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Digitization in the energy sector - what’s really happening on the road to Net Zero
 (and who's paying for it?)

Chris Middleton Profile picture for user cmiddleton June 19, 2023
Summary:
If cloud-based systems are a key destination on the journey to Net Zero, who should be paying for them?

energy

Few industries have been in the public eye as much as the energy sector over the past 12 months. Against a backdrop of soaring bills and power cuts, companies’ elevated profits have stoked public and business anger, with many users struggling to make ends meet.

Our interview with HCL’s Head of EMEA, Ashish K Gupta, suggests that some energy giants have been ploughing their inflated profits into large-scale digitization projects – moves that they would not have made without that cash, he believes.  So, just how is digitization affecting an old-economy market like energy, including oil and gas? That was the focus of a techUK event last week. 

Dhara Vyas is Deputy CEO at trade association Energy UK, which represents over 100 companies that, together, produce 95% of the energy supplied to UK homes and businesses. The sector invests £13 billion ($16.6 billion) annually and delivers nearly £30 billion ($38 billion) in gross value, she explained.

Vyas set out the urgent need to get to grips with new technology:

[Our members are] working in flexible aggregation, EV charging, emerging services, de-carbonization, and much more. What unifies them is they're all going to have to modernize and figure out how they can support people’s homes and businesses to meet the Net Zero [2050] target.

She then put forward a rather different perspective to the mainstream media’s focus on colossal energy-sector profits and customers being forced to choose between ‘heat or eat’. If Vyas is to be believed, it has been more a case of ‘pity the poor energy giants’:

All of our members and companies right across the industry are operating in unusual circumstances. COVID had a huge impact on our sector, and straight after we went into energy price prices, gas price rises, and wholesale rises. This led to a number of supplier failures, which led to increased bills and a huge political and media spotlight. 

We also had the [UK] energy generator levy, a windfall tax on excess profits. So, it's been a really tumultuous political, media and public space, which has impacted on the security of supply, and on cost, and on the complexity and resources that have been required.

As a result, data and digitization projects have effectively been put on the back burner, especially since the Energy Data Taskforce made their recommendations.

She added: 

That's not me trying to paint a picture of doom and gloom, because I think the sector has seen a lot of practical applications for data and digitization in recent years. But the operating environment matters.

No doubt. Even so, this tale of energy sector woe sits uneasily alongside many companies’ record profits, and customers’ struggles to power their homes and workplaces. To suggest that the security of supply has been affected by the windfall tax at a time of national hardship for millions might seem like a bad-faith argument to many. 

Net Zero

That aside, how will digitization help providers reach Net Zero? Vyas explained:

How we move forward is going to be really key as we try and hit the 2050 target. But we've got more consumer data than ever from smart meters. Over 50% of households have one now, and the applications will only get better with the advent of smart EV charging, and other demand-side technologies and network monitoring.

As technology becomes cheaper, it makes more sense than ever to monitor the state of networks, and the flows on the networks, because right now oversight across the system is poor. 

Plus, we’ve got an Energy Bill going through [the UK] Parliament, which should see the introduction of a future System Operator. That will make a big difference in this space.

Fair enough. But some might be surprised to hear all this from such a wealthy sector. One reading here is that energy companies of every kind have made too few efforts to modernize in the past, and so lack vital insight into the efficiency of their often-analog systems. Vyas continued:

Also, I think that the customer experience cannot be over-promoted. We live in a world that's increasingly connected. And it's really important that the energy system moves from being one of the last big things that's analogue to be digitized. The approach to customer service should be simpler and easier and give people better outcomes in a more digitized world.”

She added:

It’s a similar approach on asset registration. It's complicated to do that, as there's not really a common understanding of what energy assets are, where they are, what they're capable of, or of matching local supply to demand and reducing costs. There's so much potential in that space for better understanding of assets across the system.

