In this episode Jon and Sandra talk with Alex Schoch, Global Head Flexibility & Electrification, Octopus Energy. They explore how Octopus is driving change in the energy sector, and Alex’s perspectives on the energy transition.
Episode transcript
[00:00:04.490] - Jon Slowe
Welcome to talking new Energy, a podcast from LCP Delta. I'm Jon Slowe.
[00:00:09.290] - Sandra Trittin
And I'm Sandra Trittin. And together we are exploring how the energy transition is unfolding across Europe through conversations with guests from the leading edge of the transition.
[00:00:19.090] - Jon Slowe
Hi, Sandra.
[00:00:20.170] - Sandra Trittin
Hey, Jon. How are you?
[00:00:21.810] - Jon Slowe
I'm good. How are you doing?
[00:00:23.220] - Sandra Trittin
I'm fine, thanks. Looking to today's episode?
[00:00:26.640] - Jon Slowe
Yeah, because we'd be talking about, well, many things, but change and disruption, and those are two things that the energy sector needs plenty of. Some might be a bit uncomfortable with the disruption, but I think that's what we're seeing and going to see more of.
[00:00:41.730] - Sandra Trittin
Exactly. And there are some companies who are, let's say, at the forefront of change, right. And there's one specifically that stands out, and not only because of the nice pinky animal it has in its branding, which is octopus energy.
[00:00:58.260] - Jon Slowe
Yes, it's great to be talking today with one of the senior team at Octopus Energy, Alex Schoch, who's global head of flexibility and electrification.
[00:01:07.340] - Sandra Trittin
Exactly. And also, I know Alex already for a long time, even from Tesla.
[00:01:13.740] - Jon Slowe
Okay, so another disruptor company.
[00:01:17.370] - Sandra Trittin
Exactly.
[00:01:18.350] - Jon Slowe
So, let's get on with the discussion and say hello. Hello, Alex.
[00:01:22.660] - Alex Schoch
Hi, Jon. Hi, Sandra. Thanks for having me. Great to be here.
[00:01:25.600] - Jon Slowe
Welcome to the podcast.
[00:01:27.310] - Sandra Trittin
Welcome.
[00:01:28.480] - Jon Slowe
Alex, can you start by describing a couple of things? First of all, Octopus energy. I'm guessing most of our listeners will have heard of Octopus, but maybe a few facts or figures and stats to give everyone an idea of the scale and size you are today. And then secondly, your role at Octopus.
[00:01:47.320] - Alex Schoch
Yeah, absolutely. So Octopus Energy Group was founded in 2015 and can broadly be kind of broken up into four major areas of focus. We have our power and gas retailing business where we're active in eight countries, eight deregulated markets around the world, including the UK, France, Italy, Spain, Germany, Japan, New Zealand and Texas.
[00:02:15.940] - Jon Slowe
That's a challenge with a lot of growth. Alex, you've got to keep the list in your head.
[00:02:20.610] - Alex Schoch
Well, the thing is that our kind of company presentation slides are constantly out of date. So, we have this kind of whole dance where we kind of go, oh, sorry, that number is wrong. There's another million customers. So, speaking of customers, we have over seven and a half million customers that we serve in our retail business. We're now actually the largest electricity supplier in the UK from a standing start in 2015. We also manage over $7 billion of generation assets as part of our generation business. So that's renewables across the UK, western Europe, and rapidly expanding our footprint beyond that we have projects in development in South Korea, in Sierra Leone, in amongst other markets around the world.
[00:03:14.420] - Jon Slowe
And those are wind farms, solar farms, big chunky generation assets.
[00:03:18.370] - Alex Schoch
Yeah, exactly that. And we then have our services businesses, if you will, is like the third major part of the Octopus Energy Group. So basically, everything you need to accelerate the electrification of transport and heating. So, we have an EV leasing business. We sell and instal smart metres, EV chargepoints, solar and storage and heat pumps in a lot of the markets that we're operating in. And we also have heat pump R&D and actual even manufacturing, which we're ramping up at the moment with our new cosy range. And last but not least, we have our Kraken technology platform which not only runs the whole other parts of the businesses that I've just run through, but we also licence it to other utilities around the world. We have over 54 million accounts licenced on Kraken.
