Energy is vital to business. Without heat, light, and power, it would be impossible to run wholesale and retail operations, offices, manufacturing facilities, and most industries. Since energy is also linked to providing goods and services, it also has a direct impact on quality of life and economic growth.
Historically, the dependency on traditional forms of energy placed many companies in enviable positions. Reliable and prone to steady growth, it seemed inconceivable that this could ever change. However, it has. The sector has experienced quick, radical change within the past decade.
Greater focus on the environment has led to sweeping legislative change and greater public expectations. Energy companies can no longer operate without also considering their impact on climate change, pollution, and the long-term well-being of the populace. As a result, energy efficiency, sustainability, and renewable energy have moved to the forefront.
Shift in Perspective
The focus of the energy sector has shifted from simply supplying energy to a much broader perspective. They must now change their long-standing
patterns of energy generation and distribution. In many cases, this requires new processes, procedures, and innovative technologies for higher efficiencies and faster deployment.
Nonetheless, energy companies aren’t embracing rapid digital change even though it is apparent that pressures on the industry are increasing quickly. They appear mired in a business model that no longer serves them.
Competition has increased much quicker than many stakeholders anticipated, but most energy firms have either chosen to dabble in new technologies or hope swallowing up a few promising, innovative companies will solve their problems. They have not adopted a mindset that embraces digital change and certainly haven’t established a clear path towards digital transformation, essential to survival as the sector moves forward.
|“Meaningful innovation does not need to be based on outright invention. Rather, there is an exhilarating shortcut. It is based on bold, new combinations of already existing components that simultaneously unlock heightened levels of consumer value and reduce costs.” – “Gabor George Burt|
Agility is Vital
Agility in the energy sector is vital. Historically, many companies relied on a base of static heavy assets that provided steady returns. They did not need to broaden their horizons or change how they operated, because they enjoyed healthy profits. However, disruptive technologies are nibbling away at their value chain which has created uncertainty and volatility. Regulatory changes and the public’s view towards energy have exacerbated these challenges.
New technologies are reshaping the energy industry. The cost of alternative energy is dropping quickly and now rivals many conventional sources. The energy sector can’t afford to be complacent. This isn’t an anomaly, but a dramatic shift towards a new future.
Business leaders must step up their game, expand their options, and find ways to increase efficiency and lower costs. Otherwise, disruptive technologies will continue to steal their market share and destabilize their companies.
The most significant change in the energy sector is the rise of renewables. Pressures from non-conventional sources such as solar, wind, geothermal, biomass, hydrogen, and small hydropower continue to infringe on fossil fuels.
The obvious benefits of renewables include a diversified energy supply, less importation of fossil fuels, and reduced greenhouse gas emissions and pollutants. However, many renewable technologies also create local employment and sustainable regional economic growth, particularly valuable in remote or less affluent areas.
Nonetheless, even stalwart renewables such as hydropower are subject to change. Even though it is technically mature and economical, climate change and competition for water is threatening its availability in some regions. Future hydropower projects will need to meet ever-increasing sustainability guidelines and continually need to improve their technologies.
Certainly, non-conventional renewable energies such as wind, solar, geothermal, biogas, and marine are on the rise. However, simply buying a company to take up these technologies does not address a fundamental problem.
These business models will change too and disruptive technologies will continually emerge. Instead of relying only on mergers and acquisitions, the energy sector needs to focus on a more pliable business model and new ways to adopt disruptive technologies quickly and efficiently.
Drastically falling fossil fuel subsidies in recent years have also made renewable energy more competitive. In just three years, 50 countries instituted fossil fuel subsidy reforms.
As renewable technologies mature, their costs also plummet. According to the International Energy Agency, wind and solar have seen massive cost reductions. They suggest almost half of wind and solar PV projects over the next five years are linked to government-backed auctions or incentives such as feed-in-tariffs, tax credits, and rebates.
Changing Consumer Views
What is abundantly clear is that the consumer’s view towards fossil fuels has changed significantly taking government and business along with them. Energy consumption is now front of mind as the world focuses more on reducing greenhouse gas emissions and reaching climate change goals.
Energy companies must diversify to meet changing needs, reduce their energy consumption, and demonstrate sustainability. This is not an easy task for businesses normally content with the status quo.
|“In a chronically leaking boat, energy devoted to changing vessels is more productive than energy devoted to patching leaks.” —Warren Buffett|
To address these increasing challenges energy businesses needs to involve their entire organisation. This isn’t a matter of apply a patch to fix a small glitch. It requires overall planning, funding, and often additional infrastructure.
At the moment, the ambitions of renewables are limited by storage and generation capacities. However, 1,125 GW of capacity has been installed worldwide in the past decade alone. This trend will continue and amplify as renewables innovate and mature.
Plus, industries in countries such as Indonesia and China have drastically reduced energy intensity in recent years. Consequently, the future holds greater competition for energy spends around the globe.
Move Towards Clean Energy
Eight European countries, Canada, and Australia are leading the charge towards clean energy. As a result, global sales of electric vehicles are rising quickly in many industrialized countries. Sales surpassed 2.1 million globally in 2019, according to the Global EV Outlook 2020.
To add to the complexity, energy producers are increasingly threatened by climate change. Facilities may be affected by flooding, glacier recession, rising sea levels, or inconsistent water availability. Key to competitiveness is a continual investment in technologies and infrastructure. This often involves public–private sector partnerships to meet the needs of large investments.
Private sector participation will become increasingly important in the management and execution of projects. New technologies and operating arrangements will also become more important as government budgets continue to dwindle.
