UK’s Octopus Energy eyes the Middle East amid global expansion

Exclusive: Company plans to set up technology hub in the region

Greg Jackson, chief executive of Octopus Energy, spoke to The National. Khushnum Bhandari / The National

UK-based energy retailer Octopus Energy plans to expand into the Middle East, potentially setting up a technology centre in the region, its chief executive Greg Jackson has said.

The company, which recently closed its acquisition of Bulb, has been an outlier in a market where high gas prices have pressured margins of peers.

“I am seeing the Middle East, and particularly the UAE, as thought leaders in creating sustainable energy solutions,” Mr Jackson told The National in an interview.

“We need to really start talking to potential partners about establishing a centre here to work together on the technologies that will help tackle climate change.”

Octopus Energy, which was valued at $5 billion after its last funding round in 2021, has grown on the back of its proprietary Kraken technology, a platform designed to promote smart grid use, increase efficiency and improve customer service.

Kraken, which uses algorithms to reduce suppliers’ and customers’ costs, has been licensed to more than 45 million accounts in 13 countries, through deals with companies such as EDF Energy and Good Energy.

Retailers such as Octopus Energy buy power in wholesale markets and sell it to end users, usually at fixed prices. However, this also makes them vulnerable to volatile gas markets.

The Dutch TTF gas futures, the benchmark European contract, hit a record high of €343 ($374) per megawatt hour in August after Russia reduced natural gas exports to Europe during its conflict in Ukraine.

The benchmark has since lost about 80 per cent of its value amid rising imports of liquefied natural gas (LNG) and high storage levels.

“We're still looking at gas prices at probably three times the average in the last decade, and so there's still probably another year of challenge, particularly in Europe,” said Mr Jackson.

In the year ahead, there is going to be “incredible volatility”, with prices dependent on weather and geopolitics, he added.

“But, over the next two or three years, what we'll see is an emerging new energy system.”

Despite the rising adoption of renewable energy in most parts of the world, natural gas is expected to play the role of a key transition fuel.

“Until we have a system that can make the most of renewables, gas is the perfect gap filler,” said Mr Jackson.

The move from fossil fuel-backed power generation to renewables will involve “decades of increasing electrification” with rising adoption of batteries required to store energy produced from solar and wind, he said.

“In the short term, some of the changes in the world energy system are: countries that won't deal with Russia getting new [energy] sources [and] countries that will deal with Russia taking on Russian gas and oil."

The Octopus Energy chief said an opportunity for energy retail existed in the Middle East.

“Whether you have competitive markets or state-owned markets and monopolies, it's [applicable] across the world … it also opens the gateway to driving down costs and making a more efficient system [especially] when you've got the intermittency or the variability of renewables,” said Mr Jackson.

Although energy-rich, some countries in the region have lagged in terms of infrastructure. But, a recent move towards having more interconnected power grids is seen as a positive.

Last year, several agreements were signed to connect the electricity networks of GCC states to Iraq's grid.

In 2021, Egypt and the Saudi Arabia also signed $1.8 billion worth of contracts to build transmission plants and connect each other's power grids.

“The more we link the [power grids], the more we can balance between different time zones,” said Mr Jackson.

“I think we'll end up with a global grid … it creates a more resilient and dramatically more efficient energy system.”

Octopus Energy is currently expanding its operations globally and has invested in a solar and wind farm in Morocco, he said.

The project, which will become operational in 2027, is expected to supply 3.6 gigawatts of clean power to the UK through subsea power cables.

In December, an Octopus Energy subsidiary also said it was investing in Spain-based renewables developer FF New Energy Ventures to expand activities in Spain and enter the Portuguese market.

The Iberian region is set to be an energy powerhouse given its abundant sunshine, strong winds and mature natural gas infrastructure.

"As they build sufficient capacity to exceed local demand, you're then exporting across Europe on the various use interconnected grids," Mr Jackson said.