Transforming utilities with digital power
Many regional utilities are embracing the digital revolution as massive opportunities await those able to transform themselves ahead of the curve. As the transformation builds momentum, it should open deeper prospects for smart solutions providers
New industry realities are pushing regional utilities to reassess their positioning for the digital future in a world of fast changing consumer tastes and ubiquitous interconnectivity.
A new generation of utilities’ customers has enthusiastically embraced technology such as mobile internet and social networking, which enables them to be connected 24/7.
This trend in technology is already creating new demand, with customers seeking to create their own microgrids, generate their own energy and trade it with each other to balance supply and demand across their communities, and even make a profit while they are at it.
The challenge now for regional utilities is what they ought to urgently do in order to stay relevant. Utilities are already navigating a course through a changing landscape with the ongoing push for smart grids, rooftop solar, energy storage, connected homes and businesses as well as operational efficiency.
“In most parts of the world, mobile, social and web interfaces are giving customers a better view of their energy use and are enabling richer two-way communication between the utility and customers,” says Alaa Elshimy, managing director, Enterprise Business Group, Huawei Middle East.
“They are also improving utilities’ abilities to test and deliver new capabilities such as customised rate plans based on individual customer usage and needs. The challenge is how this trend can be fully entrenched in the region.”
Increased use of data and analytics in the energy sector could save power companies close to $20bn per year and also save $270bn of investment in new electricity infrastructure, according to one of the conclusions of a new report on digitalisation from the International Energy Agency (IEA).
The report, Digitalisation & Energy, states that digitalisation was blurring the lines between demand and supply, adding that digital technologies are set to transform the global energy system in coming decades, making it more connected, reliable and sustainable. This will have a profound and lasting impact on both energy demand and supply, says the report.
It also predicts that more than one billion households and 11 billion smart appliances could participate in interconnected electricity systems by 2040, thanks to smart meters and connected devices. “This would allow homes to alter when and how much they draw electricity from the grid,” the IEA says, adding that demand-side response in building, industry and transport could provide 185GW of flexibility, and avoid $270bn of investment in new electricity infrastructure.
With the help of smart thermostats, the IEA report finds that smart lighting and other digital tools, buildings could reduce their energy use by 10% by using real-time data to improve operational efficiency.
The ongoing digital transformation within the region’s utilities industry has over the past few years progressively attracted a wave of international solutions providers who are now giving priority to developing solutions tailored to the utilities sector.
China headquartered technology company, Huawei, says one of its key areas of focus during this year will be the utilities industry, besides public safety and as oil and gas.
“Utilities is a very strategic industry for Huawei. We want to leverage our products, solutions and expertise to support the industry’s digital transformation efforts,” says Elshimy.
“The core of our strategy is that we do business driven infrastructure ICT. So we don’t just go drop boxes, but understand the industry, its challenges and initiatives for the future. We then take these initiatives and translate them into ICT solutions to help utilities moving away from the traditional way of doing business to a digital path.”
“The primary objective is to make the network and the business smarter, faster, and easier to manage from an operation and management point of view. This would definitely reduce cost, increase efficiency and availability of the network and also increase customer satisfaction.”
In order to effectively push for digitalisation, Elshimy says that Huawei has had to rely on three building blocks; cloud, transmission and devices.
“You basically need a convergence of data analytics, transmission network and sensors that allow information to be collected from the cloud and transmitted across the network. Through machine learning algorithm, the network can control and monitor itself for any faults or where lines need to be swapped,” says Elshimy.
Elshimy says digital solutions are enabling utilities to have full visibility of the entire electric power eco-system, right from generation to the end-user point, without having to overhaul their existing physical infrastructure.
He adds that Huawei has invested more than $500mn in the manufacture of proprietary chips through its 2012 Laboratories. The chips are enabled with artificial intelligence (AI), and can be integrated into meters to make them smart.
“We work with meter companies, we insert our chip into their meter to convert it into a smart meter, and then the meter become smart. We are not doing only the connectivity, we have also worked with meter companies to make this chip for them,” says Elshimy.
“These chips come in different types depending on the type of communication, whether WiMax, WiFI or direct connectivity. We provide all options for all types of communications to connect all kinds of meters via gateways, all this at the end is connected to the utility company and then linked to a customer relationship management (ERP) programme.
“The utility is able to determine every user’s consumption and their available balance. The utility is also able to detect power theft where there is a significant contrast between the power generated and that sold to the final user. The system can be programmed to automatically shut down whenever such anomalies are detected.