[00:04:08.760] - Jon Slowe
Okay. So, grown a lot since starting in 2015, roughly how many people? Or give us an idea of the scale of the organisation in terms of the operations and where you sit in, I guess.
[00:04:24.060] - Alex Schoch
Yeah, so we have about 6000 employees currently globally across the various businesses that form the group. And it's exciting growth.
[00:04:38.330] - Sandra Trittin
Yeah, it's really impressive. And can you probably explain a little bit what your role is in that organisation?
[00:04:45.610] - Alex Schoch
Sure. So, I look after everything that we do around flexibility, which is a bit of a horrible industry term, to be honest. But when we think about everything about how we kind of harness new forms of flexibility, how we monetize it, how we build products and services and solutions for customers, whether those are domestic customers or industrial customers. And then on the electrification front, how do we continue speeding up the electrification of heating and transport, which is so critical to getting to net zero, but doing this in a sustainable way that really kind of helps speed up how our whole energy ecosystem gets digitised and automated.
[00:05:34.990] - Sandra Trittin
And what would you see currently as the biggest challenge in that electrification? Because you are actually raising a good point, right. We have to speed up. We don't have to lose time. What would you see as one of the biggest hurdles around that?
[00:05:52.100] - Alex Schoch
So, when I think about what's the longest pole in the tent, so to say it comes down to distribution networks. So, the actual networks that transport the electrons to our houses, to our charging stations, to the offices and factories. And the reason I say that is as part of this transition we're really flipping the whole energy system on its head. We're moving from a few thousand power generators, big power stations that are scheduled and planned in a very kind of static way, and they're all just pushing electrons from the generation point to the consumption point. It's a one direction flow. Voltage is being stepped up and stepped down, but that's kind of it. And now we're in a world where in the UK alone, for example, we already have millions of generators, we have multiple millions of devices on the road that can be smart and part of the kind of balancing of the grid and matching supply and demand in real time. And it's only going to get more complex and to deal with this complexity and also this opportunity, because actually we can make sure that every electron travels the least distance necessary from point of generation to point of consumption.
[00:07:17.310] - Alex Schoch
There's a huge digitisation challenge, and that challenge is especially true in the low voltage world, because right now it is a black hole from a visibility perspective. So, no one knows what exactly is happening on that power line from the last transformer to your house. And so, when I think about the biggest challenge, it's that challenge.
[00:07:43.510] - Sandra Trittin
Which is interesting, I think, because on one side, the distribution grid operator sits in that sandwich position between the transmission grid, right, and the end consumer. But looking back, like even five, six years, when you were talking to some of the distribution grid operators, they were all like, we are fine, right? We just put a bit more of copper and everything will be good. And all of a sudden it pops up and everyone wakes up, luckily, and says, like, now we have to improve, right?
[00:08:11.390] - Alex Schoch
Yeah. I mean, the infinite bus bar approach is a not only wildly inefficient and an incredible waste of customer money. I mean, at the end of the day, we also have to remember that this is all paid for by consumers. And so just saying, we're just going to build more poles and wires and build for peak in the same way that we've built our whole infrastructure for the past hundred years. It feels like wildly off.
[00:08:42.740] - Jon Slowe
Alex, I completely agree that the distribution net will become more and more of a bottleneck. And I was speaking with one of the distribution companies in the UK and his strategy was, we don't want to be a blocker. Desperately. I can see the potential for distribution networks to be a blocker, and his was desperately looking at how they could not be a blocker in the next years for electrification. What do you see as Octopus's role in this? So how can Octopus help with that? As you say, biggest pole in the tent challenge.
