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The trillion dollar promise of digitalisation

A lot of unexploited value lies in the new ability to collect highly detailed data on electricity use

The brave new world of information technology brings with it the ability to collect, visualise and analyse vast quantities of electronic data on electricity consumption. Put to good use, this new information could unlock trillions of dollars of value in the electricity business by making life easier, cheaper and greener.

EASY ELECTRICITY
More than half of all Danish homes are now equipped with remotely read electricity meters. These customers no longer have to manually report their meter readings to electricity suppliers. By 2020, all manually read meters will be replaced in Denmark and all consumption data will ow automatically from every property to the country’s grid operators and electricity traders after passing through a data hub. With the smart meter rollout complete, electricity and other utility companies will receive vast volumes of data in real time, data that must be put to good use, says Helle Juhler-Verdoner of The Danish Intelligent Energy Alliance, a partnership of utilities and businesses. We’re in full swing digitalising the utility sector. The remotely readable meters for electricity, heat and water are a vital element for the digitalisation that will unleash masses of opportunity to make life easier, greener and cheaper for customers. By combining infrastructure data with new business models, value can be created for customers and the companies involved,” says Juhler-Verdoner.

Trillions at stake

According to the World Economic Forum (WEF), digitalisation of the electric power industry can provide substantial technical and economic benefits. A WEF analysis prepared with consultancy Accenture predicts that during 2016–2025 the digital transformation can trigger gains of $3.3 trillion in OECD member countries. Of this, the value to the electric power industry is calculated at $1.3 trillion across the entire value chain and a further $2 trillion bene t is provided to society through the creation of 5.3 million jobs and a significant reduction in CO2 emissions.

Bosco Astarloa, WEF head of energy technologies, identifies three disruptive trends that have affected the energy industry in recent years: decarbonisation, decentralisation and digitalisation. Digitalisation is happening faster than we think. We had better be prepared,” he says, based on interviews with 35 power sector CEOs that he met in the run-up to WEFs annual meeting this year in Davos, Switzerland.

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The digital world

More than 20 billion devices are connected to the Internet globally, including electricity meters and sensors in homes, businesses and transformer stations. By 2020, 7.4 billion devices are expected to have been added from the electric power value chain alone. The WEF is convinced the trend in data collection made possible by the Internet will continue, providing unprecedented opportunities for the energy industry. These include improved asset management, optimised operation of power grids, intelligent management of energy, clever home automation, and responsive customer dialogue. Like millions of drops of water, small improvements in efficiency will become a flood, buoying up new insights.

Astarloa suggests that digitalisation and the increased customer focus that comes with it will transform the electricity sector. We are witnessing a shift in value creation from conventional centralised production towards solutions at the customer end of the value chain,” he says.

Meters for the masses

The measurement, collection and analysis of data fed back from the point of consumption are crucial to the digital revolution. Over the past ten years, remotely read meters have been in common use in many households and businesses in Denmark, Sweden, Finland and Italy, among other countries. Remote reading makes managing customer databases more efficient and billing more flexible. It facilitates the tracking of customers who steal electricity and minimises transmission losses. In addition to improvements in system operation, digitalisation opens the door to new market opportunities, including commercial demand management, which pays customers to brie y reduce electricity use on demand, saving the utility costly start-up of extra power plant for just an hour or so. Exactly when economic gains will be made from the gathering and analysis of small as well as big data, how large those gains will be and who will bene t is uncertain. Denmark’s decision in 2013 to require all electricity distribution companies (DSOs) to equip customers with meters that could be read remotely, passing the cost through in electricity bills, was based on a social and economic analysis by Energinet.dk, Denmark’s transmission system operator. Energinet.dk predicts that digitalisation will increase competition in the electricity market, driving down prices for consumers. It will also save money for DSOs by alleviating the need for more grid capacity. Further benefits include improved billing and customer complaint handling.

Power to the customer

More uncertain is the volume of energy savings that real time monitoring of electricity meters might generate, though experience shows that when consumers are aware of their consumption they are more inclined to save. Currently, consumers can track their consumption only by comparing annual invoices. The new meters will allow them to collect hourly values that can be viewed on a PC or tablet, providing a better analysis of their consumption habits. The monitoring can also signal any sudden and significant rise in consumption that might indicate a fault.

