Greg Jackson, the CEO of UK-based utility and green power group Octopus Energy, called for an end to “demonisation” of the fossil fuel industry.

Jackson, the founder of Octopus, told the BNEF Summit in London that he is “relaxed” on the question of fossil fuels' role in the energy industry.

“The reality is, until we've built... the upgraded new system based on renewables, we need to fill the gaps, and filling in the gaps with, for example, gas is perfectly reasonable.

Certain sectors, are going to take a long time to electrify, so we didn't need to demonise fossil fuels at all.

“Certain sectors, are going to take a long time to electrify, so we didn't need to demonise fossil fuels at all," said the Octopus CEO, who added that he wants hydrocarbons companies to be able to be honest about their role.

"Honesty also delivers better returns for investors, and helps reduce greenwashing, providing greater clarity between those companies that are driving a clean, renewables-based electrification, and those that are maintaining the wheels on the bus for a period of time. "

Jackson added: "This approach gives investors confidence to back a sector with confidence that serves the needs of society, even though, I for one, hope that it eventually winds down."

In a debate about the dual challenges of improving energy security while meeting net zero targets Jackson also said perceptions sometimes fail to take account of renewable energy's novel characteristics.

“The physics and the economics of renewables are entirely different to the previous energy system,” he said.

“When it's windy and sunny, you have abundant supercheap power, So if we are going to have a cheap renewables-based system, it’s important that we have the market reform that enables [residential and industrial] consumers to tap into this power, when it is cheapest.”

Jackson said smart grid technologies and “dynamic pricing right through the grid” will be key to gaining overall efficiencies, but he also highlighted some structural changes that could be made in a market such as the UK, where consumers are charged a flat rate irrespective of whether they are located close to where electricity is generated and transmitted, or at the other end of the country.

“When it's windy in Scotland [electricity] can be generated for a few pence per kilowatt hour, yet billions of pounds have been spent turning off wind farms rather than giving Scottish people cheap electricity," he said

Jackson referred to an effective moratorium on building new data farms west of London due to electricity constraints to illustrate what he said was a "crazy" situation.

"If we had super cheap electricity in Scotland, where it is windy, data centres would move there and this, by the way, would also then free up more electricity for homes in the south. Efficient allocation of resources comes when you unleash price signals," he said.

While some BNEF panelists advocated a more hands-on approach from governments to foster and accelerate growth in renewable energy capacities, Jackson described price signals and lucid planning measures as the most powerful levers.

'Hands-on energy transition'

Rui Teixeira, CFO EDP Renewables cited the growing frequency of extreme weather events to argue in favour of a more accelerated or "hands-on" energy transition

But he agreed that the prime business mover for energy transition is price signals, suggesting that a CO2 pricing mechanism, providing it creates a meaningful business case, would make it "natural" for oil and gas operators to move toward sectors such as green hydrogen and carbon sequestration .

"What to me is missing is that additional investment in technology for decarbonise those segments that it will be hard to electrify," he said.

Jose Entrecanales, chief financial officer of Spain's Acciona Energia group, described the challenge of meeting the European Union'target of sourcing 42.5% of final consumption from renewable sources by 2030 as "very challenging".

"This requires tripling installed capacity of solar and wind by 2030, and I think we're far from that. But there are reasons to be positive, I think we've seen the installed capacity of solar generation and wind double every four or five years, we've seen when that will every four to five years.

"And 2023 is expected to be a record year in terms of net capacity installation. So I think there are good reasons we're on the right path [but] we're probably not yet at the speed, that we need to be at."

Growing pains

The build-out also conceals some growing market distortions and bottlenecks, especially when it comes to grid access, the London event heard.

Some BNEF panelists warned about the risks that can arise if too much investment is stimulated without addressing structural demand factors, as has been seen in the fast-growing solar sector in markets such as Chile, Spain and Texas.

While Teixeira noted that solar power is 220% cheaper today than it was 20 years ago, and has effectively surpassed coal and gas in the European power mix, runaway growth scenarios led to some notes of caution.

"Solar is obviously very competitive technology, but there needs to be a planned approach to technology mix in renewables, we cannot overbuild solar at the expense of prices, negative pricing, or zero pricing leads to zero margins that leads to zero investment, zero incentives to invest and zero jobs," said Entrecanales.

"In Spain, 50 to 60GW of solar capacity are going to be deployed in three years, but the system needs to be analysed very carefully.

"Regulators and governments need to be careful how they send signals to the market to incentivise deployment and ensure that is balanced with the larger perspective that one needs to a sustainable price environment that can enable that transition."

Spain has arguably stimulated the supply side by tackling permitting and, when grid access became an issue, developers were offered added incentives to reach milestones or lose their place in connection queue.

The outcome appears to be a glut of utility-scale solar projects without keeping pace with power market reforms.

The Spanish solar sector has not run into the problems encountered in Chile, where a lack of investment in grid and an oversupply of solar leading to prices that are negative or zero during all daylight hours, but Entrecanales warned against complacency in markets where solar capacity is growing fast.

"It goes back to the need to combine the supply side of the equation with the demand side, and in between appropriate investment in grid and appropriate investment and storage," he said.

"On the supply side, there needs to be in my opinion a bit more of a planning effort, without needing to be overly interventionist or rigid around how much should be deployed. Because I think the market will be the most efficient way of allocating that capacity, there needs to be clear guidelines or signals to incentivise an appropriate mix of technologies, and how the supply chain should look."