Electricity digitalisation trends

We explore the meaning and some implications of the electricity digital transformation. Electricity digitalisation is about deploying more ICT (information and communication technologies), sensors, electronics & data analytics. What for? For better running the system and better integrating different actors and technologies.

The digitalisation technologies pervasively permeating society can be described by several trends, let's introduce a few of them.

A first exponential trend refers to the global annual internet traffic. Most of the data in the world today were created over the past few years.

This exponential growth has led to the use of increasingly large units of measurement.  For example, global annual internet traffic surpassed the exabyte (10^18 bytes) threshold in 2001 and it has recently passed the zettabyte (10^21 bytes) threshold.


The second exponential trend regards the number of transistors installed on an integrated circuit, a microchip.

You can interpret this law also claiming that the overall processing power for computers doubles every two years or so.

Moore's law says that the number of transistors in an integrated circuit doubles about every two years. Moore's law is an observation and projection of a historical trend. The law is named after Gordon Moore, the co-founder of Intel.

Rather than a law of physics, it is an empirical relationship linked to experience in production.


The third “law”, an empirical one, refers to our tendency to overestimate the impact of a new technology in the short run, and to underestimate it in the long run. 

It was coined at Stanford University, by a computer scientist named Amara.

We can see this phenomenon when we look at autonomous vehicles or perhaps blockchain - new technologies that we may have currently overestimated.

Perhaps, in few years time, attention will move away from these technologies because of perception of slow progress.

Then by the time autonomous vehicles or blockchains have truly transformed our daily lives we might be underestimating them.

Something similar happened in the past with the GPS navigation. It started out as an exciting technology during the Cold War. But since it didn’t have a tremendous immediate impact on our lives, people lost interest. Fast forward to today and GPS is what makes our smartphones so powerful. It enables much of our daily lives, yet we take it for granted, we underestimate it.

One may compare this trend with the market value of publicly traded blockchain companies.

These  publicly traded blockchain companies involve blockchain infrastructure, services, and applications but not cryptocurrencies. Their market value dropped by 56% in 2018 before rebounding slightly in early 2019. 

The open question is: are we experiencing a trend similar to the one described by the Amara’s Law?


Among the main digital transformation challenges one may consider the following three:

Data Ownerships

Digital transformation goes together with an increased production of -and reliance upon- data, and this triggers debates about:

-ownership of data, in particular of machine-generated data,
-and access to such data by others. 

“Platformisation” of the economy

Digital transformation has led since the early nineties to the flourishing of digital “platforms” in many economic sectors. A well-known case is Amazon of course.

Online platforms address a fundamental economic problem: how to coordinate supply and demand when information is imperfect, to reach the highest possible efficiency.

Online platforms remain hard to define because they have characteristics of both firms and markets, they may be involved in both production and exchange. Moreover these platforms are prone to the appearance of leading players and this may lead to the creation of closed rather than open ecosystems.

Cybersecurity

Cybersecurity has become a matter of continental interest, considering also how cyber-attacks can potentially physically damage citizens.

Digital transformation and cybersecurity co-evolve and influence each other in several aspects.

Cyber crimes have been enabled and transformed by the digital transformation. The increased digitalisation of society, governments and industry results in an enlargement of the global attack surface. The positive effects of DT in cybersecurity shall outweigh the negative ones.

The map illustrates the Digital Innovation Hubs. 

Digital Innovation Hubs provide testing facilities, digital skills and training, support for investments and networking for the digital transformation. There are more some 300 Digital Innovation Hubs in Europe and several of them are addressing blockchain issues.


Whole energy value chain impacted

Digitalisation has an impact along the entire energy value chain, ranging from generation to transmission, distribution, supply and consumption.

The system must become more “intelligent” and flexible in order to integrate energy sources that have different behaviours and technical characteristics. To this regard, several smart grid projects are being tested on the European ground: some 950 smart grid Research & Innovation projects worth 5 billion EUR.

New functions, technologies and infrastructures

New functions such as market transactions at prosumer level, or flexibility services provision from the distribution grids are emerging.

These new functions, in turn, require new technologies and infrastructures: smart meters, power electronics, smart grids to name a few.

The new infrastructure must meet the communication needs of all the actors and the devices participating in the system.

Free flows of power and data

Not only energy, but also data must flow freely in the system.

All players and devices in the new energy system increasingly need to be able to exchange bi-directionally power electrons and information electrons.


Digitalisation of electricity is part of a broader process of technological change, which – along with modifications in regulatory and market design – is both driving and responding to the electricity demand and supply trends.

This is reflected in the cost reductions that have been achieved across a range of electricity-related technologies over the last decade. As you can see from the chart on the left hand-side:

-the average cost of a smart meter has dropped by one-quarter (with nearly 600 million smart meters being deployed globally).
-battery storage cost fell by more than two-thirds (mostly thanks to the deployment of electric vehicles).
-the unit cost of small-scale PV has dropped by a factor of five,
-sensors by more than 95%

Technology cost reduction is a key driver enhancing connectivity throughout the electricity sector.

The four main elements of the electricity system transformation that digital technologies can enable are:

1)smart demand response;
2)integration of variable renewable energy;
3)smart charging for electric vehicles;
4)and 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.


Electricity digitalisation is about deploying more ICT (information and communication technologies), sensors, electronics & data analytics. Electricity digitalisation can positively impact:

  • The electricity system itself
  • The connectivity within the power system and beyond the power system. i.e. between the power system and the outside world

In other words, electricity digitalisation can:

  • Improve the electricity system performances , leading to enhanced system operation & maintenance techniques and enhanced efficiencies.

As an example, digital sensors can provide real-time information on the state of power plants and power lines (e.g. wind, fuel, temperature, current). This information can be used to better maintain, operate and plan the system.

As another example, new power electronic-based solutions emerging also at the physical can help in better directing power flows and avoid congestion.

  • Improve connectivity within and beyond the power system between humans, devices and machines.

As an example, digitalisation can enable the active participation of consumers from all demand sectors in energy system operations and in balancing demand with supply in real time. As another example, digitalisation can facilitate larger penetration of distributed energy resources, turning consumers into “prosumers”; new tools such as blockchain may facilitate such local energy trading systems.

The final goal is to enable a flexible and transparent energy market with equal possibility of participation for every player.


The energy sector has been an early adopter of digital technologies but investment in digital technologies by energy companies has risen sharply over the last few years.

Global investment in digital electricity infrastructure and software has grown by over 20% annually since 2014, reaching USD 47 billion in 2016 (IEA)

As far as Venture Capitals and start-ups are concerned (right hand side), the following trends can be observed:

  • The US attracted 75% of global VC investments in digital energy start-ups. China and Europe account for 9% of total investments each.
  • While the total number of VC-backed start-ups in the Energy sector has been constantly decreasing over the last few years, the share of digital start-ups in the Energy sector increased.
  • The most targeted areas by digital start-ups in the Energy sector include Solar Energy and Electric Utilities

 

 

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