Digitalisation: a new era in energy?26 March 2018
Digitalised energy systems in the future may identify who needs energy and deliver it at the right time and at the lowest cost. But, as the IEA’s Digitalization & Energy 2017 report indicates, getting everything right will not be easy.
Over the coming decades, digital technologies are set to make energy systems around the world more connected, intelligent, efficient, reliable and sustainable. Digitalisation is already improving the safety, productivity, accessibility and sustainability of energy systems. But it is also raising new security and privacy risks, and it is changing markets, businesses and employment. New business models are emerging, while some century-old models may be on their way out.
Data are growing at an exponential rate – internet traffic has tripled in only the past five years and around 90% of the data in the world today were created over the past two years. People and devices are becoming increasingly more connected. About 54% of households now have internet access. There are now more mobile phone subscriptions (7.7 billion) than people in the world.
Everyday objects such as watches, home appliances and cars are being connected to communications networks – the “Internet of Things” (IoT) – to provide a wide range of services including smart electricity grids. IoT connection is forecast to grow from 8.4 billion in 2017 to over 20 billion by 2020. Such tremendous digital advances and their rapid deployment across the energy landscape raise a fundamental question – are we on the threshold of a new digital era in energy?
Impact on energy
The energy sector has been an adopter of digital technologies since the 1970s when emerging technologies were used to facilitate grid management and operation. Oil and gas companies have long used digital technologies to improve decision making for
exploration and production assets.
But the pace of investment in digital technologies by energy companies has risen sharply over the last few years. Global investment in digital infrastructure and software has grown by over 20% annually since 2014, reaching USD 47 bn in 2016, 38% higher than investment in gas-fired power
generation worldwide at USD 34 bn.
Digital technologies are already widely used in energy end-use sectors, with the widespread deployment of transformative technologies on the horizon, – autonomous cars, intelligent home systems and 3D printing. But while these technologies could reduce the energy drain of goods and services, some could also induce rebound effects that
increase overall energy use.
Buildings account for nearly one-third of global final energy consumption and 55% of global electricity demand. Electricity demand growth in buildings has been particularly rapid over the last 25 years, accounting for nearly 60% of total growth in global electricity consumption. In some rapidly emerging economies demand grew on average by more than 8% a year over the last decade. In the IEA Central Scenario, electricity use in buildings is set to nearly double from 11 petawatt hours in 2014 to around 20 PWh in 2040, requiring corresponding increases in power generation and network capacity.
Digitalisation, including smart lighting and smart thermostats, could cut total energy use in residential and commercial buildings between 2017 and 2040 by as
much as 10% compared with the Central Scenario, assuming limited rebound effects. Cumulative energy savings over the period to 2040 would amount to 65 PWh.
Measures to help achieve this aim would include better responsiveness of energy services, predictive user behaviour analysis, demand response to peak loading, and predicting energy performance of buildings.
Industry is responsible for around 38% of global final energy consumption and 24% of total CO2 emissions. With the continuing expansion of industrial production, particularly in emerging economies, the value of digitalisation in improving efficiency in energy and material use will increase.
While it is expected that digitalisation in industry will continue incrementally in the near term, some digital technologies may have far-reaching effects on energy use in certain areas, especially when they are applied in combination. These would include using digital technologies to improve safety and increase production, advanced process controls, and coupling smart sensors and data analytics to predict equipment failure. In manufacturing technologies, industrial robots and 3D printing can help increase accuracy and reduce industrial scrap.
Deployment of industrial robots is expected to grow rapidly, with the total stock of robots rising from 1.6 m units at the end-2015 to just under 2.6 m by end-2019.
The increased availability of low-cost sensors and computer-aided simulations
will bring new opportunities throughout the coal supply chain. For example, sensors can provide the exact status of various components of the essential equipment in real time and analytics can compare the actual configuration with the design optimum. Digital technologies, data analytics and automation will be increasingly adopted to improve productivity and enhance workforce safety and environmental performance. The overall impact, however, may be more modest than in other sectors.
Digital data and analytics can reduce power system costs in at least four ways: by reducing operations and maintenance costs; improving power plant and network efficiency; reducing unplanned outages and downtime; and extending the operational lifetime of assets. The overall savings from these measures could be in the order of USD 80 billion per year over 2016-40, or about 5% of total annual power generation costs, based on the enhanced global deployment of available digital technologies to all power plants and network infrastructure.
Digital data and analytics can reduce O&M costs by enabling predictive maintenance, which can lultimately lower the price of electricity for end users. Over the period to 2040, a 5% reduction in O&M costs achieved through digitalisation could save companies an average of close to USD 20 bn per year.
Digital data and analytics can help achieve greater efficiencies through improved planning, improved efficiency of combustion in power plants and lower loss rates in networks, as well as better project design throughout the power system. In networks, efficiency gains can be achieved by lowering the rate of losses in the delivery of power to consumers, for example through remote monitoring that allows equipment to be operated closer to its optimal conditions, and flows and bottlenecks to be better managed by grid operators.
Digital data and analytics can also reduce the frequency of unplanned outages through better monitoring and predictive
maintenance, as well as limiting the duration of downtime by rapidly identifying the point of failure. This reduces costs and increases the resilience and reliability of supply.
Improved plant lifetime
In the long term, one of the most important potential benefits of digitalisation in the power sector is likely to be the possibility of extending the operational lifetime of power plants and network components, through improved maintenance and reduced physical stresses on the equipment. For instance, if lifetime of all the power assets in the world to be extended by five years, close to USD 1.3 trillion of cumulative investment could be deferred over 2016-40. On average, investment in power plants would be reduced by USD 34 billion per year and that in networks by USD 20 bn per year.
The greatest transformational potential for digitalisation is its ability to break down boundaries between energy sectors, increasing flexibility and enabling integration across entire systems.
The electricity sector is at the heart of this transformation, where digitalisation is blurring the distinction between generation and consumption, and enabling
four inter-related opportunities, namely smart demand response, the integration of variable renewable energy sources, the implementation of smart charging for EVs, and the emergence of small-scale distributed electricity resources such as household solar PV. They are interlinked. For example, demand response will be critical to providing the flexibility needed to integrate more generation from variable renewables.
Smart demand response could provide 185 GW of system flexibility, which could save USD 270 billion of investment in new electricity infrastructure. In the residential sector alone, 1 bn households and 11 bn smart appliances could actively participate in interconnected electricity systems, allowing them to choose when they draw electricity from the grid.
Digitalisation can help integrate variable renewables. In the European Union alone, increased storage and digitally-enabled demand response could reduce curtailment of solar PV and wind power from 7% to 1.6% in 2040, avoiding 30 m tons of CO2 emissions.
Rolling out smart charging technologies for electric vehicles could provide further flexibility to the grid while saving between USD 100 bn and USD 280 bn in avoided investment in new electricity infrastructure between 2016 and 2040.
Digitalisation can help the development of distributed energy resources, such as household solar PV and storage, by creating better incentives and making it easier for producers to store and sell surplus electricity to the grid. New tools such as blockchain could help to facilitate peer-to- peer electricity trade within communities.
While digitalisation brings many benefits, it can also make energy systems more vulnerable to cyber-attacks. To date, the disruptions caused by reported cyber- attacks have been small, but they are becoming easier and cheaper to organise, while the growth in digitalised equipment is increasing the potential ‘cyber-attack
surface’ in energy systems.