Connectivity

How Octopus Energy aims to wrangle Texas’s clean-energy transition

The retail energy provider is building a business around the idea that we can more efficiently align demand with existing energy supply.
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6 min read

Octopus Energy is trying to get its arms around a complicated issue: the clean-energy transition and the increase in electricity demand that’ll accompany it.

The renewable energy company is off to a strong start in its home market, the United Kingdom, where this year it became the largest domestic electricity supplier. Now, backed by a $9 billion valuation and investors like former Vice President Al Gore’s investment firm, it’s working to replicate that model in the Wild Wild West—the Texas energy market.

Octopus Energy’s US division, based in Houston, has an array of offerings, from thermostats to batteries to EV charging, with an emphasis on how each of those products interacts with the electric grid.

“We’re focused on reimagining what retail energy looks like,” Michael Lee, Octopus Energy US CEO, told Tech Brew, “especially as this particular state, Texas, goes through the energy transition at light speed as we bring on a ton of renewable energy, a lot of new electricity demand as we electrify everything, and really help balance this grid.”

Setting up shop in the Lone Star State

Texas has a deregulated electricity market that allows households to select their own energy suppliers, unlike most other parts of the country. The Lone Star State also has its own electric grid, the Electric Reliability Council of Texas (ERCOT).

“Texas is a fascinating place…We use about seven times more power than the average customer from the UK,” Lee said. “There is a lot of power consumption happening in Texas on the residential side and that’s almost purely because it’s so darn hot in Texas and we are using air conditioning 300 days a year.”

These factors, plus Texas’s abundant renewable energy supplies (it’s the top producer of wind power in the country), make it a fertile proving ground for the concept of load flexibility, which involves adjusting energy usage to align with supply.

Lee thinks about load flexibility in two ways, he told us. One is how to more precisely align thermostat usage with the times of day when the grid is carrying excess solar and wind energy: “That’s unlocking the built environment—and that’s approachable by every single person.”

The second is figuring out how to electrify those parts of our society that currently rely largely on fossil fuels—like transportation.

“We don’t want to bring on more electricity usage without making that electricity usage smart,” Lee said. “Those are our two major focuses in the US.”

Getting smarter

The company offers a suite of products it calls “Intelligent Octopus,” a program that helps customers optimize their energy usage based on signals from the grid.

“What we’re really thinking about here is, we want the megawatts…to shift around,” Lee said, “but what we really want to do is understand each individual customer.”

Take EV charging, for example. Amid concerns that millions more vehicles plugging in will further strain the grid’s capacity, one strategy that can be used to mitigate the impact is incentivizing users to charge their vehicles during off-peak hours.

A 2023 MIT study estimated that it would require at least 20% more power generation capacity to accommodate EV charging during peak demand hours if the issue isn’t addressed. But there’s optimism that EVs don’t have to be a burden, and could even be an asset for the grid.

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Octopus is enabling smarter charging in the UK with an electric tariff program that shifts charging overnight, when demand is lower and electricity is cheaper. In February, Octopus started offering the UK’s first vehicle-to-grid tariff, which guarantees free EV charging for users who sell energy back to the grid during peak hours.

Founder and CEO Greg Jackson told Canary Media that Octopus is “trying to build…a world where we have the right amount of generation at any moment in time, for all of our customers, from green sources. Then we flex the demand from our customers—we help our customers use it at the time that’s greenest.”

Philip Krein, a faculty member in the department of electrical and computer engineering at the University of Illinois Urbana-Champaign, told us that easing electrification’s impact on the grid will require proactively managing things like EV charging. He’s a proponent of adding widespread slow charging options and of smart charging strategies that promote plugging in during off-peak hours.

“There are times out in the California system where basically they have to dial back solar energy during the day,” he said, “because there isn’t enough load to absorb it and they don’t have any place to store it.”

What’s next?

Octopus—which also has operations in Spain, Italy, France, Germany, Japan, and New Zealand—entered the US market after acquiring Evolve Energy in 2020.

The company introduced a free charging program to customers in Texas earlier this year under its EV leasing company. And Octopus offers smart charging features to its energy customers; it uses software to align a vehicle’s charging cycle to when energy is cheapest overnight and offers an approximately 20% discount on its standard energy rate for customers who opt in.

The company further deepened its US presence by acquiring two solar farms in Ohio and Pennsylvania, part of a plan to make major investments in the US renewables market in the coming years.

Asked about whether Octopus has plans to expand its retail energy programs to other parts of the country, Lee said the company is focused on Texas at the moment.

“The market structure really rewards load flexibility here in Texas…why it’s such a central focus of ours is that this is a really great market structure to get customers to be major participants in the energy transition,” he added.

A recent ERCOT report estimated that energy usage on Texas’s grid is going to double in the next six years. At the same time, the grid is slated to bring massive amounts of new renewable energy on board.

“All of this means that the signals to be doing this will only become brighter,” Lee said, “and will only become more important as we go through this energy transition.”

Keep up with the innovative tech transforming business

Tech Brew keeps business leaders up-to-date on the latest innovations, automation advances, policy shifts, and more, so they can make informed decisions about tech.

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