New directions in energy
All markets are in a state of change: that is a basic fact of life, and the energy market is no exception to this rule. Yet before we analyze the drivers for change and the potential technology responses, let’s consider why this industry is different and special.
First, it is extremely broad in scope. It covers extractive industries: mining for coal (and now uranium and lithium), oil exploration and production; manufacturing on a huge scale (wind turbines and towers, hydro-electric schemes, refineries); distribution (grids, sub-stations, cables); and retail (customer relationships, maintenance and services response).
Second, the modern world economy is the gift of this industry, which provides easy access to lighting and heat, every form of mobility and the power to drive our factories. We can mark the beginning of the modern world to the point when fossil fuel powered machines became almost universally available. No matter what else changes, we will always need power, and in greater amounts every year.
Third, the greatest crisis of our civilization can also be traced back to the energy industry. As bad news accumulates around climate change, we cannot escape the truth that carbon emissions, pollution and by-products from burning fossil fuels are the key factors in these developments.
The energy industry is therefore faced with the greatest dilemma in its history: continue to provide the power our civilization needs, but do it while decarbonizing, decentralizing, keeping us secure and providing greater precision and efficiency, through better use of data.
The need for change has become a little more urgent as a result. So what are the strategic developments of most urgent significance?
Restructuring the energy market
The rise of renewables has been faster than expected, changing the cost base of the power generation industry, as the main sources of renewable power: wind and solar, are now less expensive than hydrocarbon-based alternatives. This has led to a major increase in new technology investment, while making the overall generation mix more complex.
Distribution grids are under unprecedented pressure as the move to electric vehicles and area heat pumps are also accelerating fast. A recent research paper from the University of Wuppertal in Germany reveals that urban power grids will be expected to deliver on average 162% of today’s requirements by 2030, rising to 200% plus by 2050. This requires new thinking about everything from cable locations and sizes to the output of high and medium voltage substations, plus new software-based management solutions.
Digitization is another change factor, as providers cope with the need to manage bi-directional energy traffic, virtual power companies are becoming more influential and relationships between providers and large customers become more complex (with some customers selling more to the grid than they take from it).
Markets are generally becoming liberalized, though this approach varies from country to country. In most places energy trading, spot markets and other forms of active energy management are in place, which makes availability the key to viability and success. Behind all of these developments is the one that sets the context for everything else.
Cybersecurity, which never used to be an issue in the industry but which is now a cause for extreme concern with governments and commercial organizations alike. Critical National Infrastructure (CNI) is relentlessly targeted by bad actors, many of them funded by governments, and the battle to keep supplies safe never ends.
Regulation, with tighter legal constraints every year designed to manage an orderly commercial marketplace, while meeting the carbon emissions targets set by governments and international bodies, without jeopardizing economic goals. Regulations must also ensure fairness and good quality service to customers, while enabling investment in new technologies and fostering adequate forward plannin
And of course, as already noted earlier, the greatest factor in driving change is the Climate Crisis, with the world still hoping to keep average temperature rises to 1.50 C, while finding it hard to agree on the actions needed to make this happen.
In an industry and market as huge and complex as this, data is the single factor that holds everything together. Creating and managing integrated data flows right across the industry enables everything from enhanced agility to better customer responsiveness; from early identification of potential issues to performance optimization.
As the industry aims to become more sustainable, efficient and carbon neutral, the need for integrated digital platforms as the foundation for systems and solutions across the marketplace becomes more urgent. In the rest of this paper we will look at how we can build such platforms, the kinds of tools we need and the potential outcomes we can deliver.