Electric Dreams -Green Energy Climbs The U.K. Investment League


OVO Energy CEO, Stephen FitzpatrickOVO EnergyJanuary inevitably brings a flurry of statistics summing up the performance of the U.K.’s startup sector in the previous year.  This year kicked off with a batch of figures – prepared for the Government-sponsored Digital Economy Council by Tech Nation and Dealroom.co – pointing to a rise of 44% in tech sector investment, with Fintech, A.I. (and deep tech) leading the race to part venture capitalists from their money.   No surprises there. Over the last few years, Fintech and A.I. have emerged as the publicity-grabbing poster children for U.K. tech and this latest round of figures indicates that between them they are still accounting for the lion’s share of a venture funding pot of more than £10 billion. Fintech firms collectively raised £4.1 billion in 2019 and as the report, rather gleefully, points out, this figure was three and seven times higher than the sums secured by their German and French counterparts. Meanwhile, British  A.I. and deep tech ventures bagged just over £2 billion.  But as the U.K. basks in some unseasonably warm January weather and the nation digests data suggesting that the last ten years have been the hottest on record, it is perhaps encouraging to note that the green electricity sector is the number three destination for investor cash. Significant DealsThis is a corner of the technology market that has witnessed some significant deals over the past year. The biggest of these was a $260 million investment in OVO Energy by the Mitsubishi Corporation of Japan – a deal that pushed the British green electricity provider above the $1 billion valuation mark. Elsewhere there were $81 million investments in solar power companies Oxford PV and Bboxx. In total, the sum raised by players in the sector amounted to around $1bn, representing a 45 percent increase on the 2018 figure. It’s tempting to cite the Greta Thunberg effect and/or the upsurge in climate activism over the last year as factors that served to drive investor interest in a sector that should – if all goes according to plan – play a key role in the overall reduction of carbon emissions. On the other hand, it seems unlikely that a backdrop of grass-roots activism is uppermost on the minds of VCs when investment decisions are made.  So that begs a question. What is prompting increased VC interest in the U.K. green energy sector?  According to Stephen Fitzpatrick, CEO of OVO Energy, the conversation has changed. “If you look at all the activity on the part of government, consumers, activists and corporations over the past 24 months, it’s clear that there has been an explosion of interest in clean energy,” he says.   And the conversation has also become more urgent. “We have 30 years to come off carbon,” he adds. “So it’s not surprising that there is more investment.”  A Shifting FocusAs he sees it, the focus of investment is also shifting. In the past, he says, investment tended to be in power generation and national or regional infrastructure, such as big grid networks. Today there are opportunities for investment in what he describes as distributed infrastructure (batteries, solar panels, etc) and the kind of devices that will help and enable individuals to cut their personal carbon footprints.  So rather than pouring their money into, say, power plants investors now have opportunities to support devices and services aimed at consumers. “In that respect, it’s becoming more like the consumer electronics market,” says Fitzpatrick.   Keeping Consumers On Board Indeed, Fitzpatrick believes that unless consumers are given affordable technology choices, it will be tough to move to a zero-carbon world.  “If you look at the changes that need to happen, it’s not something that you can entirely regulate for,” he says. “Regulation is important, but you have to develop technologies that deliver the lowest possible costs for the consumer.”  Good for the planet, of course, but also an opportunity for entrepreneurs. Founded in 2009, OVO Energy is essentially a retailer specializing in green power. But it has worked on digitizing and automating its engagement with consumers and is now in a position to expand internationally. In the last year – helped by the Mitsubishi investment – it has started operations in four other countries while also developing green power products, such as a battery storage system built in collaboration with Nissan. And Fitzpatrick believes that the U.K. is in a strong position to lead the way on clean power innovation. “Britain was one of the first countries to open up its energy market  so people from around the world are looking at how the market here operates,” he says.    .   


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