Energy 4.0: Digital Transformation In Energy & Utilities Industry
Technology has been increasingly adopted by all major industry sectors over the last several years—and the energy industry is no exception. Tech innovation is no longer associated only with replacement of paperwork with automated electronic systems. The next step is reinvention of the ways that energy and utilities companies do business, engage their customers and interact with them. And let us not forget about Energy 4.0, a buzzword used to denote the digital revolution in this industry.
Inspired by our upcoming participation in Offshore Northern Seas 2018—one of the world's top events for the global oil and energy community—we decided to spotlight the value that can be brought by the latest technology advances to energy businesses.
Industry 4.0 is a notion that is known well in the world of manufacturing. This "fourth industrial revolution" incorporates automation and data that is used for optimization of production, enhanced flexibility and efficiency within a smart factory environment. Being adopter of digital technologies since 1970s, the energy and utilities sector is embracing such emerging innovations as the Internet of Things, Data Science, and cloud computing. The digital revolution—referred to as Energy 4.0—involves these advances to build smart grids, manage renewable energy and distributed generation.
Simultaneously, hardware manufacturers and software development companies have been gathering experience in creating and integrating business-driven solutions with huge corporate systems, with an emphasis on internal reliability and ecological safety. As of now, with costs decreasing and technologies growing at an exponential pace, digitalization presents opportunities for Energy 4.0 companies to establish new business models and sustainable strategies of producing and delivering energy.
The Internet of Things in the energy sector
The IoT sector is expected to reach a global market value above $22 billion by 2020. One of the main drivers here is digital transformation of energy sector operations. In mining, oil and gas industries, Internet of Things solutions incorporate machines and data analysis to achieve the requirements to operational efficiency, set forth by energy businesses. Actionable data helps to improve decision-making, reduce vulnerabilities and risk factors. Their supply chains are also increasingly influenced by the digitalization, which positively affects related industries as well.
A variety of solutions have been deployed in the last 5 years. Drones and IoT sensors are used to inspect facilities and lines. Smart grid meters provide up-to-the-minute data regarding demand for oil, gas, water and electricity. IoT devices also can monitor changes in temperature, moisture and vibrations, making it possible to prevent equipment failures and increase human safety.
The opportunities are rather boundless, and the future of IoT in this sector will be defined by energy businesses and software development companies that build these pioneering solutions and introduce them to the market.
Digital twin technology
Digital twin technology ranks among the top strategic trends, and has been adopted by an ever widening range of industries since its original development by NASA. A digital twin is an advanced duplicate that models a real-life object or process without replacing. The digital twin, by using information gathered from IoT systems attached to its physical twin, allows an organization to monitor key performance indicators. The goal is to feed the data into machine learning systems that can then alert operators to potential issues, expects costs and the advantages of available options for fixing the situation.
According to a Gartner survey, about half of operations running IoT systems are currently using or intend to deploy digital twin technologies in 2018. By 2020, it is expected that 50% of manufacturers with revenues of more than $5B will have at least one digital twin system in place. BP, for example, employs digital twins to model new oil field production. GE has more than a million digital twins deployed, keeping tabs on more than 70% of the jet engines currently being utilized throughout the world. These processes will also find greater currency as the smart factory trend advances.
Smart energy as a part of smart city
Increased urbanization globally has made cities ground zero for the re-examination of environmental policies. By deploying IoT technologies, smart cities intended to increase quality of life while lowering energy consumption. Businesses, policy makers and entrepreneurs in cities will work together to see that urban areas play their part in the energy revolution.
78 European cities have banded together to develop protocols for digitalization of energy sector operations in smart cities. The effort is called the Smart Cities and Communities European Innovation Partnership, and EIP-SCC intends to hit a target by the end of 2019 of 300 smart cities using its approach.
Eventually, utility companies will plan to work with these initiatives in creating a vision of smart cities and smart infrastructures. This includes reviewing assets and capabilities in order to provide services within the emerging business model. Processes must be put in place to ensure that public-private partnerships deliver shared value to citizens and stakeholders. This includes being serious about attracting businesses and cities to programs, vetting ideas, and building sustainable business models.
Distributed energy resources
By 2022, it is estimated that Europeans will be able to self-generate and store power at about the same cost as when they purchase it from providers. In the world of wide DER adoption, the energy sector may be revolutionized, with customers gaining more control of energy use and possibly supplanting the traditional grid infrastructure.
Large companies are moving into the energy sector, with Walmart, Google, Amazon and Apple all showing interest. In 2016, Google established a goal of offsetting all data center and office electric consumption with renewable energy within a year. In Europe, a shift in regulatory pressures has led to an uptick in renewable energy and carbon reduction. By 2050, $67 billion in utility revenues may be at risk due to distributed solar generation in Europe. Top companies enter this sphere to increase cost savings, as well as to support green energy and initiatives concerning climate change.
In this situation, utilities should concentrate on building flexible and collaborative business processes that is capable of adapting to new business environments, employing the newest technology to stay ahead of the competition.
Blockchain and smart contracts
Blockchain technologies, particularly smart contracts, have the potential to make end-to-end delivery of energy simpler and more efficient. This includes accounting for emissions and guaranteeing that energy supplies actually came from the sources attached to the contracts. Executed trades can be automatically confirmed and recorded in the blockchain, significantly reducing delays and the costs of settlement. Emerging markets could use blockchain to acquire financing, enable transactions and promote transparency.
Blockchain technologies are still maturing and not presently robust enough to support large markets. Yet production-ready frameworks keep emerging—for example, you may check our recent blockchain demo created for the sphere of logistics and transportation. Its main principle works across multiple industries—including energy and utilities—delivering such benefits as automation, security, and auditability.
All of these ideas and opportunities are expected to surface at ONS 2018, where our team will take an active part among industry innovators and major energy and utilities companies—and we will gladly share the results of this conference on our blog. So stay tuned, and please do not hesitate to contact us with any questions!
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