[00:09:25.590] - Alex Schoch
So, we think about this from kind of multiple angles. On the one hand, as an energy system, we have seen a net reduction in overall energy electricity consumption for the past two plus decades, and now we're looking at a doubling in less than a decade. And that is really coming from these two major electrification trends. So, one big way of how we look at helping solve this is by managing that demand and managing that demand intelligently. I'll go on a quick soapbox moment, if you'll allow me, Jon? Demand side response is a term that we should not be using anymore. It is an outdated term that was conceived for when we had coal power stations and nuclear power plants that had to run baseload and couldn't really kind of ramp them down significantly overnight. And so, we talk about demand side response to keep things running, to keep our power generators running in the same way economy seven was really designed for that with storage heaters.
[00:10:35.950] - Jon Slowe
It's framed in the old paradigm, isn't it?
[00:10:38.400] - Alex Schoch
Exactly. And so, what we need to be talking about is intelligent demand. Demand that is responsive to the volatilities of making sure that we are always consuming greenest electrons that are generated closest to the consumption point so that we're not curtailing those wonderfully cheap, incredibly cheap green electrons that are generated. Sorry, soapbox moment over.
[00:11:02.150] - Jon Slowe
No, I like it.
[00:11:04.310] - Sandra Trittin
But I fully agree with you, Alex. Normally it would be more like a demand management, or in general like energy supply management. Kind of systematics.
[00:11:16.230] - Alex Schoch
Back to Jon, back to your question. So on the one hand it's how do we manage that growing demand intelligently? On the other hand, as one part of Kraken actually is Kraken grid, where we have a monitoring solution that can be installed at secondary substations and lower and provides kind of real time visibility to network operators, as well as predictive fault analysis and power quality visibility. So, we kind of approach it at both ends, both kind of providing the network operator with the tools and the platforms to do that in a modern kind of scalable way from a tech perspective, and then also helping manage the demand.
[00:12:00.320] - Jon Slowe
And the Kraken grid angle, come back to intelligent demand in a minute. But the Kraken grid angle is that because you saw a need and a gap, that you saw a gap in the market, the demand would be there for this product or this type of service, and you filled it. Or was that more opportunistic? Tell me a bit about what drove that, because that's quite different from the rest of Octopus that you described earlier.
[00:12:30.150] - Alex Schoch
Yeah, we definitely see a need for it, and we see a need for a modern kind of scalable tech solution that isn't part of an existing kind of macro framework of the very big, lumber some tech implementations that the network operators have today, which was fit for purpose ten years ago, but now they need to move much faster. And so, we looked at our core DNA, is how do we build technology fast in an iterative manner to help solve problems of today and tomorrow. And so that's where we saw this kind of the speed at which network operators were able to get tech to actually instal it, test it, and then get visibility just wasn't happening fast enough with the existing income.
[00:13:26.150] - Jon Slowe
From the traditional suppliers of network equipment. Yeah, the lead times are low. The way they work, its hardware based. The software and the tech is wrapped around the hardware.
[00:13:34.890] - Alex Schoch
You've got it.
[00:13:35.490] - Jon Slowe
And what's the reaction been from the network companies? Are you in the early stages of Kraken grid or tell us a bit about how that's going.
[00:13:43.820] - Alex Schoch
It's going very well, actually. We have customers in multiple markets in the UAE, in Norway, in Cyprus, in Switzerland. So, it's growing very fast, actually.
[00:14:00.270] - Jon Slowe
Yeah, very exciting.
[00:14:02.750] - Sandra Trittin
Finally. Finally, there is a market for it.
[00:14:05.310] - Jon Slowe
Let's go back to intelligent demand now and unpack that a bit. So, I think most Sandra and I live in this world of intelligent demand. Much nicer phrase in demand side response. A lot of our listeners will. But, yeah, tell us a bit about how you think about that at Octopus, how you break that down or framework or building blocks for that.
