With sea levels rising, wildfires raging, and prolonged droughts leading to floods, we are increasingly asking, what can keep climate change from becoming catastrophic? A shift away from fossil fuels has long been an obvious answer, and yet change has been slow. The commitment to drive this kind of change attracted me to Octopus Energy.
My experience with energy suppliers in the United Kingdom for the past two decades has been depressing. Reliance on fossil fuels, routine overcharging, confusing pricing, billing errors, dated systems, and terrible customer service were universal. I didn’t realize how far my expectations had fallen until I switched.
Octopus has impressed me repeatedly since I joined just over two years ago. The company is committed to green energy and just announced a €220 million ($220 million) fund to develop renewables and reduce Europe's reliance on gas. It boasts a slick app and website, fair and transparent pricing, and helpful customer service. It even seems to have something of a conscience.
Data Is King
Octopus Energy was founded in 2015 by entrepreneur Greg Jackson, with a vision to make energy better, fairer, and greener. He left school at 16 to code computer games but went back to study economics at Cambridge University, where he met James Eddison, who would become Octopus CTO. Jackson built several businesses over the years, but he had always wanted to set up an energy company. Growing up, he remembered struggling to pay energy bills and figured the broken and inefficient market could be made better through tech.
Octopus runs on the proprietary Kraken software system, which is an agile, continuous development model that enables Octopus to innovate rapidly. It's based on the idea that, given access to clear, advanced data, people will choose cheaper and greener power. For example, the company's Agile Octopus product gives customers half-hourly pricing. Smart homes can then use power when it's cheapest or healthiest for the grid. You can even set up IFTTT applets to run your robot vacuum when prices drop or have your water heater turn off when they rise.
Its intelligent EV tariff allows customers to say, for example, that they want their car fully charged by 9 am. They plug in at the end of the day, and the car automatically charges overnight at the cheapest possible rate. The Electric Juice scheme covers almost 300,000 charging points across the UK and Europe and allows you to juice up your EV at the tap of a card, adding charges to your energy bill if you are an Octopus customer.
In trying to drive greener energy adoption, Octopus has been seeking solutions to the intermittent nature of renewables, which generate more on sunny or windy days and less when it is cloudy or still. It ran a battery trial, subsidizing the installation of large batteries in homes to allow folks to buy energy at its cheapest and store it to use when the grid is at its busiest. It benefits the battery owner with cheaper power but should also bring prices down for everyone by alleviating pressure on the grid.
Most homes in the UK currently rely on gas-fueled central heating, but with the alarming impact of climate change and the finite nature of fossil fuels, we should be switching to heat pumps. As gas prices soar, Octopus has launched an air-source heat pump (ASHP) scheme to encourage folks to switch from gas. (More than 20,000 people have already registered an interest.)
Octopus has a research center with two full-size houses inside a warehouse, where teams of engineers have been practicing heat pump installation. Octopus CMO Rebecca Dibb-Simkin says the aim is to bring pricing, with the help of the UK government’s Boiler Upgrade Scheme, which offers up to £5,000 ($5,760) toward an ASHP, in line with the typical £3,500 cost of a gas boiler replacement. Octopus will also remove your line and meter and cap your gas for free if you ask.
It is crucial that major players step in to make this kind of switch affordable for folks in the UK. Although the technology is widely used around the world, it is prohibitively expensive here. To give you an idea, I got a quote to install an ASHP last year that came in at almost £18,000. Even after the now expired Scottish government subsidy of up to £7,500, that is four times the cost of a new gas boiler installation.
Stop the Price Gouging
It would be an understatement to say the energy market in the UK is a bit of a mess. In the 1990s, the government-owned and -operated energy sector was broken up and sold off to private companies, amid claims that competition would improve efficiency and drive down prices. Average energy bills decreased for a few years, but in the early 2000s they began to rise again, and they have not stopped since. The idea that we could shop around for the best deal sounded good, but in practice that means investing a lot of time in research.
