Rise of the Octopus; Building Efficiency
Cleaning Up - Building the billion-customer energy company - Octopus Energy’s Greg Jackson
I dug out this episode after last week’s announcement that Generation Investment Management is investing $600mm into Octopus at a $4bn pre- to “turbo boost its mission to drive the renewable revolution globally” (and in the process doubling its valuation since end of last year). The deal seems fairly unique both for its size and for being a single investor. Also of note is that it was done out of Generation long-term equity strategy, so not looking for an exit within a 10-year fund term. The press release also mentions some other initiatives that Octopus is involved in including the Centre for Net Zero think tank and building a R&D and training centre for decarbonising heating, a fascinating topic in itself and one that gets little attention relative to its importance. Key takeaway: Having a highly dynamic energy system, including load shifting on the demand side, is key to delivering the energy transition cost efficiently:
As of the time of the recording (Feb) Octopus was the 5th biggest energy supplier in the UK, having broken into bracket of “the big six” providers that was the major concern when first launching
They have also created an energy software platform, Kraken, that they license to other energy companies around the world, including Australia, Japan, US, Germany
Octopus have a variable tariff that does time-of-day pricing - encourages households to use off-peak, cheaper electricity where possible, can be automated in terms of setting times for EVs to charge etc
EVs provide major balancing opportunity to the grid since they can charge any time of day, and that’s even before the batteries can be hooked up bidirectionally in vehicle-to-grid
Energy grids are still highly centralised and centrally planned, usually by government or quasi-government bodies. This blocks market price signals and doesn’t let the market find ways to do things better.
On the technologies needed for full renewables penetration, including long-term storage - scaled up interconnectors (like Northlink just connected w Norway and the huge Xlinks project announced between Morocco and UK), hydrogen for long-term storage, and a more flexible grid
Jackson prefaces this answer by saying that whatever answer we come up with now will almost certainly be incorrect as technology develops - gives the example of the elderly that have been able to stay in touch with people over lockdown through Zoom - a solution that people couldn’t have identified 15 years ago [I love this perspective and is the reason that I allow myself some optimism about climate action. The world at large is only just starting to put its back into this challenge and we are going to see a staggering amount of innovation over the next decade.]
The Energy Gang: The science of decarbonising buildings
Christine Williamson is the creator of Building Science Fight Club instagram account, where she posts about building efficiency for industry practitioners, mostly architects. She is one of those fantastic people who have found a kind of wonkish niche for themselves and bring amazing passion and energy to it. This one was great fun to listen to and there are more interesting details in it than I can succinctly summarise here. Key takeaway: Most important thing for building efficiency (in order): 1. Glazing ratio (the best windows perform worse than the worst walls), 2. Air tightness, 3. Insulation.
Buildings - through direct and indirect emissions - account for 40% of global emissions [this looks a bit high to me - using the Our World in Data sector breakdown, I can only get to about 27% including all steel and cement. People can often expand the boundaries to make a point, e.g. recent study that finds food and ag responsible for 35% of emissions vs about 18% in the OWID chart.]
Something like 60-75% of emissions from building are related to emissions (heating, cooling, etc)
Building stock is projected to double (!) between now and 2050
“Value Engineering” - the term for what happens towards the end of construction when money is running out and a lot of the “extras” for enhanced efficiency get taken out, the extra value being taken out the building
There has been significant improvement in energy use in residential buildings in the US over the last 30 years, about a 25% improvement per person, even once accounting for bigger homes / lower occupancy.
Commercial buildings have not seen much improvements at all, a big part of which is down to the fact that they tend to have a lot more glass and they get ventilated at a much higher rate than in residential buildings - optimised for productivity rather than comfort. [Efficiency optimisation is why my old professional home has much less glazing than usual.]
With the improvement in materials and building codes, there come certain design and construction challenges that mean that things can’t be built in the same way they used to, particularly around damp and condensation management etc.
Architecture training hasn’t been evolving fast enough to accommodate
The current rating system for buildings falls short as they are based on projected emissions, rather than actual emissions, and the two can diverge significantly. E.g. Bank of America’s building in One Bryant Park was awarded a platinum rating, but uses about 3 times as much energy per square foot as the Empire State Building and twice as much as Goldman’s offices. [There are lots of cool companies now working to optimise energy usage in buildings, such as Carbon Lighthouse in the US and Evercomm in Asia.]