[00:14:30.340] - Alex Schoch
Yeah, it's a great question. And I think the way that we think about it is very always with the mindset of what is the customer proposition and what is the customer experience? Because it's very easy to fall into a trap to build products and solutions that are optimised for yourself as the business or optimised for a specific market construct. It's much harder to think and work at what is the simplest, easiest to understand proposition or product that gives the end customer an incredible benefit. And then in the background, you can kind of deal with the complexity. And let me give an example. We have an EV smart charging tariff called IntelligentOctopus Go, where in the Octopus app, customers can sign up in less than five minutes. And to the point that they sign up, they authenticate their car or their chargepoint. We connect it to Kraken, we send a command to confirm that we've connected to that device, we get the telemetry back from that device saying, we've authenticated this car or this chargepoint, and then it's done. Then you're onboarded and the customer proposition is every kilowatt hour that your car is smart charging according to Octopus's smart charging schedule, you're getting a 66% discount on your unit rate. So, you're paying seven and a half p for all of that electricity. Not just the electricity going to the car, but the whole home. So that allows customers to save 600 - 700 pounds a year for charging their car. That's it. The only thing the customers need to do is set when they want the car ready by and what state of charge in the background we deal with. How does that change our kind of power trading positions? How do we market the aggregated capacity to DSOs? How do we market that capacity to the transmission operator in various services and markets? But the customer needs are always paramount.
[00:17:03.470] - Jon Slowe
I imagine you think about the whole system and the opportunities to provide services to the DSO or the transmission system operator. But that starting point with a customer, I would imagine that different. Well, I can see that differentiates you from a number of other companies if that passion is always there about delivering an incredible experience to the customer. So that seems fairly ingrained in your culture and how you work.
[00:17:33.970] - Alex Schoch
It absolutely is, because the central ingredient to this being something that is adopted is trust. And the utility sector, if it's one thing it's poor on, is consumer trust. And so of course that is a fundamental central pillar of our company culture. Because if customers don't trust us to do the best thing and the right thing for them, then all of this other stuff remains an academic exercise.
[00:18:04.650] - Sandra Trittin
And I think this goes a bit along with all the, let's say, neo utilities or newcomers in the market. And this is really impressive done also by octopus, right? This focus on the consumer, how to make it easy. And then in the second step, look on how you make the processes working behind. Whereas if you look at the old world, it was always like, how can we make the processes work? And then you see the mess up to the customer side, right, where people have to wait to change their metering and settlement for more than six months in Germany, what I recently heard, right, which is ridiculous.
[00:18:42.630] - Alex Schoch
And I kind of see this every day, really talking with other actors in the utility industry or with manufacturers of different devices. They're like, oh, but what are the criteria that you make the customer do? Like, surely, they must have to plug in at certain time and they must do this and must do that. I'm like, no, we collect 2.9 billion rows of data a day and it's on us to use that data to build our forecast, build the confidence in what we need to achieve. That is our risk to bear. You might be able to get a few early adopters who are super keen on participating in stuff, doing that. That will never be a mass market thing. And I think it's actually think about the cast your mind back 20 - 25 years, the complexity of mobile phone contracts and plans, and then think about how incredibly straightforward they are now. They address different customer needs, different customer segments, they're very easy to understand and you can switch between them also relatively easily. And I think if there's a good kind of parable, that's probably the evolution of consumer offerings in the mobile telephone space and kind of mobile space versus what's going to happen in energy over this coming decade.
[00:20:13.030] - Jon Slowe
What do you think the biggest challenge is to get to that where we are today with mobile phones and the contracts you described, Alex, not just for well, either for you or Octopus or the sector in general, what worries you the most about really unlocking intelligent demand?
[00:20:30.110] - Alex Schoch
Well, and Sandra, I think, will echo this. The single biggest foundational step is smart metres.
[00:20:38.520] - Sandra Trittin
Fully agree.
