The Energy Markets Podcast S3E20: Octopus Energy's Michael Lee speaks to his company's consumer-centric vision of 'Retail 2.0' for energy supply
UK-based Octopus Energy has seen extraordinary growth since launched in 2015 by fund-management firm Octopus Group. It's heavily invested in renewable energy in the UK and elsewhere, and it has retail energy supply operations in Australia, Germany, Italy, Japan and New Zealand, with its U.S. arm headquartered in Houston. As its name would suggest, Octopus has its tentacles everywhere all at once in competitive energy supply, it would seem. And that reach promises to extend even further with the company's Kraken software platform, which it doesn't keep to itself but licenses to other retail energy providers.
The fact that the company chose Texas as the first energy market in the U.S. to invest in serves as a strong counterpoint to baseless criticisms of the ERCOT market in the wake of the deadly Winter Storm Uri outage. It's simple: Texas, with its wholesale power market unencumbered by the price caps hobbling competitive eletricity markets in the Northeast, provides the price signals Octopus needs to actively engage its residential customers in aggregating demand response and distributed solar energy resources, and shares the proceeds the company earns in the wholesale market with its participating retail customers. Its recent pilot during the month of August saw participants earning, on average, 20 cents per kilowatt-hour on their self-produced renewable energy they, through Octopus, sold back into the grid rather than consume during critical events in ERCOT, or roughly twice what might have been available via net metering. Some customers made nearly $1,000 that month for arbitraging their energy use and "exporting" their clean energy to the grid, says Octopus Energy US CEO Michael Lee.
"What we're really doing is really aligning customers to say, yes, you want to produce your power and you want to sell it back," he says. "Let's move on beyond this product called net metering, and let's align the financial outcomes to the customers." It's an example of what Lee describes as moving beyond the "Retail 1.0" offered by most energy suppliers today to a much more consumer-centric "Retail 2.0."
"Usually, net metering is a one-for-one credit. But because we were able to find financial incentives they were getting more than one-for-one and some people were getting a 20-to-one credit because they were getting $1 or $2 a kilowatt-hour for their exports for the entire month of August," Lee says of the recently concluded pilot. "My personal opinion is that Retail 1.0 has quite underserved the market. There's a huge opportunity to completely rethink what retail energy is going forward and what it looks like for customers and how that benefits all the players, the grid, the utilities – everyone."