Digital transformation ‘goes mainstream’ in energy industry

The GE-Exelon software deal highlights the potential for a broader shift in the sector.
Published: Mon 21 Nov 2016

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General Electric’s software deal with US energy utility Exelon signifies a massive change occurring in the broader electricity space.

Exelon will be deploying GE’s Predix software portfolio across its energy facilities, aimed at attaining greater efficiency from the business of generating electricity. Exelon will use GE's software and applications across its 91 power plants, which produce 32,700 megawatts and supply more than 10 million customers.

The cloud-based operating system, which has been developed to help energy companies operate more reliably and efficiently, could save Exelon up to 25% in maintenance and operations costs, while collecting tons of data to vastly improve the company’s productivity. In initial uses, GE's technology has increased power plant efficiency by 3% and reliability by 5%.

Exelon's deployment is nearly six times larger than the previous largest GE deal, signed last month with the New York Power Authority and covering 16 power plants in New York state that generate about 5,600 megawatts. Exelon will also use GE software that analyzes the company's business performance and profitability, something NYPA didn't choose, GE said. GE and Exelon also agreed to work together on new Predix-based software applications.

Ganesh Bell, Chief Digital Officer, GE Power, says the platform could be the ‘tipping point of the industry where digital transformation of electricity just went mainstream.’

GE’s digital industrial transformation in action

GE has been working hard towards establishing a robust industrial internet strategy. The recent contract marks another advance in GE's vision to increase annual digital technology revenue to $15 billion in 2020 from $5 billion in 2015, across its many industrial products.Its aim is to invest in software and technology for the industrial space, like energy and transportation. [Heavyweights GE AND Cisco back IoT with Bit Stew Systems.] More recently, GE Digital acquired Bit Stew Systems which brings its data intelligence capabilities to Predix, GE’s operating system for the Industrial Internet, and its industrial applications such as Asset Performance Management (APM). According to Harel Kodesh, CTO at GE Digital, the acquisition will enable GE Digital to “accelerate their industrial offerings, providing customers with a contextual understanding of their assets and operations.”

GE's power business accounts for 40% of GE's digital revenue and about $400 million a year is produced by GE Power's software business. This revenue continues to grow by 50% each year,

Last year, GE launched a new division called GE Digital, and built a new office in Silicon Valley, employing well over 1000 employees. GE spent $915 million to buy cloud software maker ServiceMax.

Gartner’s research director Chet Geschikter  says that GE has been working towards this vision for a while now and adds that from a market awareness and mindshare perspective, GE has taken a significant jump forward in the market.

However, with other players in the space like ABB, Siemens, and Hitachi which are all fighting for a slice of the market, it’s hard to say who will lead at this point in time since it will take a while before the rest of the industry catches up to all the new technology.

But GE certainly seems to have a headstart. It claims one-third of the power in the world comes from GE-powered machines, and having that existing customer-base, on top of its 120-year history, gives an edge that other companies may not have.

“We think the industrial market is different and it takes much more than simple data science to understand. You need to understand the physics of the machines, the operations of the industry, and that’s why we think our approach will be very different,” says Bell.

Digitisation market worth billions

According to the World Economic Forum, the electricity industry has the opportunity to harness approximately $1.3 trillion in value over the next 10 years through the digitisation of infrastructure including platforms and devices, as well as “cloud” and advanced analytics. The enhancements in condition monitoring and predictive forecasting have the potential to drive an additional $387 billion in value, says the Forum.

A paper published by the Forum in January this year stipulates that the electricity sector is ripe for realising value from rapid digital transformation. It estimates that there is $1.3 trillion of value up for grabs globally, from 2016 to 2025.

 

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