[00:20:40.830] - Alex Schoch
Without that, this remains a purely theoretical discussion. The things that worry me the most in that regard is look at what's happened in Germany now with the vaunted paragraph 14A, which is, if anything, this horrendous, terrible, terrible compromise of, okay, network operators, you don't have the tools to actually do anything about managing your network, so we're just going to give you a big red button to kind of turn off large loads that are installed. It's crazy really. I mean, in the same way.
[00:21:22.990] - Jon Slowe
It's definitely not intelligent demand, is it?
[00:21:25.180] - Alex Schoch
No, it's brute force. It's what happened in South Australia as well, where with the rapid increase in rooftop residential solar, 25% of all housing stock had solar, the DNSP there got the similar big red button. Now, of course I would argue that in the south Australian case the need was more acute, but I don't think it was the right approach to take because the better approach to take would be put out the price signals that say, and then allow the market to iterate.
[00:22:08.060] - Jon Slowe
And there's no shortage of innovators and innovation in the market that will respond to that. We've learned that over the years.
[00:22:15.040] - Sandra Trittin
I think on the technology side, right, we are fully there. It's really only about how to make the market design and how to build up the business model. But currently I don't see the challenge on the technical side.
[00:22:29.260] - Jon Slowe
Alex, I'd like to ask you, looking back over the last few years at Octopus, what's gone faster than you thought and what's gone slower? So maybe pick out something that has been more of a challenge than you thought it would be, and something that, wow, that's accelerated quickly.
[00:22:49.780] - Alex Schoch
Great question, Jon. I think if I look at what's gone slower, it's a great example how whole system thinking is a critical element to ensuring that this transition happens at pace. And so, in that context, the kind of government, you know, government policy and regulatory framework, I don't think has kind of taken that whole system thinking to the logical conclusion of where it should be to kind of have consistent policies to drive wholesale market reform, for example. Big topic in the UK, or for that matter, provide consistent confidence on electrification of heating as being the primary strategy. We still hear rumblings around hydrogen for domestic heating, which is bonkers, right. It's the most inefficient thing you could possibly do, and you've got heat pumps that are magic, that you put in 1 kilowatt hour of electricity, and you get three units of heat out. So I'd say that in the context of declaring a climate emergency, of actually seeing not only the fundamental thing that we need to tackle, which is climate change, but also the huge economic opportunity that this presents, I think that has been slower.
[00:24:21.740] - Jon Slowe
Has that slowed you down at Octopus as well? If you think of your plans for electrifying heat, for example, or capturing the value of flexibility and value stacking?
[00:24:35.650] - Alex Schoch
To a degree. I think more broadly, though, it's not just about Octopus, it's about the whole market and it's about having businesses that we're very fortunate. We have fantastic investors who have a very long-term view on where this transition is going, and we have a leadership team that wholeheartedly believes in this. There are other businesses where you need stronger signals or clarity to make investment calls. And the longer that those investment calls aren't made or aren't really doubled down on, the bigger impact to accelerating this transition across the board.
[00:25:20.920] - Jon Slowe
And then one thing that's gone quicker or faster or surprised you.
[00:25:25.850] - Alex Schoch
This is maybe a bit more tactical than the what's gone slower answer, the demand flexibility service in the UK. So, this went from an Octopus funded trial of 100,000 customers with National Grid ESO two and a half years ago to. To a service that is available to all customers, whether that's business or domestic customers via either suppliers or aggregators and is now in its second kind of season of operation. For me, why it's gone faster is that it shows the power of how to do innovation in the real world and iterating in the real world and not in the historical industry approach of kind of segmented off innovation projects that are completely move at such a slow pace that by the time they're finished, the market has changed. And that's even more powerful now because very few people, if you really ask them, can truly articulate what exponential growth or exponential change means. And so, if you have people looking five years back being like, oh, well, that's ready now, that doesn't work anymore.
[00:26:57.650] - Sandra Trittin
And what would you think made this intelligent demand management so successful?
