Navigating the Digital Transition to the Clean Energy EconomyMedium Wednesday, December 16th 2020
What’s the role of digitalization in advancing the clean energy transition? For the latest Dynamo event, co-hosted with the Norwegian Consulate General in New York, we brought together global energy industry leaders to unpack this timely topic and to explore bottlenecks, opportunities, and latest advancements and trends in this space. The participating companies included BloombergNEF, Cognite, Con Edison, Equinor, Google, National Offshore Wind and R&D Consortium, NRG Energy, Scatec Solar, as well as innovative cleantechs BrainBox AI, Enerex, EnergyHawk, The Megawatt Hour, Opus One Solutions, and Volue.
Claire Curry, Head of Digital Industry and Climate-tech Innovation at BloombergNEF, opened up the conversation with an overview of the status of digitalization as it pertains to the energy sector, with a focus on electric utilities and renewables. Claire kicked off with the reasons why companies are rushing towards digital transformation:
– Reduces uncertainty and minimize losses in operations
– Helps to comply with environmental and safety regulations
– Generates new value and outpaces competitors
– Shifts the business model
Digitalization in the power sector in particular has been gaining momentum in recent years as the number of intermittent, and decentralized, energy resources on the grid continues to grow. More U.S. states are implementing energy efficiency and decarbonization mandates, requirements that are challenging to navigate with outdated power sector resource management, infrastructure, and other processes. Therefore, for the power sector, the benefits of digitalization are numerous. As Claire noted it can:
– Reduce operating costs
– Enhance resiliency
– Enable flexibility
– Engage the customer
– Support employee retention
What’s the role of software in decentralizing power generation?
IoT and analytics software is being adopted across all forms of power generation technology. BNEF’s research shows that wind and natural gas power plants buy the most software for analytics, and this trend will hold in 2025. While BNEF expects most utility-scale solar farms buy software for remote monitoring and analytics, the technology is relatively straightforward and less expensive than for wind or gas plants (due to their rotating parts). While battery storage energy management software is a small market today BNEF expects it to grow fast as the storage industry expands and batteries become an essential part of grid balancing.
Where is smart grid development today?
When it comes to the current state of digitalization in the power sector, some applications are much further along than others. According to BNEF’s analysis, the largest software application for managing the power grid sector today is Advanced Distribution Management Systems (ADMS). ADMS control voltage to minimize power losses on wires and use grid sensors and circuit breakers to isolate faults on the grid and restore service to unaffected areas. BNEF believes 46% of the global grid is covered by a version of such system. The smallest market size today and in 2025 for smart grid software is Distributed Energy Resource Management Systems (DERMS) that help grid operators control distributed energy resources like wind, solar, energy storage, demand-side resources, EVs, etc. Wide and rapid deployment of DERMS platforms is one way of enabling higher levels of renewable penetration while ensuring the reliability of the grid (if left unmanaged, DERs can disrupt distribution systems and undermine grid reliability).
What is the “on the ground” experience of large power purchasers, utilities, cleantechs, and renewable energy developers? Our conversation demonstrated that all these stakeholders face a mix of challenges, none of which they can overcome on their own. However, chief among them is lack of data liberalization — access to data is key for enabling more players to enter the market, improve project operation efficiencies, integrate more energy storage, balance the grid load, and the list goes on. Lack of data liberalization in the US is impeding the clean energy transition and must be addressed now to allow us to meet decarbonization goals while saving consumers’ money and ensuring grid reliability.
“Look at offshore wind projects which are enormous engineering undertakings. If you are not thinking of information-sharing and data openness you’re going to incur huge expenses that could be avoided.” — Francois Laborie, President for North America, Cognite.
What are the Key Challenges?
1. Complex US power market structure. Digitalizing the renewable energy industry and integrating it with the US electric utilities presents numerous challenges. One of the reasons is deregulated power markets where power providers, energy sources, and utility commissions vary greatly from state to state and across regions.
2. Outdated operations. Even in progressive companies in the US, internal operations and data management processes can be grossly outdated and data often is not shared even across teams in large organizations, all of which complicates the digital transition.
3. Lack of data liberalization. As mentioned earlier, data liberalization has not been embraced in the US but it is a key component for digitalization, crucial to increasing the number of renewables on the grid. New sectors rapidly coming online — like offshore wind industry — creates a lot of uncertainty for the grid. Lack of data access creates lack of predictability in operating assets and managing production outputs.
4. No standardized way to share data: Even if data liberalization were to take place, there is no standard way to store, share, or read it.
“The clean energy economy relies on markets, connectivity, and trust, and we need to have a common language and data standards. The utility sector must embrace APIs to meet the demand for customer data or risk hampering customers’ ability to self direct into sustainable energy options. Granular data exchange is still missing, and utilities are slow to move into these paradigms.” — Nate Richards, Co-Founder and CFO, Enerex.
5. Slow to change regulatory landscape. One of the reasons for the lack of data access is the disparate regulatory landscape that makes it challenging to drive change in the power sector. Additionally, data-sharing is often perceived as a threat by utilities and companies, and opening up data is not prioritized at the regulatory level.
“The data value increases as you trade and share it, as opposed to storing it somewhere hidden away from other parties, often including your own.” — Francois Laborie, Cognite.
What about the Customer’s Access to Data?
