Digitalization and energy

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IEA (International Energy Agency) published the report “Digitalization and Energy 2017”. According to the research, over the coming decades, digital technologies are set to make energy systems around the world more connected, intelligent, efficient, reliable and sustainable. Stunning advances in data, analytics and connectivity are enabling a range of new digital applications such as smart appliances, shared mobility, and 3D printing. Digitalized energy systems in the future may be able to identify who needs energy and deliver it at the right time, in the right place and at the lowest cost. Digitalization is already improving the safety, productivity, accessibility and sustainability of energy systems. But digitalization is also raising new security and privacy risks. It is also changing markets, businesses and employment. New business models are emerging, while some century-old models may be on their way out. Besides, 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. This exponential growth has led to the use of increasingly large units of measurement. For example, global annual internet traffic surpassed the exabyte threshold in 2001 and is expected to pass the zettabyte threshold by 2017. People and devices are also becoming connected in ever-increasing numbers. More than 3.5 billion people, or nearly half the global population, now use the internet – up from only 500 million in 2001. About 54% of households now have internet access at home. In the last five years, global mobile broadband subscriptions increased threefold and surpassed 4 billion active subscriptions in 2017. 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 range of services and applications, such as personal healthcare, smart electricity grids, surveillance, home automation and intelligent transport. The number of connected IoT devices is forecast to grow from 8.4 billion in 2017 to over 20 billion by 2020.

Digitalization’s impact on energy
The energy sector has been an early adopter of digital technologies. In the 1970s, power utilities were digital pioneers, using emerging technologies to facilitate grid management and operation. Oil and gas companies have long used digital technologies to improve decision making for exploration and production assets, including reservoirs and pipelines. The industrial sector has used process controls and automation for decades, particularly in heavy industry, to maximise quality and yields while minimising energy use. Intelligent transport systems are using digital technologies in all modes of transport to improve safety, reliability and efficiency. The pace of digitalization in energy is increasing. Investment in digital technologies by energy companies has risen sharply over the last few years. For example, global investment in digital electricity infrastructure and software has grown by over 20% annually since 2014, reaching USD 47 billion in 2016. This digital investment in 2016 was almost 40% higher than investment in gas-fired power generation worldwide (USD 34 billion) and almost equal to total investment in India’s electricity sector (USD 55 billion).

Buildings
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, including China and India, electricity demand in buildings grew on average by more than 8% per year over the last decade. Digitalization, including smart thermostats and smart lighting, could cut total energy use in residential and commercial buildings between 2017 and 2040 by as much as 10%. It helps ensure that energy is consumed when and where it is needed, by improving the responsiveness of energy services (e.g. by using lighting sensors) and predictively with respect to user behaviour (e.g. through learning algorithms that auto-programme heating and cooling services). It enables demand response to reduce peak loads (e.g. shifting the time of use of a washing machine), to shed loads (e.g. adjusting temperature settings to lower energy demand at a particular time) and to store energy (e.g. in thermal smart grids) in response to real-time energy prices or other conditions specified by the user. It predicts, measures and monitors in real time the energy performance of buildings, allowing consumers, building managers, network operators and other stakeholders to identify where and when maintenance is needed, when investments are not performing as expected or where energy savings can be achieved.

Industry
Industry is responsible for around 38% of global final energy consumption and 24% of total CO2 emissions. With the expected continuing expansion of industrial production over the coming decades, particularly in emerging economies, the value of digitalization in improving the efficiency of energy and material use will only increase. While it is expected that digitalization in industry will continue in an incremental manner in the near term both inside individual plants as well as beyond the plant fence, some digital technologies may have far-reaching effects on energy use in certain areas, especially when they are applied in combination. In industry, many companies have a long history of using digital technologies to improve safety and increase production. Further cost-effective energy savings can be achieved through advanced process controls, and by coupling smart sensors and data analytics to predict equipment failure. Digital technologies have also had an impact on the way products are manufactured. Technologies such as industrial robots and 3D printing are becoming standard practice in certain industrial applications. These technologies can help increase accuracy and reduce industrial scrap. Deployment of industrial robots is expected to continue to grow rapidly, with the total stock of robots rising from around 1.6 million units at the end of 2015 to just under 2.6 million at the end of 2019. 3D printing can produce products in layer by layer fashion, on demand and directly from digital 3D files. It has several advantages compared with conventional manufacturing, including reductions in lead time, reduction of scrap materials, lower inventory costs, less manufacturing complexity, reduced floor space and the ability to deliver manufactured pieces with complex shapes and geometries. It can yield significant energy and resource savings under the right conditions.

Fundamentally transforming electricity via digitally-interconnected systems
The greatest transformational potential for digitalization 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 digitalization is blurring the distinction between generation and consumption, and enabling four inter-related opportunities: 1) smart demand response; 2) the integration of variable renewable energy sources; 3) the implementation of smart charging for EVs; and 4) the emergence of small-scale distributed electricity resources such as household solar PV. They are interlinked as, 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, roughly equivalent to the currently installed electricity supply capacity of Australia and Italy combined. This could save USD 270 billion of investment in new electricity infrastructure that would have otherwise been needed. In the residential sector alone, 1 billion households and 11 billion smart appliances could actively participate in interconnected electricity systems, allowing these households and devices to alter when they draw electricity from the grid.

Cybersecurity
In parallel with these opportunities, digitalization is raising new security and privacy risks, as well as disrupting markets, businesses and employment. While the growth of the “Internet of Things” could herald significant benefits in terms of energy efficiency to households and industries, it also increases the range of energy targets for cyber-attacks. Such attacks have had limited impact so far, but they are also becoming cheaper and easier to organize. To help understand and deal with this fast-evolving landscape, the report concludes with 10 no-regret policy recommendations, as sound policy and market design will be critical in steering a digitally enhanced energy system along a more efficient, secure, accessible and sustainable path:

  • Build digital expertise within the staff

  • Ensure appropriate access to timely, robust, and verifiable data

  • Build flexibility into policies to accommodate new technologies and developments

  • Experiment, including through “learning by doing” pilot projects

  • Participate in broader inter-agency discussions on digitalization

  • Focus on the broader, overall system benefits

  • Monitor the energy impacts of digitalization on overall energy demand

  • Incorporate digital resilience by design into research, development and product manufacturing

  • Provide a level playing field to allow a variety of companies to compete and serve consumers better

  • Learn from others, including both positive case studies as well as more cautionary tales.

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