[00:27:04.710] - Alex Schoch
I think the demand flexibility service was very successful and continues to grow because a, it engages consumers in a way that the electricity industry hasn't done before, right. And it's a complete opt in. It's an ability to kind of like, I want to do this in the same way that you go to the supermarket and some people will go for the bargain, kind of the bargain bucket of stuff that is marked down. Other people go like, no, I want this brand of flour or this brand of drink. And I think what it does, it opens up optionality for me. I think it's a very important example of how you can harness consumers even in what is essentially a quite manual activation to deliver some gigawatt hours of demand shifting.
[00:28:06.240] - Jon Slowe
I think it's been fantastic. Millions of customers participating in that really manual, quite clunky service that shows what's possible.
[00:28:15.500] - Alex Schoch
Exactly. And it shows what's possible. And for me that's so important because instead of waiting for the perfect technical solution, which requires digitisation across the energy space, as we talked about before, it kind of signposts a very clear evolution that you can do whilst taking the consumers and the customers of the energy system on that journey with you, instead of kind of iterating in kind of closed doors, meeting rooms, thinking about the future of tomorrow, without ever actually talking to humans, being like, would you actually like this?
[00:28:49.240] - Jon Slowe
Sandra, I'm thinking back to our previous podcast discussion with the International Energy Agency and how hard it is for policymakers to make the right decisions. And I think that's a brilliant example of being able to innovate, take some risk, but manage those risks and that very rapid feedback loop so we don't get stuck in these five-year innovation programmes as you described. Alex, I don't know what you think. Sandra, does that shine with you?
[00:29:19.640] - Sandra Trittin
Yeah, exactly. I mean, this was at the end of our last discussion, right, where I said, we know that the regulator has to change and that guidelines will have to change in the long run, laws, et cetera. But we cannot wait for it, right? We have that time pressure to get that energy transition happen and so we need to find ways on how to implement new solutions already today, and then for sure, they will improve, right. Once the regulation changes, it gets much easier. I think what is most important, that regulations should not put additional hurdles into the system. I think this is even more crucial than helping to push it forward, because I think there is a lot of push going on through newcomers, start-ups, et cetera. There are solutions out there, but at least the regulator should have in mind not to put additional difficulties into the system and at best, even support these new solutions.
[00:30:20.030] - Jon Slowe
Difficult job. Being a regulator.
[00:30:23.590] - Sandra Trittin
As I said, would not be my dream job. Right.
[00:30:25.340] - Jon Slowe
Alex, one last question. I'd like to look back to your experience with Tesla and Octopus and I guess less. I don't know if you would share the view that octopus and Tesla are disruptors or use that word or categorise them in that way. They both have, I think, disrupted the automotive and now the energy sector. Any views or reflections on what it's like working with these companies, or reflections on what sort of key takeaways that have enabled Tesla and Octopus to really succeed in the way they have?
[00:31:02.640] - Alex Schoch
It's a great question, Jon. I think there's a couple things to come to mind. But one of the most salient things is, at both organisations, there is such a strong mission driven culture. It's not a profitability driven culture. It is a culture that is very much driven to accelerate a sustainable world using technology, whether that's battery and drivetrain and manufacturing technology, or software, to digitise and run the whole energy system. And that then attracts a certain type of individual. And quite frankly, I've been privileged to work with some of the smartest people that I will ever have met, both at Tesla and at Octopus. And that is the single biggest. If you have a really hard problem to solve, you want to surround yourself with people way smarter than you who have a shared passion and mission to achieve something that most people would say is impossible.
[00:32:17.750] - Jon Slowe
And that mission, how's that mission kept front of mind at Octopus? Or do you talk about that all the time? Does it permeate all the conversations? Is it just alignment of the people and what you all are driven by?
[00:32:32.020] - Alex Schoch
I think it deeply permeates everything that we do, and we have at Octopus. Every Friday afternoon, we have family dinner, which is a tradition that started long before I joined the company, when the company was less than six months old. Of everyone going to the pub and talking about the week, about what went well and what didn't go well, it's now a bit more formalised. And we have highlights from around the world, from all the different divisions and parts of the company centre to that is how have we helped customers? What have we done to help customers today and what have we done to kind of push forward, building new technology, changing markets, building more generation. And that is kind of central to everything that we do.