On the subject of which, Simon Bennett is Director, Innovation and Incubation, for industrial asset software company AVEVA. He outlined a number of case studies where energy companies have used digital tools to help them manage their assets better. But first, he noted:

There’s a feeling of hope around how we can accelerate the energy transition and digitize our businesses...We see energy transformation through three lenses: current energy-system de-carbonization, transition accelerators, and new energy frontiers. 

Bennett pointed to a number of use cases to back up his points: 

From a de-carbonization point of view, a customer of ours, [petroleum refinery giant] Reliance Industries, has used process optimization as a way of managing their energy consumption, and they've saved $12.2 million in annual energy spend. 

One of their biggest challenges was they had a misalignment in their cogeneration plant. They had more energy produced and consumed than planned, which caused them huge energy over-costs or overpayment.  So, we helped them clarify some of their business subjects and to link KPIs to those objectives, then provided them with a platform of sensing technologies, data streaming devices, and tools to give them the data they needed to visualize that across two different operating groups. They told us this helped them understand where they were losing money, and that put them in control of their own energy usage.

Meanwhile, [US energy supplier] Dominion Energy has been using our data hub solution to share energy renewable information via the cloud to increase speed to market for most of its wind farms, helping with its own increasing energy transition. 

And EDF have around 39 million customers. One of its biggest issues was brand management, because of severe recent machine or network failures. But EDF didn't have the capability to detect or provide early warning of future failures. So, it resolved to create five monitoring centers to monitor over 300 fossil, nuclear, and hydro plants.  he system allowed EDF to visualize all of the information from across that fleet [sic]. On top of that, it layered predictive analytics solutions. 

Flipping to a different type of technology, [oil, gas, and electricity company] Total wanted to provide its employees with realistic virtual learning environments. So, it deployed six cloud-based operator-training simulators, which we layered on top of Microsoft's Azure platform. Using these, Total created a full simulation of its petrochemical facility, providing highly effective training in a safe environment that was identical to its control room.”

Tech 

Bryan Hill is a Technology Strategist at Microsoft, working with the energy sector. He said:

From Microsoft’s point of view, it’s very much about focusing on early-stage technologies. and how energy companies can align them against their goals and strategies.

If you work for an energy company, your focus will be on your particular objectives, and your role in the business. But if you work for a technology company, you have a great view of the technologies coming through, but not necessarily an awareness of how they can be exploited. So, by bringing different people together from the energy industry, the technology sector and other partners, that's how you create real innovation.

He added:

There was a McKinsey report last year that highlighted the supply chain risks around Net Zero ambitions. [It noted that] to build all this Net Zero infrastructure, you have to understand if you have enough raw materials. Have you got the right manufactured items, and do you have the skilled workers to deliver it? 

But if we start to invest in the right manufacturing areas now, then we can start to mitigate the risks that could happen in the future. So, the ability to do long-term modelling and prediction around supply chains gives energy companies a huge benefit in mitigating future risks.

All this talk of simulations, digital twins, predictive analytics, and asset monitoring suggests that AI would find a natural home in the energy sector. And that is the case, explained AVEVA’s Bennett:

We've been using AVEVA AI solutions to increase customers’ operational efficiency, giving them up to 30% lower energy usage.  We're helping them to improve their IT equipment use, in partnership with Microsoft and Amazon. This has helped them reduce their spend, increase their committed uptime, and increase their carbon efficiency and use of resources through predictive and prescriptive operations. And to manage carbon emission reductions through collaborative and remote working.

Then he added: 

The technology already exists in many areas to massively improve the energy sector, in terms of efficiency and de-carbonization, and the transition to new energy techniques. But the digitization of the energy sector is a prerequisite for creating digital twins.  We believe that more focus should be put on enabling these businesses to achieve full digitization, and therefore to create capacity in their businesses to work on new science and tech.

My take

An interesting discussion which suggests that energy players are actively working towards digitization as stage one on the journey to Net Zero. But they do also appear to expect their customers to pay for it, rather than eat into their usual profit margins...

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