Bjarne Hansen, a 78-year-old retiree from Svaneke on the island of Bornholm, took part in Eco–GridEU, a now completed project on using information technology to increase the efficiency of grid operation for more than 2000 households. Hansen agreed to allow his heat pump to be centrally monitored and controlled in return for getting extensive data on his consumption, which to this day he follows with interest. Hansen regrets that his second house in the village of Rutsker was not part of the EcoGridEU project. If it had been, he would have known that its heat pump was suddenly using an abnormally large volume of electricity. The equipment malfunction led to runaway electricity consumption that cost him €2420. The ability to monitor electricity usage in ne detail provides the option for consumption to be shifted from periods of peak demand to times of low demand, theoretically lowering the required capacity of the whole system. Whether such demand management will deliver economic rewards and how large those might be also remains uncertain. Much depends on local conditions. Demand response as a peak shaving tool is gaining ground in countries such as France, the UK and Finland, where the emphasis is typically on major electricity consumers. EcoGridEU and other research and development projects demonstrate that privately owned heat pumps, electric heaters and electric cars can be controlled remotely, but justifying the business case is often di cult owing to low volume. In a new project, EcoGrid 2.0, nine partners are to demonstrate how 1000 customers can provide grid support services through flexible consumption of electrical heating and heat pumps in response to market signals—and whether this customer-based approach boosts the efficiency of system operation.

Pay-back time

At Kamstrup, a Danish supplier of remote metering solutions globally, Jesper Daugaard confirms the relatively long term nature of the return on investment. DSOs expect a payback within seven to eight years, he says. In reality it takes more like a year and a half or two years for distribution companies to discover that they can reduce network losses with better data. Grid operators are just discovering the value of high-resolution data.” Losses can occur through theft. Cooperating with the Danish police, grid operators have uncovered theft of electricity by illicit drug laboratories, but such cases are rare. Losses are mainly from friction on the wires; the further electricity travels the greater the loss.

More importantly for the DSOs’ bottom line is that the large ow of customer data and the many monitoring points embedded in their networks create a detailed picture of the load on their substations and power systems. Until recently this was unknown territory,” says Daugaard. In California a distribution company was considering a $15 million investment in a new substation to meet rising customer demand. The data revealed that the substation was heavily loaded for only one hour, once a year when three customers made unusually high demands on the system during maintenance work. Dialogue with the three customers has led them to spread the exceptional usage over three days, saving the distribution company $15 million. Grid losses affect electricity distribution companies around the world and waste billions of dollars. In an otherwise well-functioning country such as Denmark about 7% of electricity is lost between production and consumption. In other areas of the world, theft of electricity by tapping it from the grid before the meter is endemic.

A new project will demonstrate how 1000 customers can provide grid support through exible consumption of electrical heating in response to market signals”

The combination of data and alarms can also provide economic benefits for DSOs and their clients,” says Daugaard. Many distribution companies world-wide have challenges with voltage running too low or too high. If distribution can be disconnected, electrical appliances do not burn out when problems arise.”

In Pakistan, an under dimensioned grid means that refrigerators and other electric appliances are in permanent danger of burnout. Better data and the ability to disconnect customers in critical situations improves the quality of the service provided. Installing meters on the fringes of the grids and making sure they can send alarms or shut consumption down allows much to be done immediately and within 24 hours of a situation,” says Daugaard. By collecting and analysing data over time, the distribution companies can better plan their maintenance and investment.” Daugaard speaks with the authority of practical experience in managing data, to the extent that he was called to Washington DC in spring 2016 to speak to White House officials.

lightbulbIn California, better and more detailed data flow saved a distribution company $15 million for a planned new substation to meet rising customer demand when it became clear the station was heavily loaded for only one hour, once a year when three customers made unusually high demands. Dialogue with the three customers solved the problem by rescheduling maintenance work.

IT magic at work

The snapshots of conditions drawn by some data reports are so obvious that they trigger an immediate response from distribution companies, but it is only now that advances in IT technology have added serious value by providing a complete overview. Microsoft has made cloud solutions available through its Azure platform and Google Deep Mind has announced an up to 40% reduction in electricity used to cool its data centres thanks to mechanical data analysis, commonly known as machine learning. Such platforms provide new opportunities for innovative technology companies large and small. Norwegian company eSmart Systems is one of them. The rm’s country manager for Denmark, John Haar, welcomes the vast data crunching exercises. The new systems can nd patterns that we can exploit. I expect data analysis with machine learning will be the big game changer,” he says. For three months, a Norwegian DSO received data from eSmart Systems about consumption and weather conditions, plus other indicators. Using analytical software, electricity consumption in the supply area could be predicted 24 hours ahead with 97% accuracy, compared to 80–88% previously, enabling far more efficient matching of supply and demand. The distribution companies can use these management tools to control heat pumps and electric vehicles, as well as to optimise power-grid operation and investment planning,” says Haar.