[00:33:29.220] - Jon Slowe
Well, journey has been amazing so far and I'm sure it will be amazing in the next years, Alex, which takes us on to the talking new energy crystal ball. So, I'd like to set the dial to 2030. So, six years’ time and can you give us a view from 2030 as to where we'll be at with electrification and flexibility?
[00:33:57.150] - Alex Schoch
Well, on the electrification front, even the esteemed analyst team at BNEF are consistently wrong and under bake, how many EVs are put on the road? So, I would say whatever their forecast is, plus 25%. And the way that I think about this is look at the trillions of dollars that in the past 15 years have been invested into electrification of transport and the whole supply chain, from anode and cathode production, to battery cell production, to the continued dropping in dollars per kilowatt hour cost of batteries, to the commitments of incumbent legacy automakers desperately trying to catch up to what we're seeing Chinese manufacturers coming out to Tesla's continued domination of the EV space, especially in North America and Europe. So, on that front, I don't think that we're going to see any change. We should probably expect some battery chemistry kind of improvements. Jury's out on whether solid state batteries will be anywhere near mainstream or fuel promise. I don't think fuel cell technology will make any material kind of jumps. And I think that actually isn't so much around fuel cell technology in and of itself. It's more that can everyone please remember that transporting and storing hydrogen is incredibly hard and difficult.
[00:35:50.910] - Alex Schoch
If anyone really wants to look at the billions of euros or dollars that are spent in subsidising just hydrogen fuel stations. And like the thing we already have an electricity grid. We just need to build it out a bit more and then we need to manage it intelligently and use it better. And so, on the flip side, I think in terms of flexibility, I'd expect that we'd see probably several hundred thousand vehicle to grid enabled vehicles kind of connected and actually being used as grid assets as well as kind of mobility assets. I'd expect that in the context of, for example, the UK balancing mechanism, that a third of all resources are aggregated kind of small loads and not big power stations and yeah, those are maybe two things.
[00:36:47.140] - Jon Slowe
So, electrification of transport in particular, going faster and faster, continue to out beat forecasts. I don't know if that. Well, hopefully the LCP Delta forecasts are more realistic than the BNA forest and more flexibility. I like that metric. Third of all, balancing coming from distributed assets would be great. Sandra, I don't know what you think, setting those sort of goals for the flexibility the system needs. How much is going to come from distributed assets? At the moment it's small, but we need to be getting up to that third or that sort of order of magnitude.
[00:37:32.360] - Sandra Trittin
I would think we are stupid if we don't get it there.
[00:37:36.850] - Jon Slowe
It's going to be there.
[00:37:37.990] - Sandra Trittin
Yeah. The resources are there anyway, right?
[00:37:40.530] - Jon Slowe
Yeah.
[00:37:40.900] - Sandra Trittin
I mean, my neighbour is not going to ask me to buy an electric car because he wants to trade flexibility, but because he wants to have an electric car and drive, but it comes with the capacity of providing flexibility. So, this is why, I mean, we would be really stupid not to leverage this capacity. In addition, and as Alex was saying, if we do it in an intelligent and consumer centric way, the client will not even realise, right. Because he will still have the car to drive, but we will have this additional value.
[00:38:13.550] - Jon Slowe
And they'll save money.
[00:38:17.150] - Sandra Trittin
Exactly.
