The International Energy Agency has just released a report on the digitisation of the global energy system and its implications for energy players. In total, Smart Grids could save electricity producers and distributors up to €100 billion per year.
A power grid – Photo credit: Alexander Popov in CC
In the first chapter, the report gives a very complete picture of the impacts of digitisation on energy demand in the transport, building and industrial sectors. It then looks at the potential impacts of digitisation on the oil, gas and coal sectors before turning to the digital transformation of the electricity system. It assembles various datasets on energy consumption by digital industries, before identifying a series of cross-cutting risks (cyber security, privacy, impacts on jobs and skills) “in an increasingly digital energy world” and making some general recommendations for policy makers.
In addition to the general analyses, the IEA report contains a whole series of figures and projections up to 2040: investments in digital transformation, potential impacts on operations, on the sector’s economy and on prices.
Investments in the digitization of electricity systems grew by 40% in 2016
The IEA points to an acceleration in the pace of digitisation of the electricity system. Worldwide, investments in the digitisation of electricity have, according to the IEA, increased by more than 20% per year since 2014, reaching 47 billion euros in 2016. This is 40% more than the global investment in gas-fired electricity generation (34 billion euros) and almost as much as the total investment in India’s electricity sector (55 billion euros).
These 47 billion euros aggregate investments directed at software (electrical systems management, industrial energy management), building energy control systems, chargers for electric vehicles, intelligent network infrastructure and smart meters.
Digitisation to save 5% of total annual electricity generation costs
Digitization and the exploitation of data could reduce power grid costs by means of four levers: reducing operating and maintenance costs; y improving power plant and grid efficiency; reducing outages and downtime; and extending the operational life of assets.
Global savings that would be achieved thanks to the exploitation of data could according to the IAE top 80 billion per year over the period 2016-2040, or about 5% of total annual electricity generation costs (assuming enhanced global deployment of digital technologies available in all power plants and network infrastructure).
Data exploitation, particularly through predictive maintenance, could reduce operating and maintenance costs in production and distribution and, ultimately, the price of electricity. A 5% reduction in electricity prices would save consumers $20 billion a year.
In the long term, one of the most important potential benefits of digitisation in the electricity sector is “probably the possibility of extending the operational life of power plants and network components through improved maintenance and reduced physical constraints on equipment”. Extending the lifetime of all energy assets, made possible by digitisation, would reduce investment in power plants by €34 billion per year and in networks by €20 billion per year.
Fundamental transformation of electricity by digitally interconnected systems
The IEA underlines the interdependence of these four “opportunities: meeting demand will be essential, for example, to provide the flexibility to integrate more intermittent renewable energy production.
Intelligent demand response systems could provide 185 GW of flexibility, which is roughly equivalent to the electricity supply capacity currently installed in Australia and Italy combined. This would save €270 billion in investment in new electricity infrastructure that would otherwise have been necessary.
By enabling electric vehicles to recharge when electricity demand is low and supply abundant, smart charging technologies could save between €100-280 billion (depending on the number of EVs deployed) between 2016 and 2040.
ITEMS International for Think Smartgrids