With the rapid transformation of the energy market, customers can play a key role in driving the energy transition, but haphazard data access and lack of transparency into energy usage and associated costs prevents them from actively participating in the energy market and delays the clean energy transition and emissions reduction.
“To enable the clean energy transition, we need to give customers an ability to access their usage and cost data. Smart meters are a big step in the right direction, but we have to go further. If there was one standard way to access utility meter data with permission from customers across the country, instead of going utility by utility, one customer and account at a time, we could unlock so much efficiency very quickly.” — Deirdre Lord, Co-Founder and COO, The Megawatt Hour
To drive the needle on this issue, the change has to happen at the PUC and state regulatory level, but digitalization and customer data access is not prioritized among regulators. Engaging with regulators, briefing them on customers’ needs and technological advances in this space is a good starting point. Notably, customers increasingly appreciate that sharing their data is beneficial to them, and having a trusted service provider working with customers, utilities, and regulators could be the winning solution.
Can Large C&I Customers Drive Change?
The answer is yes when you’re Google, but there are still challenges. Under its new 24×7 clean energy framework, the company is moving from global annual accounting to regional hourly energy matching. This approach significantly increases the complexity of renewable procurement, and to address this goal, Google focuses on three areas of digitalization to get there: measuring and tracking, planning and forecasting, managing and optimizing.
For all three, data is everything but accessing it at the needed levels is still challenging due to the number of involved partners and the scale of operations. Savannah Goodman, Technical Program Manager for Carbon-Free Energy at Google, mentioned solutions such as centralized data hubs (there are currently several initiatives including in Norway, Spain, Estonia) where customers or third parties who have permissions can access their load and production data through secured API. Savannah added that translating this model to other markets could be a huge win for the growth of renewables.
Why is Digitalization Important for Offshore Wind?
It’s no secret that New York State is rapidly building out the offshore wind sector, and how it is built efficiently and integrated with the grid are some of the key questions that utilities, project developers, and government are looking to digitalization to help them solve.
Carrie Hitt, Executive Director at National Offshore Wind R&D Consortium noted that they are laser-focused on R&D that would help developers effectively and reliably build and connect offshore wind in the US: “We are looking at research proposals that seek to address how data and AI can help with lowering the cost of operations and maintenance, like using drones rather than humans to access offshore sights.”
Other project development areas, such as environmentally responsible construction, safety requirements, minimization of impact on marine life — are all challenges that innovative data-based solutions help address. However, in nearly all areas the gathered data is viewed as proprietary to the developer or supplier, creating obstacles even from the research side.
“This will probably change over time but now even for research purposes projects are concerned about sharing their information.” — Carrie Hitt, Executive Director, National Offshore Wind R&D Consortium
However, several industry leaders with years of experience in energy project development know that data access is key to the energy transition and needs to be liberalized. Equinor, for example, owns enormous quantities of data from their decades of operating offshore, and makes their subsurface data from offshore oil and gas projects, as well as from the Hywind Scotland wind project, available to third parties.
“Digitalization itself is not an add-on to any project, it’s not an afterthought, it’s a core part of each development site. To realize the cost improvements, operational efficiencies, environmental deliveries we require digitalization.” — Jonathan Forde, Commercial Manager, Equinor Wind US
Ultimately, digitalization is a win-win for project developers as it allows them to create more with less, lower cost for consumers, and increase returns.
Utilities are Here to Stay if they Embrace Change…
While some argue that with growth of distributed energy sources the need for utilities is disappearing, ConEdison says that, in fact, it is the opposite. As the grid needs to take in more distributed energy resources, and as widespread electrification takes place across the state, Con Edison will be building more transmission distribution. But building transmission lines is not everything, and utilities, in fact, can be better positioned to manage the increasingly complex and dynamic grid for similar reasons to Equinor — decades of experience and large quantities of data. But leveraging this data is still the challenge.
“We have this onslaught of information and the question is how do we boil it down for the operator so that they only get what they need to know.” — Damian Sciano, Director of Distributed Resource Integration, Con Edison
… but the Pressure is On
The energy transition is not currently progressing quickly enough to deliver on climate targets, but digitalization can accelerate it. Furthermore, without digitalization, balancing the grid with high levels of renewables is going to be impossible. Now with relatively low numbers of renewables on the grid, the balancing for intermittent supply is largely done manually. However, when you have 60–70 percent renewables on the grid, you need digital tools and technology to manage the volatile energy supply seamlessly in real-time.
“It’s not the matter of “if” but “when” the renewables will dominate the energy sector.” — Pål Strøm, Senior Vice President, Scatec Solar.
Clearly, challenges to widespread digitalization of the energy sector are numerous, but the greatest adversity is the lack of data sharing. Liberalizing data access will not only create efficiencies and lower costs for consumers, it will accelerate the integration of battery storage, increase renewables penetration on the grid, and improve grid resiliency and reliability.
As Francois of Cognite noted, digitalization is inevitable and will continue but “it’s not a revolution, it’s an evolution, and the real change will happen when there’s open data-sharing.”
In the short-term, data centralization and the swift development of standards for data-gathering and sharing seem unlikely in the deregulated US electricity markets. Simultaneously, private companies’ resistance to widely share their data is not going away any time soon. However, the rise of innovative solutions that convert various data models between key stakeholders will be the next step for automated data-sharing, and an industry where we will see a rise in innovation.
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