In 1882, the world’s first coal-fired power station was opened on Holborn Viaduct, just a few yards from where the Octopus head office is located today. The construction of this power station was the brainchild of Thomas Edison, whose entrepreneurial drive caused a revolution in the energy market, bringing cheap electricity to the masses.
Over the following decades coal became the driving force behind the world’s economic growth. At its peak, more than one million people (including my wife’s father) worked in the coal mines in the UK.
While the economic benefits are clear, this growth came at a price. In cities like London, the air quality deteriorated to the point where in December 1952 a smog suffocated the city for weeks at a time. The government intervened, passing legislation that started the country on the path towards cleaner sources of energy.
The real transition, however, has happened much more recently. Subsidies for renewable energy generation kickstarted the growth of large-scale solar farms and onshore wind farms which, in turn, have reduced the share of coal in electricity generation from 41% in 2012 to just 2% in 2019. The final coal-fired power stations will close in the UK in the next five years.
Octopus has led the way in this transition. Over the last decade, we’ve built a team of 80 renewable energy specialists, investing more than £3 billion into solar and wind farms in the UK, Finland, Sweden, France and Australia. We’re particularly proud of the role we’ve played in helping the UK to reduce its emissions. Since 1990 UK emissions have fallen 42% (more than ten times the average of the G7) while the economy has grown by around 70%.
This journey will continue in the years ahead as the UK and other countries set out to achieve “net zero”. The continued growth in renewables – more than £21 trillion of cumulative investment into renewable energy is expected to be required globally between 2016 and 2050 in order to meet the objectives of the Paris Agreement – will be driven by the massive increase in appetite amongst institutional investors to invest in assets that combine a high level of sustainability with attractive levels of income.
For Octopus Group, our presence in the energy sector is not limited to investing in the renewables sector. Five years ago, we took the decision to start building an energy supply business, Octopus Energy. Since then, the founder and CEO Greg Jackson and his team have built this business to the point where it now has 1.5 million customers in the UK and Germany. Its unparalleled customer service and value have won it a plethora of awards.
At the heart of the business’s success is a proprietary technology platform called Kraken. Kraken allows Octopus Energy to deliver the best service in the energy sector and puts them at the vanguard of making energy both cheaper and greener (all the electricity that we supply is renewable electricity).
Kraken is now widely recognised as the world’s leading operating platform for energy supply businesses. Last month we announced a licensing deal with E.On, which will see Npower and E.On’s six million UK customers move onto the Kraken platform. And it won’t end there. There are dozens of other energy supply businesses round the world camped on Octopus Energy’s doorstep asking to engage in licensing opportunities as they transition away from inflexible and customer-unfriendly operating systems. By 2030, we expect Kraken to be powering the energy supply of more than 100 million people around the world.
To deliver on our scale of ambition, however, it was clear that we’d need to find the right company to partner with. Today, we’re delighted to announce that we’ve chosen Origin Energy, Australia’s largest energy company, as our partner. The deal with Origin will see over £300 million injected into Octopus Energy over the next three years in the form of equity, licensing fees, and the provision of a working capital facility.
We chose Origin because, more than anyone else, they understood our mission to use technology to improve service, drive down costs and make energy greener. Indeed, as part of this partnership, Origin will themselves license the Kraken platform to make their Australian business even more efficient, improve customer experience and support their renewables expansion.
As well as helping to power the growth of our energy supply business in the UK and internationally, Origin’s investment will also allow us to invest millions of pounds in creating The Future Energy Research Centre. This Centre will bring together climate experts, data scientists, economists and policy specialists to devise plans and models to make net zero faster and more affordable. Octopus Energy will freely contribute its data and technology expertise to give these experts unique insight into how customers, networks and grids can contribute to a faster, more affordable transition to renewables.
Over the next decade, the energy industry will change in ways people can’t even imagine today. Octopus is, we believe, uniquely placed to lead this transformation. Our ambition is simple. We want to be a global leader in the future of energy, empowering our people to lead the change against climate change and creating a fairer, more sustainable future for everyone.