As Storm Eunice swept in from the Atlantic last week, cutting power to more than a million homes, the dark clouds had a small silver lining: on the wholesale power market there was some brief respite from the high prices that have characterised this winter as wind generation reached a new peak.
Of course, the drop in wholesale prices won’t have been noticeable for the vast majority of consumers, even those who can see the turbines from their window, most of whom pay a flat rate for the energy they use.
Octopus Energy, which last year announced the creation of its renewable generation arm as well as a new type of tariff, is looking to change this.
The Fan Club tariff launched in January offers smart meter customers living within 5km of one its turbines a 20% discount on their electricity whenever they are spinning and 50% off when the wind picks up and output is high.
For the time being, there are just two 500kW turbines at Caerphilly in South Wales and Market Weighton in Yorkshire.
Zoisa North-Bond, chief executive of Octopus Energy Generation, says they deliberately acquired turbines that were close to towns and villages as “we wanted to understand how much people cared about them.”
They posed themselves the question: “If you have a wind farm on the side of your village and you can get as much as 50% off your bill for using energy at all the right times, does that change peoples’ opinions as to what renewables look like?”
North-Bond says they are trying to create an alternative to the current development model for renewables, whereby colossal “industrial-sized” turbines are built in locations where the wind is strongest – mainly in the north of the UK.
The power from these “nameless” turbines is sold on the wholesale market and fed onto the national grid so it can be transmitted hundreds of miles across the country. North-Bond says their sheer size and lack of connection to the local community, at least metaphorically speaking, means the industry has been “creating friction by trying to shove these projects into place that they didn’t belong.”
“It’s such a great shame because from my perspective while I was working for another utility, the biggest limiting factor to the mass rollout of renewables in the UK was actually how people felt about them,” she states.
North-Bond hopes that by building smaller, more “palatable” turbines closer to demand and offering cut price electricity to those who live nearby, Octopus can foster this sense of connection and overcome some of the resistance that has been limiting the deployment of renewables, particularly in England.
She believes this will be much more effective at winning people over than local benefits funds: “You ended up giving this to a community or town of 500 people and they would end up with millions and millions of pounds, all sat in town halls in the middle of January disputing how to spend it.”
Recounting her previous experiences as director of Coop Community Energy , she says this money was usually “given over to over a third party so people just felt really disconnected. Its nothing to do with energy.” She says there were “only so many Brownie huts you could save.”
North-Bond says the initial response to their launch “blew us away” as they now have “a pipeline of over a thousand towns and villages” actually asking them to build wind turbines and solar farms in their area: “We got to the end of last year and we saw this massive pull coming from communities.”
She says the limited number of Fan Club tariffs sold out in “something like two weeks” and there are clear signs adopters have been changing their domestic routine to take advantage of the cheaper electricity on offer: “Of course, not everybody can do those things – not everybody will want to do those things in terms of adapting what they do in the household – but the option is there and when they can, people seem to be doing it.”
It’s no surprise then that Octopus has ambitious plans to expand the model with more turbines: “We have five that are going to be launched immediately this year, so very, very soon. We’re just about to sign all of the land leases on those.
“There will be at least 30 in the next two years and we’ve actually said there will be 2,000 – that’s in this market and across the world – by the end of the decade. And that’s something we’re estimating will be about £4 billion worth of investment that we’ll raise to deploy that.”
North-Bond acknowledges that, all other things being equal, smaller turbines do produce energy at a higher cost per unit.
But she believes this difference can be offset in several ways, firstly through lower development costs: “We are finding that because you’re not constantly fighting a community, you can do this much more quickly. When you’ve got people saying, yes, we want it here, it drives down a lot of those development costs which is absolutely fantastic.”
Building generation closer to demand should also reduce the need to build expensive network infrastructure: “If energy is travelling a really short distance into households and homes that electron should be the cheapest electron than can possibly be created.”
But for this to work, North-Bond says the benefits of transporting power over short distances will need to be reflected in pricing, which will need to vary by location: “This idea at the moment of having a single wholesale price doesn’t make much sense.”
Her sentiments in this regard appear to contrast with many others in the renewable industry who argue that high locational transmission charges in Scotland, for example, are merely making renewables more expensive and deterring investment.
However, North-Bond argues that Octopus’ Fan Club model is the best way of rolling out renewables faster and at greater scale: “I would love to see onshore wind and solar development pick up massively because I think it’s possible and we haven’t really seen much since 2015 when some of those subsidies dried up.”
She believes this will be attractive to the growing number of environmentally conscious investors looking for a steady pipeline of projects to put their money into, even if the returns are slightly lower: “You get some people that are chasing subsidies across the world but they are drying up”.
While the immediate focus is onshore wind, North-Bond says they also have their eye on other types of energy assets – solar farms, storage and even offshore wind: “There are many places where people don’t like an offshore wind farm but if they could get much cheaper energy as a result, does that change their opinion? There are things afoot that we would like to look at there.”