What does digitalisation mean for the energy market?

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11 Jan 2022
5 min read
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Development and Future of Digitalisation

Introduction to Digitalisation Transformation

Imagine this: you live in a world where the majority of electricity generated in the city is renewable. All roofs are equipped with photovoltaic panels, enabling electricity consumers to become independent electricity producers. Imagine a world in which energy supplies are decentralised, and energy suppliers are not forced to rely on middle men to sell electricity. All the aforementioned processes are quantified in real-time. It’s something of a rose-coloured future, wouldn’t you say? But this world is, in fact, a not-so-distant reality. As digitalisation technologies begin to drive change in the energy sector, the electricity market is about to witness some serious changes.

Over the past 15 years, digitalisation has been the driving force behind rapid change in many commercial sectors, enabling greater productivity, as well as access to unparalleled sums of information. For the energy sector, the process of digitalisation and the change that it will bring has just begun.

But what is digitalisation? What does it mean for the future of the energy market? How can digitalisation push us towards that rose-coloured future, where energy is decentralised and producer are independent?

Relationship of Digitalisation and Energy Market

What is digitalisation?

Digitalisation (similarly known as digitisation) can be thought of as the process by which knowledge assumes a tangible form.

What could digitalisation mean for the future of the energy market?

The increase in renewable energy resources has given birth to a little something called distributed energy resources (DER). You can read more about this phenomenon in Clean Energy Council’s 2016 report

Unlike conventional distribution networks, which favored a unidirectional flow from an energy source to its user, DER-distributed energy systems allow bidirectional flow between two parties. These systems make it possible for more people to sell electricity from their homes and businesses.

At inavitas, we have worked with multiple distribution companies, investors, and EPC/O&M companies to monitor the distributed energy resources, for the purpose of managing their performance, as well as the effects that said resources have on the electricity distribution networks. We have considered all the ups and downs of digitalising — among other things — the electricity distribution sector. The entire ordeal certainly raises questions about the ethics of the digitalisation process, as well as the wider effects that it may inadvertently have on the electricity distribution sector. We could talk for

hours about all the possible realities that might evolve from the digitalisation process, but let’s scale it back a bit to what the process of digitalisation actually begins with.

The digitalisation process begins with the transformation of data into knowledge. It requires the cooperation of data, machine learning, and artificial intelligence, which — in turn — is made possible through use of IoT-based systems. Blockchain and Distributed Ledger Technology are also important players in the aforementioned process.

How is data transformed into knowledge?

The digitalisation of information is nothing new: it’s at the crux of most management services — especially in the electricity distribution sector, where data can be received via a network of communication technologies.

Consider this scenario: there’s a power outage in your neighborhood. You call your electricity distributor for answers. A robot takes your query, and moments later, you are informed of the interruption in your area.

From a consumer perspective, the process may seem simple: They call a customer service number, and a robot tells them what’s what.

In reality, the process is a bit more complicated:

  • First, the caller’s dilemma has to be processed and turned into tangible knowledge by a Customer Information System (CIS).
  • Information regarding the instant failure is gathered from the field and relayed to the robot by an IoT-based system. Regional information can also be gathered from the field and relayed using a Geographic Information System (GIS).

In this way, knowledge can be made tangible. These systems transform the gathered data into information that can be communicated to one another behind the scenes, to consumers, or to an O&M team to act accordingly.

How are consumers driving the need for digitalisation?

What drives change in any digital system — such as the one described in the previous such — is customer expectation. Customers expect from their electricity supply services what they would from any other service: independence and flexibility.

Independence and flexibility of purchase used to mean that you were able to easily buy electricity from any electricity retailer. Thanks to the existence of renewable energy resources (particularly solar energy), however, the production of the electricity is slowly becoming decentralized.

Now, independence and flexibility mean that you can produce energy from the roof of your own home, and have the ability to sell it, use it, or store it as you please. So you see, consumers can experience independence from the grid, and flexibility in what they want to do with their electricity.

How can digitalisation push us towards our rose-coloured future?

The rapid development of technology, coupled with customer expectations, has led to a new and upcoming energy distribution network: Australia Grid 2.0! This new distribution network will accommodate our shift to renewable energy. The use of digitalisation technologies — intelligent devices, smart software, and machine learning, for example — will be at the helm of this transformation. They will push us towards that rust-colored future, where distributed energy resources are decentralised, and suppliers are independent.

What problems and opportunities will Utility 2.0 create?

This new era will give birth to new business models and disrupt the operation of electricity distribution systems that are not independent of their physical infrastructure. Unfortunately, there are many layers to the preparation process, and many stakeholders are at risk in each layer. Learning how to make the most of Grid 2.0 will take some time.

A future where DER are digitalised raises questions about the ethics of digitalisation, and its effects on the processes, operations, and business models of producers, consumers, retailers, and distribution companies within the electrical sector. The scope of concern extends beyond those immediately affected by the digitalisation of the energy sector, and raises questions its effects on distributed production and electric cars, for example.

That being said, digitalisation technologies will be crucial in the shift from the conventional grid to Utility 2.0. It will also play an important role in overcoming key challenges associated with this process. Still, the benefits will outweigh the detriments, according to this BNEF report  which speculates that the market size may be worth $64 billion by the end of 2025.

The digitisation of the energy sector will certainly be a driver of change — especially as we move towards that rose-coloured future in which Grid 2.0 becomes our reality. If you would like more information on what lies ahead, or are keen to chat about our personal vision for the future, please visit our website inavitas or contact us info@inavitas.com.

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