Digital molting electricity

The digital transformation of the electricity sector


"The future of energy will be digital and connected," said KPMG in a recent report. recent report. And it is undoubtedly the electrical sector that will undergo the most important transformations. In this sector, digitisation refers to the generalisation of information and communication technologies (ICT) throughout the entire production chain: smart grids and meters, energy solutions and the use of renewable energy sources. cloud computing (which concern mobile applications for energy management), use of ICTs for power plant operation and grid load management.

GEM and ZEW (the European Economic Research Centre) conduct a bi-annual survey of energy market experts from industry, science and public administration in France and Germany. Here is an outline of the latest one barometer "In the summer of 2016, we will focus on the digital transformation in the energy sector.

En the case of France, 58 % of the experts interviewed believe that the level of progress in the digital transformation of the electricity sector is close to that of other Western countries. Our German neighbours, for their part, believe that the level of digitisation in Germany is adequate, if not high. On the other hand, the majority of French and German experts agree that the speed of this transformation is too slow.

Economically viable technologies?

The survey reveals that several factors are hampering the digitisation of the electricity sector. The main obstacle concerns an unfavourable cost-benefit ratio.

Take the smart grid For example, several deployments have been carried out around pilot projects such as Issy Grid, Nice Grid or Greenlys in Lyon and Grenoble, among others.

Although the state of the art of the technologies is not questioned, they are evaluated on small-scale projects and their maturity for larger scale deployment is often questioned. The Commission de régulation de l'énergie, which is responsible for ensuring the proper functioning of the electricity and gas markets in France, also suggests organising a gradual deployment in order to have better control over costs and to be able to take advantage of learning effects.

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In France, the regulatory framework is pointed out as the second most important obstacle to digitisation in the electricity sector. This result echoes the feedback demonstrators that argue that the regulatory framework does not allow the benefits of these technologies to be monetised and made economically viable.

Due to rounding, figures may not add up to 100 %. Energy Barometer (GEM, 2016)., Author provided

Cyber-threats worry

Cybersecurity is also seen as an important lock. In fact, German experts consider that in Germany, cyber threats are a more important blocking factor than the regulatory framework. Concerns about data security, and privacy in particular, have been raised in the wake of the ongoing digitisation of the economy.

For example, 97 % out of the top 500 US companies in terms of turnover have acknowledged having been victims of at least one successful cyber attack incident. In the energy sector, it is true that power grids have long relied on ICTs to transfer the data needed for good network management, often through closed industrial networks.

However, as more equipment becomes interconnected, often relying on technologies such as the cloud computing or Internet Protocol, the entire system becomes more vulnerable to cyber attacks. We remember in particular theUkrainian episode end 2015 during which two energy suppliers were the victims of cyber-attacks causing power outages in the west of the country and plunging some 700,000 people into darkness.

Finally, the French experts raised two other blocking factors. First, the centralized, semi-monopolistic nature of the network, which diminishes the willingness of established firms to embrace change. Second, issues relating to thesocial acceptance have also been mentioned, in particular with regard to the deployment of smart meters.

As in other countries, concerns in France relate to privacy (anonymity of data and espionage), as well as the harmfulness of radiation.

How to manage the transformation?

Given the importance of the "cyber-security" brake on the digital switchover in the electricity sector, it is natural to ask how to manage the digital transformation.

Should we focus on technical aspects and support the introduction of ICTs into the power system or should we first and foremost ensure that cybersecurity is preserved?

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In France, experts are currently divided on the stance taken so far. 21 % believe that the emphasis has been placed more on digitization and a roughly equal share of 23 % believe that, on the contrary, cybersecurity has been favored.

The largest share of respondents (39 %) responded that the electricity industry has followed a balanced approach between the technical aspects of digitization and the preservation of cyber security.

For Germany, only 16 % of the respondents felt that cybersecurity had been given priority. 27 % think that the focus was on digitization and 26 % think that a balanced approach is being followed.

Balancing supply and demand

The digital transformation, although challenging, is also a potential source of power system optimization.

French and German experts agree on the areas in which the digital transformation will produce the most efficiency gains. Leading the way, with 21 % from the French experts and 20 % from the Germans, better predictions for network load management.

Network operators have to adapt to increasingly decentralised power generation which creates challenges in balancing electricity supply and demand and digitisation is clearly seen as one of the solutions.

16 % of the French experts and 17 % of the German experts also believe that it will be possible to better distribute electricity production. Gains are also expected with regard to operational procedures such as invoicing for 11 % of the French experts and 16 % of the German experts.

The paradoxical positioning of the consumer

Digitisation should also benefit consumers. For example, 18 % of the French experts and 19 % of the German experts anticipate greater flexibility in industry among the regions benefiting from digitisation.

However, as far as households are concerned, less than 10 % of the French experts and 11 % of the German experts think that they will benefit from greater flexibility. These results highlight one of the paradoxes of the digital transformation in the electricity sector. On the one hand, the fact that the expectations of end consumers are changing is often mentioned as one of the factors driving the digitisation of the sector.

Indeed, some people are asking for more information in order to better control their electricity consumption and thus reduce their bills and their environmental impact. In addition, many people produce their own electricity and are increasingly moving towards self-consumption of energy, a trend that creates new needs in terms of energy services.

On the other hand, there are doubts as to whether all consumers will be able to take full advantage of the introduction of digital technologies.

Cross-sectoral benefits still isolated

Finally, one might have expected the experts to point to benefits in connection with the connection of the power generation chain with other sectors. However, this is not the case and only 9 % of the French experts and 12 % of the Germans anticipate benefits.

The advent of new technologies such as electric vehicles, the power to gas (e.g. conversion of electricity into hydrogen), or methanation, connects the electricity sector with other sectors such as gas, transportation, and waste management.

This calls for more integrated cross-sectoral digital management. The fact that these technologies are for many immature and still not widespread could explain why few experts anticipate benefits at this level.

Anne-Lorène VernayLecturer in strategy, Grenoble École de Management (GEM), Joachim SchleichProfessor of Energy Economics, Grenoble École de Management (GEM) and Laurent JavaudinLecturer in management, Grenoble École de Management (GEM)

The original text of this article was published on The Conversation.


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