25:09Azeem Azhar?

  Mm hmm. Have you been in my preferences? Because that's where I am. Yeah.

• 25:12Speaker 01

  There you go. That's, I think it's the default. It might be eighty percent, but anyways. And then all they do is plug in when they get home and we'll decide exactly when it charges. They get the charge they want. But by us being able to control it automatically, it's not only grabbing electricity at the cheapest times, typically when it's windy and sunny, but it's also able to, for example, help balance the grid, help reduce the risk of the exact issues we've just been talking about. And in return, they get very cheap driving. So the scale of this is mad. In three years, we've gone from zero to 1.7 gigawatts. Now, that's the equivalent of nearly two mid-sized nuclear power stations for free, right? Because basically, this is a byproduct of the car. That's when cars, EVs, are only 5% of the fleet in the UK.

• 25:56Speaker 01

  So as you get towards, you know, EVs being 100% of the fleet, this isn't a bolt onto the energy system, it is the energy system.

• 26:04Azeem Azhar?

  It's 20 or 30 nuclear power station equivalents. But look, let's get to this crossing, road crossing. I really love your description of it as crossing the road. And we've left one side. We're halfway across. And yes, there are all these lovely things on the other side of the road. There's the ice cream stand, there's the virtual power plant, there's getting cheap energy at this time, and zonal pricing, which means that I pay a price that's more appropriate to the cost of producing and distributing the electricity to me. All these market mechanisms that create financial assets which allow the grid to work with a higher degree of efficiency and resilience. It's lovely, but there's still four more lanes of traffic that I've got to get across. So let's, like, not sugarcoat. It's harder

• 26:48Azeem Azhar?

  today, right? I mean, the technology is a bit of a tailwind, but what happens market to market to actually get across that road?

• 26:55Speaker 01

  We're at a stage now where there are going to be winners and losers. So for example, you mentioned zonal pricing, and that, by the way, more than half the electricity in the OECD is under some locational pricing model. It is the norm. But as countries move to it, it means that, you know, some of the generators today that get paid the high national price for every unit, even though they'd happily charge less, get paid less. They still get paid enough because they're getting paid above what they bid. It's just they're not getting paid the very, very high national price. And by the way, that's why zonal pricing doesn't just reduce it for people, prices for people who live near these assets, it reduces prices for everybody.

• 27:35Speaker 01

  Because we're no longer contributing to such a an inefficient system. For example, when a generator is in a low price zone, any electricity they send to another zone is also priced at that low price. So instead today, where it's priced at a high price, and that's how everyone benefits. Now, governments that are grasping this opportunity are genuinely seeing lower prices for consumers. You know, for example, great examples in Scandinavia, for example. But they're also attracting new industries, like big AI data centers popping up in Norway, not because there's a big population, there obviously isn't, but because there's cheap energy.

• 28:11Azeem Azhar?

  Right.

• 28:11Speaker 01

  And so but the challenge is, a very big difference between energy and other sectors is the amount of lobbying. So traditional retailers didn't get to lobby that Amazon was unfair or that the internet was unfair. They just had to deal with this new efficient source of competition that frankly was better for some people than what was there before.

• 28:35Azeem Azhar?

  Uh huh.

• 28:35Speaker 01

  But in energy, like, energy is the equivalent of Walmart being able to go and lobby, you know, that we've got to shut down the internet because it's unfair to us. Instead, I think what we need is governments that are able to say, look, we've already set climate goals, we shouldn't row back from those, but we can't expect people to pay more. Instead, actually, we should be accepting that renewable technologies are cheaper as long as we choose the market reforms and they've got to be brave.

• 29:00Azeem Azhar?

  I mean, there was clearly a flaw in Iberia, which was to do with practice systems design, right? There wasn't enough interconnect. They allowed this sort of reserve of inertia, inertial energy to to disappear over the course of the 20 years where they've led in in solar. And what's interesting to me is that those are like externalities. And a large part of the argument around renewables is that they don't have the same externalities that fossil fuel has, right? In terms of its carbon, carbon emissions. And it just strikes me that there's a certain amount of, perhaps it's pragmatism, right? We sit at the start of 2025, AI data centers are booming, there's going to be a couple of trillion dollars spent on building them out over the next few years, half of which

• 29:45Azeem Azhar?

  will go into chips and a large part will go into producing the energy. The industry is demanding it really, really rapidly. Natural gas will be the natural swing resource, particularly in the US. Is there a base now for articulating this in a way that is perhaps not as, you know, techno optimistic as we may have come from?

• 30:07Speaker 01

  I was joking to someone recently that I'm not a good salesman, which is why we had to build Octopus to show not have. And I think showing rather than telling is the key. For example, we talked earlier about those electric cars, right? Using that smart charging, it is six times cheaper to drive an electric car per mile than it is to drive a petrol car. Now politicians around the world worry about the cost of driving. We've had fuel protests, G L A J and so on. The electric car actually isn't, this isn't about techno optimism because it's available right now, right here. And there are only now, I think the premium in the UK is they're six percent more expensive to buy than a petrol car. And some models are coming out where both electric and petrol version are the same. We're getting, it's basically price parity.

