Octopus Energy chief Greg Jackson declares London world leader of green energy tech as it wins “double unicorn” $2bn status

Interview: CEO declares Britain’s mixture free market and technology skills give green energy tech massive export potential

Costly: Windfarms

Jim Armitage @ArmitageJim

23 December 2020

Greg Jackson has the kind of ambition Britain needs from its tech stars.

Rather than just have a great idea then sell out to a Google or a Facebook, he wants to grow his green power brainchild, Octopus, to become the "Amazon of Energy".

Today, he took another step forward in that vaulting ambition with a fundraising deal that values his company at $2 billion. Not bad when you consider he only set it up five years ago.

It’s a rare example of a British “double unicorn”.

So what is Octopus Energy?

Octopus is two things. First off, it’s a green energy retailer that supplies 1.8 million homes in the UK and tens of thousands more in the US and Germany. It has contracts with solar and windfarms in the UK (including those of its founder Octopus Investments), and by buying through the grid with certificates that pay green producers for their output.

It does all that through the second string to its bow, its clever cloud-based software called Kraken.

This acts as the interface between the energy providers and its customers and automatically matches their supply and price tariffs with the times the cheapest energy is available. So, if you have an electric vehicle, Kraken will see to it that it automatically charges it at 4am when there is ample renewable energy available.

“It’s like a big robot, really,” says Jackson. “It sources the energy, designs and prices the products and service and generates our apps [that customers use]”

Jackson reckons that by regulating demand in this way, not only can you save customers money but you can use solar and wind energy more efficiently through the 24 hour cycle. That, in turn, means having to invest less in expensive battery storage, bringing down the cost of renewables further.

Kraken, he says, is so efficient that Octopus’s operating costs are 2.5 times cheaper than rivals.

Octopus sells Kraken for use by other suppliers including old ones trying to get savvier in green energy such as Eon in the UK and Origin in Australia.

Doesn’t it bother him, letting competitors use his Kraken kit?

“Not at all," he says. "We want to drive the green energy revolution globally. By working with other companies, Octopus will make that happen faster. We’re driving the invention, pioneering the technology with our customers, then we can license it out.”

Ocado has morphed into a similar model, spending its first decade building its own online grocery business and now licensing out its robot expertise to others.

Seems like Ocado’s not an ambitious enough comparison for Jackson, though. He prefers another analogy: “We’re more like Amazon. It’s a retailer, but licenses out its AWS [cloud computing arm] to other retailers, and allows them to use its website.”

Around 17 million customers are now on the Kraken system. “We want 100 million customers in five years,” says Jackson.

That’s a serious scale-up ambition.

How come it’s a double unicorn?

Last year, as part of a tie-up to supply Origin with Kraken, the Aussie utility invested in a deal valuing Octopus at around $1billion, making it a unicorn.

Today, it announced a similar deal with the 135-year-old Tokyo Gas, which has also done a supply-and-invest deal which values Octopus at “in excess of” $2 billion, including $247 million of investment plus full funding for the launch of Octopus Energy in Japan.

The funding round makes it Britain’s first energy double unicorn, but rival Ovo Energy is currently in the middle of a round of fundraising that could see it valued at £2 billion to £3 billion.

It is seeking £300 million of new investment, adding to the funds raised early last year from new investor Mitsubishi Corporation. Expect an announcement in the New Year.

Why Japan?

Jackson says Japan has a long way to go to reach its stated desire to become a net zero energy economy, with only 18.9% of the country’s energy currently provided from renewable sources.

“We want to be part of increasing that dramatically.”

But Tokyo Gas is clearly a fossil fuel operator. The clue’s in the name. Isn’t that hypocritical?

Jackson says not at all. “Our activities there will not have anything to do with fossil fuels. Whenever we do a deal like this I always meet the top guys and am clear their money comes with no strings attached. Teaming up with Tokyo Gas or Origin means we can reach more customers faster than on our own.”

But surely you can’t be purely green if you deal with these guys? “Look," he answers. "I love the niche green energy providers [who don’t work with the legacy giants]. They’re great people, but after all these years they’ve only gained a fraction of one percent of the market.

"We have to meet hundreds of millions of customers and relentlessly make it cheaper than fossil fuel.”

Only by dealing with the majors will he ever build such scale, he says.

Surely renewables will only ever be a minority of power supply

Untrue, says Jackson. “Wind and solar energy have so much legs, as long as we are using technology alongside them. I think we can get a massive proportion of our energy from it. There’s room for five or 10 times more wind than today in the UK. That has to be the focus.”

London as a green energy hub

As with its deals in the US, Australia and Germany, today’s move with Japan Gas marks a significant new slice of export income for a British company.

Investment giant BlackRock recently estimated that $130 trillion would be invested in renewables in the next 30 years, and Jackson says the UK is ideally placed to be the world leader in this field due to our brains and innovation created by the free market for energy.

“Britain is perfect because we have the most competitive market for energy in the world and can capitalise on our status as a major tech hub. The US have nothing like the competition we do. This is a huge opportunity for the UK. Not only that, but all political parties are pursuing a green energy agenda.”

Referring to David Cameron’s reported order in 2013 that his officials “get rid of all the green crap” to make energy bills cheaper, Jackson said: “Look how far we’ve come from green crap!”

Just weeks ago, Boris Johnson and Rishi Sunak launched a new green agenda with a 10 point plan far more ambitious than ever.

For all his high praise for the competitive nature of energy supply in the UK, he also wants similar freedom for the grid that gets the electricity from the generators to people’s houses.

“We really need to open National Grid up to market forces and bring in dynamic pricing,” he says, using higher or lower pricing to smooth out the peaks and troughs of energy use.

It also annoys him that green energy is taxed the same as fossil fuels and, he says, more than gas. “Green energy is actually subsidising fossil fuels!” he says, exasperated.

Will he float the company?

Not likely. “We have all the investment we need as a private company and there are hundreds of millions of dollars more interest from global investors. Being private allows us to innovate without the short term pressures of a public company.”

He may be building a great British company, but, for now at least, we ordinary investors must marvel from afar.

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