The tariffs are confusing. When Which challenged folks to select the best deal from a range of options in 2012, only 8 percent of them could do it. Even after energy regulator Ofgem stepped in to simplify tariffs, only a third could identify the cheapest deal. Suppliers also penalized folks who failed to do the research or switch suppliers by automatically putting them on higher-cost tariffs whenever their fixed-rate deals ended.
Every energy supplier I have tried (six in total) has routinely overcharged me, estimating my usage to be much higher than it actually was every year. Most folks prepay their energy bills by direct debit in the UK, and energy suppliers estimate your usage and set your monthly bill at a level to cover it. They only calculate what you actually used every three months. And they don’t refund the amount they overcharge, preferring to keep it for future bills. I have wasted hours of my life on hold or arguing with suppliers to claim my credit back and reduce my monthly payments, only to see them increased again the next month.
Because energy use soars in the winter when it’s cold, there is a legitimate argument for accruing credit over the summer, but even taking that into account, an Ofgem report revealed that in 2018, energy suppliers had taken £1.4 billion more than they needed. The number of suppliers peaked at 70 that same year, but many were already dipping into this cash. The regulators failed woefully to hold new suppliers to account, despite clear evidence of financial unsustainability (Avro was the most egregious example), and many went bust, leaving taxpayers to foot the bill.
Clear and Direct
When I first logged on to Octopus' website, I could see my energy use and bills at a glance or submit a meter reading. It may seem like a low bar, but all my previous suppliers had clunky systems offering limited data, not to mention frequent downtime and data breaches. With Octopus, you can submit a meter reading as often as you like, which means accurate billing based on your actual usage.
Submit a meter reading every month and you earn a spin of the wheel of fortune, where you can win prizes from £1 up to £512. This gamification of meter readings is a clever way to encourage folks to submit them more often. Dibb-Simkin told me that it doesn’t just make billing more accurate, it also allows more efficient balancing of the power grid by providing insight into real-time usage.
A few months after joining Octopus, I got a smart meter. It was installed for free and came with a wireless display that shows my energy use for electricity and gas. I don’t have to submit meter readings anymore, as the info automatically uploads to Octopus, but the company still allows me a monthly wheel of fortune spin. Even its hold music is better. When lines are busy, if Octopus has your date of birth on file, it will play the No. 1 song from when you were 14 years old. Your musical tastes cemented back then, and hearing a tune you like helps chill you out.
I’m not the only happy customer. Octopus has scored consistently highly for customer service and won a coveted Which Recommendation five years in a row (it’s the only energy firm to get one this year).
Sense of Responsibility
Last winter, Octopus set up a £2.5 million Assistance Fund for customers struggling with high prices. It gave away 7,000 free electric blankets for the hardest hit, because it is much more affordable to heat a person than a whole home. The fund has been increased to £7 million this year.
The company also ran a Winter Workout challenge that estimated your gas usage over 12 weeks of winter and offered anyone who reduced their gas consumption the chance to win a cash prize. Aside from offering tips and a space for folks to share ideas, there were weekly and grand prizes, and everyone who was successful shared in a £1 million pot. It was a smart way to reduce gas usage, and it included an option to donate your winnings to the Assistance Fund at the end, with Octopus matching all donations.
While Octopus isn’t the cheapest supplier, it is consistently cheaper than the major alternatives. You may wonder how it can afford to run. Octopus has at least a 50 percent lower cost to serve a customer than most of its rivals, according to Dibb-Simkin. It is lean and efficient, doing everything, including marketing, in-house, and it makes a sizable chunk of change by licensing its Kraken software to other energy suppliers.
The average UK energy bill was £1,400 ($1,600) a year in October 2021. That rose to £2,000 by April this year, and Ofgem announced it will go up to £3,549 from October. And it won't stop there, with further increases predicted in January that could take the average annual bill above £4,200. Many people will be unable to properly heat their homes this winter. With this crisis looming, the need for change has never been more obvious.
Many suggestions have been made, from a price cap freeze to renationalization to take the whole industry back under government ownership. But we also need a united effort to reduce our reliance on gas, build a resilient power grid that harnesses the enormous potential of renewables in the UK, and to provide proper support for those facing hardship. As the wider industry and the UK government shamefully fail to act, Octopus stands out by doing the right things.