• 30:49Speaker 01

  They cost less to run, there's virtually no servicing. In China, by the way, an electric car is 20% cheaper than the petrol equivalent. So the technology is now here. By the way, the smartest form of electric charging we've got is where a battery and a car can go both ways. As you said, powering house and the grid. If someone's got one of those cars, we give them 13,000 miles a year, 20,000 kilometers of free driving. We shouldn't try and convince people this, we should be able to show it. And increasingly now, and I was, I was at just a child's birthday event recently and one of the grandparents was there, they don't care, it was somebody who isn't environmentalist or anything like that, and they told me the joy about their electric car because there's

• 31:32Speaker 01

  a retired couple, they've bought a tiny electric car. He said, we've had it a year and a half and we've only paid for charging once, you know, because they charge while they're at a supermarket, they charge on the super cheap tariff at home, they've only charged out of home once and paid for it. And I think as people like that tell those stories, actually the lived experience beats the techno optimism. You know, we are now building homes, we've signed deals in eight of the biggest house builders in the UK to build homes where there will never be an energy bill because they have a combination of heat pump. Battery and solar panels and then use some technology to optimize that with the grid.

• 32:08Azeem Azhar?

  And you never have to pay for pay an energy bill again. I mean, that's part of, you know, you're bringing that at weirdly, that's a Silicon Valley future, right? Which is abundance of energy genuinely too cheap to meter. But this message is different to a lot of the people who have talked about the renewable transition over the last 10 or 15 years and certainly the minister in the UK. When I hear him speak, Ed Miliband, what I hear is somebody who is first and foremost thinking about a political objective, which is net zero, rather than effectively a technological reimagining of the grid. The notion that it used to cost you $20 to to take 24 photos and get them

• 32:52Azeem Azhar?

  processed and you only got 24. Now with digital, we can take a million photos. They're probably even some of them are better than ones we used to take. That is what happens in a technology transition. Actually, we do benefit from a smarter, digital, two-way grid. It can be more resilient. It's certainly going to be cheaper. But a number of the advocates are promoting it in a way that is very ideologically driven, that is probably not very persuasive, frankly, compared to the notion of I'm not going to pay an energy bill.

• 33:20Speaker 01

  Yeah, but I think, look, we've got to remember, take the internet, which we've both referenced multiple times as an analogy, right? It originally came out from a military objective, which was how do you maintain secure communications? Even in wartime conditions, the whole idea was how to create self-healing distributed network.

• 33:36Azeem Azhar?

  Mm hmm.

• 33:36Speaker 01

  It then, you know, kind of merged with the academic world where you could use it to join that education institutions in higher education for research purposes. But when the private sector got hold of that technology, they were able to say, here's how we can use it to drive down costs, to create new products and services, to kind of revolutionize many parts of the commercial world. And it's very similar to this, which is, look, policymakers create the subsidy regimes and the, um, the policy regimes that first create the innovations that enable us to get solar and wind and battery to anything like a kind of realistic, scalable solution. But now, in the hands of the private sector, we're able to innovate stuff that is better

• 34:21Speaker 01

  for consumers. And I don't in any way kind of begrudge the messaging around climate because that's what got us here now. But what has gifted us are innovations that can transform one of the most important sectors of our economy. Now, one thing I will say though is that one of the big differences between the internet and energy is the internet didn't have to really fight an opposition. There wasn't a sort of pre-existing thing that was trying to defend its turf. Now, you may have had that in little bits, for example.

• 34:49Azeem Azhar?

  There was little bits, there was that with the telecoms guys, they, they, I mean, I remember both in the US and the UK, they made a big deal about nine one one calls and nine nine nine calls and saying you won't be able to make them over the internet. There was definitely some resistance, but it wasn't as big as the multi-trillion dollar business that was the oil industry.

• 35:05Speaker 01

  By the way, it's not just the oil industry. You know, the electricity industry, like, and utilities, in many countries, they're, they're owned by or managed by governments, or the monopolies are handsomely by governments. And even when you've got a private competitive system, a lot of them grew out of government. So they've got these hundred-year relationships with governments, and governments run the rules, like, you know, the, the rules of a grid are typically set by a government, which means the core strength of most energy companies is lobbying.

• 35:31Azeem Azhar?

  Right.

• 35:32Speaker 01

  Which means when change comes along, when it works for them, by the way, they lobby very hard for it, where it's not in the interest of the existing solutions or providers, they lobby very, very hard against it. And so, uh, you know, I actually salute governments for the strength they've shown in kind of pushing this through. But we're now on that second half of the road, and the faster we get across the rest of the road. The safer we're gonna be because at the moment you kind of try to ride two horses at once and that's really never very effective.

• 36:03Azeem Azhar?

