'West tying itself in knots over energy transition as China steams ahead,' says Octopus chief

The West is tying itself in knots in its energy transition by trying to subsidise incumbent industries while China steams ahead with its renewables rollout, said Octopus Energy chief Greg Jackson.

Speaking on a panel at a BloombergNEF energy transition summit today in London, Jackson, CEO of British renewables group Octopus, said it was good to see that in the UK’s recent election tackling climate change hadn’t become “another culture war.”

“But I think the reality, if we stand back, is that the momentum is not great in the West,” said Jackson.

“I was stunned by the data coming out of China” on its rapid shift from being a country highly reliant on fossil fuels to becoming the “absolute leader in renewables,” he said. Last year, 59% of all renewables deployed were in China, he added.

“When you visit cities like Shenzhen, Beijing, Shanghai, where maybe not much more than five years ago people wore masks because of local air pollution, the air is now cleaner than it is in many Western cities,” said Jackson.

When he visited New York, Jackson said it struck him “how dirty the air was” compared to Chinese cities.

“While the West is tying itself in knots, working out how we have an orderly transition, defending incumbent industries, countries that are not constrained by that are moving ahead.”

“What we really need is far more confident leadership to invest in the industry for the future.”

China is moving at such an “astonishing speed” because renewables are cheaper, he said, while the West is being held up by “convoluted market structures”.

“And we end up in a crazy world where things like AI data centres are not able to be built because we don't have access to enough electricity.”

Jackson questioned moves to support incumbent energy generation sources through carbon capture, usage and storage (CCUS).

“If I was a company whose assets were gas in the ground and pipes and storage tanks, I’d be very keen on public subsidy for CCUS,” he said.

“We need to be very, very careful” concerning the “huge” sway held by incumbent industries over policymaking, he warned. “Because by definition, emerging industries don’t have the organisation, history and resources to lobby as strongly.”

Renewables are cheaper than conventional fuel sources and are getting cheaper every year, he said. Propping up other fuel sources is like “deciding to subsidise the abacus industry so they could compete against pocket calculators.”

Poland’s climate and environment minister Krzysztof Bolesta said he did not entirely agree with this, describing the picture as “ever so complicated.”

It is important to remember that some industries will struggle to decarbonise with electricity, he said, and CCUS is important for keeping industries such as cement in Europe.

“Otherwise we'll be importing the stuff from Turkey or even China.”

He compared the US and its $369bn Inflation Reduction Act (IRA) incentive package for clean energy with similar action Europe has taken to encourage transition technologies.

“I think the difference between American policymaking and European policymaking is that the Americans prefer carrots, incentives, and we prefer very much the stick.”

"I think that's the main problem. Because if you're a global company that can allocate capital at will, you will decide I cannot put up with this. I'm moving on.”

Europe needs a “very fast answer” to the IRA, said Bolesta, because otherwise it will not just be the cleantech companies leaving but also traditional energy intensive companies that will have better investment opportunities in the US.

Rhian-Mari Thomas, CEO of the Green Finance Institute, said that unfortunately in the UK we “don’t have $369bn down the back of the sofa.”

What the UK does have, however, is “one of the deepest pools of capital in the world,” and the “creativity and ingenuity” to put that to use.

An example of this ingenuity, she said, is the Contracts for Difference scheme pioneered by the UK government that helped the country become a global leader in offshore wind.

Jesse Scott, adjunct professor at the German Institute for Economic Research, said that Europe does “prefer carrots to sticks as a political proposition, who doesn’t? Politicians certainly do.”

“But I think what we're coming up against is, we all like to think that all good things go together. And medium, long term, no question. The green transition, prosperity, national security, democratic consensus, European integration, should all be a package.”

“Short term, there are clearly some tensions between some of these things. And some trade-off discussions. And that's really what the next five years comes down to.”