Seeing is believing

Visualisation is part of this brave new world. Haar’s colleague at eSmart Systems, Jostein Andreassen brings up a colourful map on his monitor of the stunningly lovely Norwegian archipelago. It locates customers of distribution company Norgesnett Fredrikstad and also identifies trouble spots, showing power outages or ground faults. Meters at the point of consumption report hourly data to Norgesnett, providing continuous information on what is happening on its distribution networks. We visualise the location of the meters relative to the energy company’s substations,” says Andreassen, who is enthusiastic about the software system’s many new opportunities, including the management of data collected by drones.

Instead of deploying technicians to wander through the countryside inspecting transmission lines, grid operators are using remotely controlled inspection drones to return images to them in real time. Using cameras (including the heat-seeking variety) and sensors connected to software, drones identify problems, such as threatening tree branches or incipient damage. Technicians can then be dispatched to a precise location to deal with a known issue. Norgesnett Fredrikstad uses its improved knowledge of network conditions to prioritise its spending. If the same error repeatedly occurs in the same place, it may be high time for a cable or transformer update. Access to instant data allows for efficient preventative action, saving money and avoiding breakdowns in service. Moreover, in times of crisis, for the first time load can quickly be shed from the network in cooperation with customers through temporary disconnection of specific non-essential supply, such us electric floor heating, immersion tanks and heat pumps. Of course this requires acceptance by customers,” emphasises Andreassen.

A better overview

Norgesnett welcomes the opportunity to work with its customers on energy effciency. It is definitely a good investment. We are still in a development phase with eSmart, so the system is not up and running yet, but it will make it possible for us to use information from the smart meters to operate the power grid,” says the distribution utility’s CEO, Eilert Henriksen, He says data are best used by combining the operation of the grid and smart meters in the same IT system. It gives a better overview of the operational status of the low-voltage grid and speeds up debugging as well as providing information on ground faults and voltage levels at the customer. All of this is controlled from our new operations centre,” says Henriksen. Software from eSmart being developed on Microsoft’s Azure platform must be able to work with that already in use by grid operators and trading companies. Andreassen says the software can also be used by homes, commercial buildings and municipalities to boost energy efficiency. Ambitions for IT deployment in cities include everything from traffic control and street lights to emptying the trash bins. According to eSmart Systems, its software can also aid interaction between distribution companies, electricity traders and their customers. Data is collected on an app so that key information on electricity supply at any moment can be owed to customers through social media such as Twitter and Facebook. Certain phrases such as Oops, the power is out” can be picked up by a filter and set o an instant alarm at the power system control centre, enabling rapid location of the problem and its fast resolution.

lightbulbThe Danish island of Bornholm and its 40,000 residents exist as an entire miniature society, with a hospital, schools, utility services and various local businesses. Currently, 45 % of the island’s electricity comes from wind, solar and biomass, making it a useful full-scale test facility for independent power supply from variable sources of energy.

Value in data

Every country operates its own electricity market under its own regulations and eSmart, just like its competitors, is adapting its products to be country specific. The small Norwegian rm recently agreed to carry out a pilot project with The Energy Authority (TEA), an American IT and electricity trading collaboration between 50 public power companies. Together, eSmart Systems and TEA will develop system solutions for handling large volumes of data using artificial intelligence to analyse big data flows. Through this collaboration we can o er several robust data analysis solutions for energy companies, including data management from smart meters, simplified handling work ow, smart grid management, and targeted customer segmentation and management,” says Joanie Teo lo, CEO of TEA, In coming years, the energy sector will be highly focused on realising the trillions of dollars of value in the energy business that the WEF says is achievable by application of IT technology. Astarloa points out the importance of thinking holistically about management of electricity, heating, cooling, water, sewage, wastewater and transport to shave peaks in demand and thereby reduce overcapacity in the power grid. The convergence of telecommunications, data collection and machine learning with electromechanical technologies is forcing players from different sectors into partnerships to provide new services. No one can do this alone,” Astarloa stresses. He mentions several innovative alliances that like TEA and eSmart Systems are trying to wring value out of the rapidly developing market, naming Italian utility Enel, car makers Nissan and TESLA, Solar City, cloud service provider Oracle, and electronics giants Philips and Ericsson. Data from customers will be the main source of value creation by allowing the development of new customer-centred services,” says Astarloa. Unlocking the trillions will require signi cant changes in regulation and the basic business model of the traditional utility sector. The EU is taking steps in this direction and has promised to publish new market regulations by December. The front runners? They’re in the US, with some states pursuing very interesting initiatives. California and New York are implementing ground breaking market structures that will blaze a trail for the rest of the world. South Korea and Japan in Asia are the leaders on the technological side,” says Astarloa. •

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TEXT Jesper Tornbjerg