“By deploying digital automation solutions, utilities are also able to prioritise power supply to areas or facilities that require more power at specific periods during the day without affecting other power consumers. This makes it easier to control distribution, reduces operational and management expenses, controls production and boosts customer satisfaction,” says Elshimy.
Huawei is already working with seven out of the top ten utilities companies in the world. The company is already engaged by 190 power companies in more than 73 countries to integrate these solutions.
As power demand in the GCC reaches unprecedented levels, regional governments are rapidly embracing renewable energy and have set ambitious targets that will see renewable energy contributing a significant share of their power generation sources.
Besides the solar photovoltaic and concentrated solar power (CSP) power plants being built in the UAE, Saudi Arabia and Kuwait, rooftop solar is also rapidly taking off, allowing individuals to generate their own power. Nearly 100GW is expected to be generated from renewable energy sources in the GCC over the next few years.
While an increase in decentralised energy generation comes with its own benefits in terms of enhanced power supply, the challenges of power intermittency due to lack of adequate energy storage are common and can only be addressed through a robust smart grid infrastructure.
“Millions of people depend on electricity for almost every aspect of their everyday lives. It is therefore extremely important to ensure availability, reliability and efficiency” says Claudio Facchin, president of the Power Grids division, ABB.
“It is a top priority for every utility to have a dependable transmission grid and distribution network by deploying world-class technologies and driving innovation with the help of the technology providers.”
With end-to-end transparency of distribution and transmission, utilities and operators will be better able to understand both grid performance and customer behaviour. That insight can be used to optimise OpEx (operational expenditure) and CapEx (capital expenditure) and create new business services.
“The challenge will be not just to gather and secure data from a hugely diverse range of sources, but also to make sense of a wide variety of structured and unstructured formats. Moreover, it’s not just the quantity but the quality of data that counts.” says Facchin.
According to a recent Transparency Market Research report, by 2018, the global market for smart grid technologies, which includes sensors, management and control technologies, communication networks, and software, will be worth $80.6bn, a growth of 28.7% from 2011. By 2020, the global smart grid market is forecast to exceed $400bn.
As power grids evolve, they must be capable of adapting fast to rapidly fluctuating conditions, serving a complex power generation, supply and demand landscape. This will rely on digital technology at a deeper level in electricity substations than ever before.
The approach is already central to Dubai Electricity and Water Authority (DEWA) for its research and development drive at the Mohammed Bin Rashid Al Maktoum solar park, where the operator is conducting research to integrate smart grid technology and enhance the production and efficient consumption of energy.
Digital substations will be a key component of next generation grids as they enable smarter power systems, adds Facchin. This innovative technology concept supports the digital transformation of the power sector. They will incorporate digital communications via fibre optic cables, replacing traditional copper connections using analogue signals. They will also enable greater flexibility, availability and safety, while reducing cost, risk and environmental impact.
Digital substations will also feature Intelligent Electronic Devices (IEDs) with integrated information and communication technology. An IED is a microprocessor-based protection and control device for power equipment, such as circuit breakers, transformers and capacitor banks.
The increasing amounts of data available in a digital substation will also enable more sophisticated monitoring, diagnostics, protection and optimisation of assets.
As major utilities chart the course to growth and returns through digital transformation, the global number of devices being managed by utility companies is projected to grow to $1.53bn in 2020, according to market research reports.
Despite the economic slowdown in the GCC occasioned by low oil prices, this is just the beginning of the utility industry’s transformation, and solutions providers are ready to take advantage of the growing prospects.
General Electric (GE), whose presence in the region dates back over 80 years ago, foresees a surge in business opportunities around electric power. The company is pushing ahead with its strategy framed around technology, localisation and digital.
The company believes that the journey to the empowered consumer begins with the digitalisation of central generation and the grid. Without digitalised generation, no power producer will have the insights it needs to forecast accurately and trade intelligently in a digital marketplace, says GE. Without a digital grid, solutions providers can’t possibly seamlessly integrate distributed energy resources, nor put the power of choice in the hands of their customers.
“Customers often ask me: what will it take for digitalisation to become a mainstream reality?” says Joe Anis, president and CEO, GE Power Business, Middle East and Africa (MEA). “I tell them I have long held a belief that every industry will be reimagined with software, and I foresee an end-to-end digitalised electricity value network. It will be a network in which every node doesn’t just generate or consume electricity, it also generates a data bit for every electron.”
