International consulting and engineering company Pöyry is working with a number of system operators and solution providers on digitalisation projects. For example it recently partnered with Nokia and Infosys to build an artificial intelligence framework for industry, utilities, transportation and infrastructure organizations known as KRTI 4.0™. Engerati speaks to Pöyry’s chief digital officer Stephen Woodhouse about utility sector digitalisation and the implications of this evolution for energy companies.
E: What is digitalisation and how is it different from digitisation?
SW: Digitisation is turning analogue information to digital, eg scanning photographs or converting VHS and vinyl into MP3 and MP4 files.
Digitalisation is a combination of new data, new visualisation and analytical tools for decision-making, and automation. In a sense it is nothing new – todays work force (mainly) started in the era of universal desktop computing – and to date in the energy world it has largely been about improving efficiency. But in energy, as in other industries, it has the potential for far deeper transformation. Firstly to unlock deep decarbonisation by harnessing flexibility from millions of consumer devices and cars to balance renewable generation. Secondly to transform the relationship between customers and energy providers.
E: How will digitalisation change the way power suppliers deal with their customers?
SW: The possibilities are endless. Imagine a world where you buy an appliance from a well-known retailer, and there is a box to tick to buy 12 months electricity supply for your washing machine, which would be sub-metered. TenneT in the Netherlands already does something like this, and Elexon has been consulting on having multiple retailers at one house. You could offer a discounted rate if the supplier can manage the flexibility, or if they sign up to a membership service and home hub like Amazon Echo and prime, so they could have a million washing machines to balance demand and supply. It’s all part of bundling services together. Just a what if? Tesla gave away free electricity for life with a new car back in 2014, which was fantastic marketing.
What if when I plug in my car I tell it to find 25 kWh before 7am and it negotiates a contract and finds the best supplier?
Will customers be willing to pay more for their power supply if someone else can find a way to package it in a more appealing way? The truth is we have got no clue how customers will behave in the future but we have to be prepared for the fact someone else could come and do it.
E: How should companies approach the increased cyber security risks?
SW: At the moment people are decentralising control but there isn’t a full understanding of how much vulnerability is opening up. There are basically two forms of defence: put everything you value behind a high wall – ie build a castle. Or the other is to build different cells, have a mechanism that isolates one from the other like a spy network. Either could work, but the trouble is we are decentralising without isolating. We’ve adopted the decentralised model but the walls are not high and the cells are not independent. And the walls can never be high enough. There’s no way you will ever defend yourself against hackers. It’s a war.
E: How are major energy companies adapting to this disruption?
SW: Digitalisation is fundamentally about change. It’s about people it’s not about technology alone. Energy companies are adopting digitalisation enthusiastically, but the workforce, attitude and working practices are only changing slowly. But even if the companies transform, will their customers accept it? Many companies lack a proper understanding of their customers’ preferences.
E: What will differentiate successful digital start-ups from unsuccessful ones?
SW: Firstly luck! And secondly being able to capture a wave of customer acceptance at the right time: if it’s adopted too early it won’t work. You’ve got to have the right product at the right time. It’s ultimately about understanding the problem that customers face and not about being wedded to a particular solution.
E: Which parts of the energy value chain will change the most as a result of digitalisation?
SW: The jury’s out but potentially retail. Retail has the most potential for change. Getting the customer to give flexibility back to the system – it goes beyond the grid edge and behind the meter.
E: What are energy company CEOs most concerned about?
SW: CEOs are concerned about the profitability of their assets. They are still largely focused on assets and not customers, and that’s the alarm bell. The issue is assets are money for today and customers are (potentially) revenue stream for the future. If you look at Centrica and its new customer-centric focus, it’s being punished on the stock market. Customers (and investors) are not yet ready for the new relationship.
Lots of customers are installing solar panels, and even batteries. Some people are willing to pay more for their electricity but they’re paying it to someone else than an energy company. Maybe they want their own electricity and not someone else’s. You’d better be worried.
E: Can you tell us anything about your AI project with Nokia and Infosys? What are the possibilities for AI for the energy sector and how should utilities approach these opportunities?
SW: We are in discussion with many clients and a number of firm proposals are already in progress. KRTI4.0 will allow for a better grip on asset management in general: life-cycle costing, risk, informed decision-making and increased awareness of the organisation of the asset status. Risks are understood and classified better through modelling and understanding the potential failure and consequences in a wider perspective of the system. Proactive risk management, more efficient maintenance: improved data connections and security and many other applications.
The key distinguishing factor is that we start with an assessment phase, in which the critical assets are identified and the efforts are put to places which bring most value added to the client. One day, computing power will be infinite and communications will be free, but for now we need to apply the 80/20 rule to prioritise the sensors and data analytics to deliver a manageable solution.