With the takeover of sister business Octopus Renewables this supplier is going ‘vertically integrated’. What does that mean for our fight against fake green tariffs?
The news that Octopus Energy is acquiring its sister company, Octopus Renewables, to take on a portfolio of 2.8GW was applauded in the (currently virtual) Good Energy towers.
We have been banging the drum for a crackdown on greenwashing in energy supply for some time now. Calling on the regulators to stop the use of cheap green certificates, called REGOs, to badge fossil fuel power as green. To date, a practice which Octopus Energy has been one of the biggest culprits of. A brilliant tech company, whose (full disclosure) tech we use ourselves, Octopus Energy has historically not had the greenest approach to sourcing its energy.
Whilst on one level a simple shift in corporate structure, Octopus Group merging its renewable generation business with its energy supply business can only be a good thing. It will make the link between the choice Octopus Energy’s customers have made and investment in renewables a closer one. A massive endorsement of what we have been saying all along.
But before we pop the champagne and claim ultimate victory, a few questions remain.
Owning the carrot farms
The first question is, will the power from Octopus Energy’s new renewable generation portfolio be matched directly to its customers’ electricity usage?
According to the Guardian, the generation portfolio is big enough to power 1.2 million homes, whereas Octopus Energy has around 2 million UK customers. Meaning the answer to the question is at least “not all of its customers’ use”.
Octopus has said it “plans to increase its renewables division to generate as much clean electricity as it sells”, which is brilliant. But it still doesn’t quite give us the full picture.
The analogy we have used before, is that greenwashing energy is like labelling and selling non-organic carrots as organic. To extend this analogy, Octopus Energy will now own the organic carrot farm, but not necessarily sell the organic carrots to its customers. It can still sell the organic carrots elsewhere, whilst supplying plain old non-organic carrots with an organic label to its customers. And given power purchase agreements (PPAs), or in this analogy carrot purchasing contracts, tend to be longterm, it probably will be doing so for a while at least.
Where are the farms?
The new Octopus Energy Generation comprises of 300 projects across six countries. An hour long ‘virtual tour’ video shows many are in the UK, but many are not.
You can trade electricity across countries, but it’s not as straightforward as trading within one. Nor is it as green — like importing carrots from Spain versus buying from your local farm. That is part of the reason why Good Energy has always advocated for local energy.
It is unlikely that Octopus Energy’s European generators will be supplying power to its UK customers. It is possible that Octopus Energy could use the renewable certificates from these European generators to label its UK electricity green, but this version of greenwashing is something Octopus has joined us in condemning. It should be safe to say that won’t be happening.
Vertically integrated versus distributive
Being both a generator and a supplier of energy, as Octopus Energy will shortly be, is known as ‘vertical integration’. Good Energy owns six solar farms and two wind farms, one of which is the UK’s first ever commercial wind farm at Delabole in Cornwall. We have been in the ‘vertically integrated’ game a long time.
But we actually moved away from the model a few years ago, and stopped looking to develop or own any new renewable assets directly ourselves in favour of a people powered approach. We don’t see the future clean energy system as a centralized one where a handful of companies own and operate everything. That wasn’t good when we had a fossil fuel based system, and wouldn’t be good for a renewable based one.
We can have a much bigger and broader impact by enabling others to be an active part of a distributive energy system, generating their own clean power. We believe the +1600 power purchase agreements we hold with renewable generators achieve far more impact than we could have developing sites ourselves. Through them, we are involving thousands of people and communities in the renewable revolution.
There is of course more than one way to crack a nut. Good Energy has lobbied to stop the use of REGOs to greenwash non-renewable electricity, because that does not crack the nuts. But whilst we believe our approach to nut cracking is the best way, we do not believe that it is the only way. Octopus Energy’s new vertically integrated model can work too. They will now be a big investor in renewables, which is unquestionably a good thing. As ever, what matters most is that customers who think they are helping grow renewables, are getting what they are paying for.
That is why we are heralding this as big step forward for us, for Octopus Energy and for everyone pushing towards a cleaner, greener future together.