“And the data generated will fuel our industry’s ability to drive-up efficiency, lower emissions, and bring more flexibility and resilience to generation and to the grid. It will also transform the way we operate and maintain our assets, and streamline labour-intensive processes.
“We understand that change happens all the time and that the industry itself is looking for challenges. Our customers want to work efficiently and to have insights within their operations as well as assets. In response, we have strengthened our capabilities for enhanced total plant solutions, thus offering vital added value to utility and industrial power plant operators around the world.”
GE has since 2012 invested billions of dollars into the budding market for Industrial Internet, with a strong a conviction that the move will above its immense benefits, deliver the much needed efficiency in the power and utilities industry.
There is currently about 300GW of installed capacity in the MEA region, operating at 25% efficiency. But Anis believes that with digital solutions, efficiency could reach 60%, which could translate into huge savings in operational costs.
“A lot of what we do in power business focuses on how to improve the performance of customer equipment and operations. A lot of the technology that we invest in looks at improving the performance of a power plant, whether you are going to introduce a new technology or upgrade an existing technology,” says Anis.
“If you are looking at a new plant, with our technology, we have moved at a world record of 62% plus efficiency. If you look at within existing equipment, we are introducing solutions that can bring that frame of technology up to the latest that we can push in terms of output efficiency and improvements.”
GE is blending hardware innovations, advanced software and data analytics with its 9EMAX technology innovations to help users achieve their desired outcomes. 9EMax solution is a game-changing leap forward in 9E gas turbine performance that redefines how its Middle East and Northern Africa (MENA) customers can quickly deliver more power to one of the world’s fastest-growing regions, at lower costs.
The breakthrough technology can significantly increase output, up to 143MW (single cycle) and 210MW (combined cycle), a 4.8% increase for simple-cycle, while empowering power providers to rapidly and cost-effectively deploy the solution.
But the rapid push for digital transformation could be derailed due to lack of adequate expertise and the necessary leadership to provide strategic direction, a recurring theme in a number of discussions that have been held to discuss the challenges around digital trends in utilities.
Dietmar Siersdorfer, CEO, Siemens Middle East and UAE says that while vision from the top is crucial, making sure the rest of the organisation is empowered to bring about meaningful change is essential.
“It is important to empower people inside your company because even if you have a solid digital strategy, you can still fail if the rest of the organisation isn’t on board,” he says. “The digital transformation has to be embraced by everybody, but the CEO needs to drive the change.”
Stressing this point further, Siersdorfer says that leadership is all about ownership and vision. “If you want to use digitalisation as a disrupter, it has to come from the top,” he says. “It will never work unless the CEO pushes the agenda.”
Ghazi Atallah, CEO, NXN Group points out that those charged specifically with driving digital change should also be proactive. “The CEO should be visionary, but CIOs should be more ambitious in the way they can affect the company. Don’t wait for the CEO to tell you – you need to be ambitious and effect change as a business,” he says.
He adds that firms must carefully review their operating mind-sets when considering any digital transformation, and go about it with an agile, failure-friendly attitude. “You have to embrace a culture of learn-fast, learn often.”
The increasing number of cyber-attacks targeting utilities and other critical infrastructure objects continues to result into significant financial losses and also pose a threat to the smooth journey of digital transformation. However, utilities in the GCC, as well as vendors of ICS (industrial control systems), are now alert to the issue and are devising smart ways of avoiding such threats and minimising their potential impact.
Utilities are now implementing IT security solutions in the market that integrate network, endpoint and malware analysis, threat intelligence and remediation capabilities that don’t just deliver rapid detection and response, but continuous automated incident resolution.
But the momentum seems to have reached a point of no return. The digital transformation of energy is expected to step up a gear over the coming years, with advances in the Internet of Things and big data providing utilities with the chance to reinvent themselves.
“The main demand drivers such as cost reduction, availability of service, value addition, efficiency and customer satisfaction will continue to drive the market for digital solutions across the GCC utilities industry,” says Huawei’s Elshimy.
“But the real risk of digital transformation will come from the potential cost of lost opportunities,” says GE’s Anis. “Power providers have not only a chance to greatly improve how they utilise and operate their generating assets, but a unique opportunity to provide new and real value-adding services to customers, becoming a central part of their lives in the way that the banks and some tech giants have become. Sooner or later, somebody will seize it. Energy businesses had better be bold. As they say, ‘who dares wins’.”