Innovation in energy

Innovation is one of the key factors that will drive the energy transition process and will help countries to meet their 2050 climate targets, including the decarbonisation of the energy sector trough low-carbon technologies.

Limiting climate change to below 2°C implies a reduction of energy related carbon dioxide emissions of nearly 70 per cent from their 2015 levels. According to the International Renewable Energy Agency (IRENA), the decarbonisation of the energy system will only happen if there is a growth in breakthrough technologies.

Innovation can reduce the cost of technologies to economically viable levels. A holistic innovation framework can also help to overcome other barriers that have hampered deployment of decarbonised energy approaches, such as the lack of infrastructure to deploy the technologies and the access to capital for the build-up of industrial capacity.

According to IRENA, innovation includes, among other things, technology breakthroughs that provide renewable solutions to sectors where at present no cost- effective alternatives to conventional energy technologies exist; improvements to the existing renewable technologies, which reduce cost and stimulate deployment and new business models and engagement of new actors across energy systems, allowing for a profitable scale-up of renewable technologies.

“Improved digital options can also allow the network to be operated smartly, using information technology and operational technology integration, big data and predictive services,” said Nikos D. Hatziargyriou, chairman of the European Technology and Innovation Platform for Smart Network for Energy Transition (ETIP SNET).

“There are also new models for transmission and distribution networks and power generators’ assets with data-driven business models and technology-driven customer engagement. Benefits are manifold, including: increased reliability of supply, reduced cost of operations, improved quality of service; isolation and restoration reducing the number and duration of outages; deferred grid upgrades and increased renewable energy penetration.”

Reduced energy bills

At the same time, digitalisation favours consumers by reducing energy bills for citizens and enterprises, through energy efficiency and participation in mechanisms of flexible demand. Energy consumers can be at the centre and contribute to a new design for the energy markets.

“I am young, digital, millennial: this means that something is changing in the industry,” said Dacil Borges, the 29-year-old CEO of Totum Innova, during the Budapest Energy Summit held last December.

“Millennials are the new customers of the energy sector, so important players need to focus on big data now, linking the tradition to modern technologies.”

Digitalisation of the energy sector can also boost a country’s competitiveness and open new global markets for components, like ICT or electronics, and services.

“In recent years, EU-funded research in energy systems has put lots of focus on synergies. As a result, many R&D projects are under way. For instance, improved forecasting tools lead to more efficient operation of the grid, in combination with demand-side management, reactive power injection and dynamic line rating. In this field, for example, the SWIFT project has shown that it is possible to connect a wind farm without a costly grid upgrade,” Mr Hatziargyriou added.

According to Peeter Pikk, founding partner of Baltic Energy Partners, an independent energy trader in the Baltics since 2006, the most important applications of digitalisation in the energy sector vary depending on where people live, and while today the system provides a balance, in the future we will need much more clean electricity and in large amounts.

“We need to solve three challenges: invest in affordable CO2-free base-load, add flexibility of demand and storage of electricity and electrify the energy system as a whole,” Mr Pikk tells Emerging Europe.

“We need to figure out how to produce electricity without emitting CO2. Many countries have decided to phase out nuclear from their energy mix. Sun and wind are good sources when they are available. Digitalisation will play a vital role in demand side flexibility. We are still in the early stage of digitalisation of the energy sector. Transmission Systems Operators (TSOs), especially here in the Nordics, are the catalysts for that digitalisation. Central data hubs, together with smart metre roll-out provide efficient access to energy and related data. However, that is not enough as data hubs deliver only yesterday’s news at best. The true demand-side flexibility needs co-ordination based on (close to) real-time data,” he continues.

Not just technology

For Larry E. Glover, senior partner at the strategic marketing consultancy firm Breakthrough Marketing Technologies, we cannot forget about what happens on the human side.

“Our goal is to connect customers,” he said at the Budapest Energy Summit. “If we do not use technology for connecting, and only for business goals, it is useless. We need to understand what digitalisation is and how it affects the way we do things; how do we take this world which has been reduced to its basic elements and integrate them. We need to use those data for behavioural changes.”

“The most innovative thing I experienced is not about technology but the state of mind that needs to be changed,” Mrs Borges adds. “The energy sector has to innovate the mindset that data comes from different sources, not only inside the economy. It is a big ecosystem. The way we interact with data makes the difference. We can learn more from customers, how are they using utilities at home.”

Peeter Pikk’s Baltic Energy Partners participated in an EU funded project called Peakapp, where they looked into ways how digital technologies could make people more aware of their energy usage and costs. By just making their energy data readily available 40 per cent of people said that they started to pay more attention to their energy usage, 22 per cent said they changed their consumption habits and 14 per cent claimed that they replaced inefficient appliances.

“With better awareness, you can change your habits. Much of the digital innovation is about helping people to make better energy decisions and form sound energy habits. For example, enabling electricity sharing among friends increases the awareness of possible solutions and nudging everybody towards better investment or usage decisions,” Mr Pikk says.

The energy sector in 10 years

“Everyone is talking about smart: smart cars, smart cities, smart behaviour. When we talk about the legal side we do not talk about smart legislation, but that is what it takes to make these things happen. We need to legislate for the future, not for the things we are using today, and that’s a challenge,” Mr Glover commented.

Countries such as Bulgaria, as well as non-EU member states including Albania, Bosnia and Ukraine still do not meet the requirements of the Third Energy Package for the liberalisation of the electricity and gas market. As a result, the Energy Community has started a dispute settlement against these countries which continue to keep their energy markets closed, as opposed to opening themselves up to increased integration with the European Union, harming competition and potential investment.

“I want energy companies to be more transparent, to stop customers from making mistakes,” said Mohamed Anis, head of energy and services Europe at IT consultancy company Infosys. “But I am aware that they will reduce their revenues. Is there anyone willing to cannibalise its business for the customer?”

“More support-free investments into renewable energy need to be the norm. A lot of innovation will go into integrating energy production into buildings. We see many investments into the electrification of the transport system. Energy will become cheap and capacity expensive,” comments Mr Pikk.

“I am following the blockchain scene quite closely, trying to figure out what is innovation and what is just marketing. I have not seen any ‘killer apps’ yet, but that does not mean there will not be any. TSOs with an efficient data hub can create trust and transparency at least as much as blockchain. Probably even faster and more effectively,” Mr Pikk says.

But together with new technologies come new challenges, making it difficult for governments to control and legislate.

In the past, for example, physical access to a substation was required in order to disrupt the energy flow and seriously impact society. Today the same damage can be achieved with a single keystroke from anywhere in the world. An attack on the Ukraine power grid in 2015 illustrated the impact of cyber-attacks on the electricity sub-sector. This attack resulted in several outages that caused approximately 225,000 customers to lose power across the country.