  Yeah, I mean, I think that is exactly the the complication right now, you know, where we're sort of kind of getting dressed and we've got our rugby shirt on our the top and our tuxedo trousers below and we just look stupid as it is and we have to just sort of finish that job. I want to leave with a sort of sort of a last kind of question about what you think might happen over the next, you know, five or 10 years as we continue down this road. Obviously, solar and batteries are very, very cheap. They're coming down in price. The economic case to buy them even as a homeowner is higher and the electric vehicles will continue to progress even if they're slowed a little bit by the new tariff regimes. Do you imagine we're going to see more of these cascading failures, more of

• 36:47Azeem Azhar?

  these blackouts as we get across that road, whether it's in Western Europe or Asia or the United States?

• 36:53Speaker 01

  Twenty years ago, 5% of global clean energy patents were Chinese. Today is 75%.

• 37:00Azeem Azhar?

  Right.

• 37:01Speaker 01

  Slowing down the move to electric vehicles to protect incumbent industries through tariffs or through regulation is literally guaranteeing you're missing the train for the most important technology transformation of our time other than AI. So it is mad to condemn our companies, our industries, and I say that for many Western countries, to condemn them to essentially irrelevance. Instead, we should be spurring that change so they can be part of the emerging world. You know, when you said we're going to see more of the issues like Spain or whatever, but I think the failure to understand customers in energy really holds back policy. And you

• 37:45Speaker 01

  said we've done these kind of big living lab experiments at global scale. We need more of that. It's fascinating, you know, one of the energy companies in the UK also provides broadband. And they said, if a customer is far up and has to choose which one they pay, they pay broadband. Because the internet is considered by customers more important than electricity for a short period of time. A customer said to me, look, if I've got power, I've zoned my laptop and watched a movie on Netflix, right? Um, because I've got a battery in there. And so, no, by I'm not advocating not having power. I'm just saying the assumptions of what people want and need are changing. And to create this kind of much more flexible resilient grid, first of all, we need market signals for building batteries everywhere. And then we need to understand customers.

• 38:29Speaker 01

  So when we pay people to shift their consumption, what we're really doing there is saying, instead of having a random blackout caused by an inflexible system, we're allowing individual households to say, I'm okay without it for a bit and earn money and drive down their costs by doing so.

• 38:46Azeem Azhar?

  Great, there's so much in here. I mean, I love the focus on the customer. Many of us will remember what energy companies have been like historically, and you see it in their net promoter scores. Uh, and so on, that's pretty unique. I think the other thing that's so interesting is how you have been able to address this collective action problem. Actually, without the, the sort of structures of a government, you've been able to get people to, to work collectively in a number of different geographies and in different ways responding to that, that incentive. And of course, there is the digitization that is really so fundamental to, to octopus. The thing that puzzles me for my very last question, why an octopus?

• 39:28Speaker 01

  Well, look, I'm, first of all, I can't help but respond to your thing about that, that digitalization. Look, the point really being, um, so much of our new consumption, like electric vehicles, is totally flexible about when and where we use it.

• 39:39Azeem Azhar?

  Yeah.

• 39:39Speaker 01

  You know, in fact, there are loads of people who could go for a week without charging their car. And therefore, if it's not windy for a week, they are very, very happy to fill up beforehand and then just use the electricity they've already got. That's the world we're emerging in. And the reason I mention this, we used to think the way to build a safe car was to put more steel in it and make it more and more rigid. And what we discovered was crumple zones, right? Uh, by making it more flexible, it could be safer. And it's the same with our energy system, whether it be the expense of the UK or, you know, the sort of supply resilience that we saw in Spain and Portugal. Flexibility is everything. I mentioned the internet, we both mentioned it. It is successful because it is decentralised and flexible.

• 40:22Speaker 01

  And that's what we need to build with our grids. And if we understand our customers, we can offer them products and services that are much, much cheaper than trying to keep building more and more rigidity. Right, why an octopus? Um, oh, I tell you what, we were originally going to be called Positive Energy. We had a great logo, by the way, I loved it. Um, we, we loved it, whatever your reaction. Anyway, our first investor was called Octopus Investments. And they agreed to invest an awful lot of money to build our big idea. A week before, uh, we finalised the investment, they said, would you call it octopus energy? And we were like, oh no, slimy tentacles suckers. It was before the Netflix, Once a Teacher, before the book. Obviously, we wanted the investment.

• 41:06Speaker 01

  So in good spirit, we went away and said, how do you make an octopus cute? And the answer was, uh, big eyes and short tentacles and a smile. And, uh, and you know what? Just before they made the investor, they said, actually, please don't call it octopus energy. And we were like, we're calling it octopus. And, um, I am so glad because it's memorable, uh, playful, and it's enabled us to make a real connection in an industry where so many people don't even know the name of the company that supplies them.

• 41:33Azeem Azhar?

  That's very true. Greg, you've been generous with your time. Have a great weekend.

• 41:36Speaker 01

  You've been brilliant. Thank you. I've really enjoyed it. Thank you.

• 41:39Azeem Azhar?

  Cheers. Bye bye.