The Case for Digital Transformation in the Electricity and Energy Sectors
Bottom-line - Software abstracts complexity, allowing new forms of value to be created.
Like all industries that have undergone digital transformation, the modern electric grid and the energy sector are discovering that we can shape the world around us to meet new goals – goals like supporting energy independence, mitigating climate change, and phasing out fossil-fuels. Digital transformation offers us a unique opportunity to make electric systems work better, while making previously unimagined advances possible.
As an example, the digital transformation of the telecommunications industry offers the energy sector an important window into the future. Faced with exploding demand from video, audio, and data, rather than making costly investments in new hardware, telecommunication providers are pushing the envelop of information and communication technologies (ICT) to exponentially increase the capacity of their networks to carry more bits by literally leveraging the spaces between bytes. Electricity is ripe for similar digital transformation.
Given that global energy demand is set to increase by nearly 50% in the next 25 years, to keep pace with electrification needs, innovations are necessary to do more with less. Coupled with the increased presence of cost-effective distributed energy resources (DER), new information and communication technologies (ICT), will allow the distribution grid and DER to be configured and optimized into more resilient and responsive networks of networks. The value of neural-like networks is that they can act to enhance or inhibit energy activation states making energy use more efficient, while creating overall system awareness of the network’s emergent requirements.
By enabling responsive and intelligent demand for electricity, we can accommodate peak times and be more local in nature. ICT and DER will make it possible to avoid investments in new and expensive fossil-fuel generation facilities while meeting rising energy needs, including the phasing out of the internal combustion engine and the transition to electric vehicles.
This paradigm change challenges the heart of legacy electricity, which has existed as a centralized, unidirectional, control-based industry. We can safely assume that if electricity shares the characteristics of other digitally transformed industries, it will move towards service-based products while becoming increasingly customer centric. Digitalization offers the promise of new business models structured around algorithms that integrate and harness billions of sensors and appliances, into a multitude of smart and efficient arbiters of energy products and services. A day will come when devices can negotiate real-time prices as either a load (consumer) or a resource (prosumer) of electricity, giving a whole new meaning to currency markets.
By not wasting energy and by optimizing the potential of devices, vehicles, DER, and appliances to intelligently alternate between load and resource, we can transform the demands we place on the physical grid. ICT can help us to realize radical efficiencies in the effort to meet the rising clean energy needs of the planet.