[00:38:18.190] - Alex Schoch
I think maybe one last point, Jon, that I think about a lot, and maybe it's a bit of a UK specific example, but I think the same thing is true. Generally, flexibility is not a new topic. Flexibility has been around for as long as we've had an electricity system, because it's balancing supply and demand. But what we're really talking about is the net need of flexibility is increasing exponentially for every energy system as we move from kind of dispatchable generation to intermittent generation, as we get more and more renewables. And on top of that, so, like, the UK system runs on what I think 60 gigawatts of flexibility today, 95% of that is thermal, or let's call it what it is, gas. But by 2040 to 2050, even, like a middling forecast from not the super ambitious forecast, and not the most pessimistic, like the middle forecast says the UK system will need somewhere around 210 gigawatts of flexibility to operate. So that's a substantial increase. Bear in mind that actually 50 gigawatts or 55 gigawatts of the 60 used today will actually be gone. So you have a net replacement of that plus new.
[00:39:41.050] - Alex Schoch
But I'm really not worried about it because we've got gigawatts of front of the metre batteries that are in the pipeline to be built. We've got millions of EVs and heat pumps and home batteries that are going to be put, and industrial processes that are being electrified more and more. To Sandra's point, the resource and asset base is there. It's just about a kind of shaking off the cobweb, thinking about everything has to look like a gas power station for me to trust it from a kind of TSO perspective. And then that innovators and new businesses are able to create those solutions and propositions that get the end customer, whether that is an EV driver or a heat pump owner in their house or a factory manager, to kind of get a good deal and without impacting their primary needs.
[00:40:32.140] - Jon Slowe
Alex, I think that's a lovely way to sum up the discussion, actually, and that's what we're all aiming towards. And Octopus is trailblazing the way towards that. So thanks so much for your time and sharing your thoughts. It's been a fascinating discussion. And Sandra, any reflections from your side on the discussion?
[00:40:58.760] - Sandra Trittin
So, first of all, thank you for that interesting discussion. I think my key takeaway is, again, that there are newcomers who manage to play under the existing regulation towards the energy transition to bring it forward. And the key part of the solution is really to put the consumer in the focus of all its thinking. And there are other newcomers as well, right? In Germany, in Austria, et cetera, and many more. But the more I look at them in general, the more I see this consumer centric approach is crucial to all of them. And then for sure, there is an advantage because they can build up on a greenfield area, right, or the IT, et cetera. They don't have all these legacies, but I think also having the appetite to take some risk and to be aware, okay, something can go wrong, but it doesn't have to, I think, is crucial to move forward. And this is really something I'm missing in the existing industry.
[00:42:10.660] - Jon Slowe
And I think it's the way that plays into the culture of a company like Octopus, the culture and the ethos. One of the first podcasts on talking new energy was with Greg Jackson, the founder and CEO of Octopus. And he was telling me about how he spoke to customers every day, I think. And that leadership and that culture and that customer obsession then permeates. Culture is quite fluid when a company is young, but as a company grows, the culture calcifies. And I think what Octopus has done is really embedded that fantastic customer centric tech, fast moving culture that Alex described to us today.
[00:42:56.890] - Sandra Trittin
And would you add any additional Jon, like what would be your key takeaway?
[00:43:04.190] - Jon Slowe
Probably your one and then the can-do attitude and creating the future. It's easy to moan or complain about regulation and policy. We all do it and it does. Poor regulators and policymakers are stuck in the middle. But there's a lot that can be done today and making the most of what can be done today and creating the future, I think.
[00:43:26.770] - Sandra Trittin
Great.
[00:43:27.750] - Jon Slowe
Okay, well, let's leave it there for today. Thanks everyone for listening. Hope you enjoyed the episode and look forward to welcoming you back next week.
[00:43:35.480] - Alex Schoch
Thanks Jon. Thanks Sandra.
[00:43:36.670] - Sandra Trittin
Thank you very much.
[00:43:37.730] - Jon Slowe
Goodbye.
[00:43:38.620] - Sandra Trittin
Thanks for tuning in. We are excited to bring you captivating conversations from the leading edge of Europe's energy transition. If you got suggestions for topics or guests for future episodes, please let us know.
[00:43:50.490] - Jon Slowe
And if you're enjoying the podcast, then please do rate it and share it with colleagues. For show notes, transcripts, and more, please visit lcpdelta.com.
Talking New Energy
An LCP Delta podcast
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