Private partners can provide funding and management and technical skills while their public partner focuses on compliance, licenses, permits, and risk control.
How is the Sector Adapting?
As mentioned, many energy companies are using mergers and acquisitions to counteract the impact of renewables. They believe that increasing their exposure to renewables will secure their stake in the new energy mix.
Many utilities and major fossil fuel companies are now venturing into power generation and renewables. Five out of eight oil majors have invested heavily in renewable energy hoping this will help them adapt. The others will likely mimic this strategy.
Fortunately, technology has also played an increasingly important role in improvements of existing sources. This can ease the industry’s transition towards a more sustainable business model by increasing efficiencies and reducing harmful emissions.
Hydroelectric continues to be a major energy source in the world. Nonetheless, there is always room for improvement. Climate change demands hydroelectric facilities offer greater returns over a wider range of conditions.
Recent improvements include smart control systems, battery hybrids, and more refined air, water, and discharge controls. Data collection and processing also allows turbines to perform at peak efficiency through hydropower digitisation. This adds to energy production, lowers costs, and significantly reduces greenhouse gas emissions.
Other innovations include using electric converters for peaking regulation in plants that operate in both turbine and pump mode. Electronics with current-controlled power supplies also better control machines in their start and stop phases.
Hydropower has also adapted to the smaller formats required by small grids favoured in more sustainable scenarios. Turbines are also more fish-friendly to address environmental concerns.
Smart grids are the latest advancement in electrical networks. They rely on advanced telecommunications and control technologies to coordinate energy production, flow, storage, and to prevent energy loss and optimize usage. This technology can be integrated into other renewable energy initiatives such as ocean energy generators.
When hydrogen is burned or converted into electricity the only by-product is water. However, until recently the process either required using natural gas or energy-intensive hydrolysis. Now a new water splitting technology offers 98.7% efficiency with equipment costs as much as 50 percent less.
Just one kilogram of hydrogen has as much energy as 3.8 litres of gasoline and it does not produce greenhouse gases.
Solar Energy Improvements
Solar is the fasting growing renewable energy source in the world. Research suggests it could cover a quarter of global power by 2050.
Innovation continues within the solar energy sector too. Floating solar farms now preserve valuable land for other uses. They are more effective, easier to keep clean, and can help reduce algae production, lowering water treatment costs.
Solar has also been integrated into building architecture. Building-integrated photovoltaics can now be found on roofs, windows, facades, and other components making the technology more accessible and more affordable. Solar skins are also being installed for aesthetic and advertising purposes. They provide solar energy and display a custom image.
Innovative technologies have also introduced solar into fibres. This could potentially eliminate the need for solar panels by providing versatile fabrics instead. The U.S. government is also experimenting with photovoltaic solar noise barriers that generate electricity and block traffic noise.
The biggest resistance to tidal energy was high cost. However, recent technological advances have made tidal energy projects more efficient, safer, and more environmentally friendly.
Innovations in Portugal, Wales, New York City, Scotland, and Korea are set to help the world meet their energy needs.
Food, human, and animal waste provides a readily available energy-source for the world. When microorganisms devour this waste it results in methane.
While this is not a green source of energy it is valuable as a way to bring down emissions and ensure universal access. For instance, some cities are using trash dumps and other sites to provide a consistent source of energy generation. Household biogas digesters are now being used as an energy source in remote areas too. New technologies will continue to scale up efficiency and production capabilities.
The commercial use of geothermal is dependent on technological improvements. The U.S. Department of Energy predicts geothermal has the most potential for growth within the electric and heating sector with 3.7 percent installed energy capacity and 8.5 percent electricity production by 2050.
With fossil fuels on the downturn and electrical usage on the rise, utility companies will need to invest heavily in the electric grid. Intelligent technology such as smart grids will use communication sensors to optimize power usage throughout the network. This allows governments, businesses and residents to better manage their energy consumption.
Emergence of Private Digital Services
The transformation of the global energy system is already underway and technological innovation is the enabler of progress. However, how the energy sector views innovation has to change.
Innovation must move beyond research and development within a company’s four walls to a new business model with broader policies and processes.
Collaboration must be at the forefront of the energy sector’s transition. Government support for innovation can spearhead the journey, but it is the private sector that is usually responsible for commercialisation. Organisations need to create a culture of innovation, increase digitalisation, and decentralise innovation efforts to succeed.
Transformation in Sector Falls Short
The pace of the transformation in the energy sector falls short. At the current level, organisations will not meet their emission control goals, never mind remaining relevant and profitable.
Digital transformation does require a more flexible mindset and a willingness to accept more risk. However, disruption can yield big results quickly. For those lingering on the sidelines hoping the market with equalize and renewables will fade into oblivion, you are already well behind. Acting now is essential, but you will need guidance.
Digital transformation can seem an overwhelming task even when a business understands its challenges. It can be difficult to identify what’s available and which emerging technologies hold promise.
Change is Within Reach
Luckily, many of the technologies needs to aggregate, store, and search data are already available. Many startups and innovators have already created appropriate innovations for the energy sector. Many others are more than willing to tackle new challenges and can create innovative, cost-effective solutions.
Energy companies can have cutting-edge technologies that satisfy their needs. Private digital services are a cost-effective option to fill operational and service gaps quickly and effectively. Plus, new technologies can serve the long-term to ensure relevance as the sector evolves.
The benefits of using external resources are manyfold. Unified systems can be implemented across multiple regions for unimpeded data flow. Technology can provide new services and delivery models quickly and efficiently, something that will be becoming increasingly important as renewables apply more pressure.
Regrettably, the energy sector often fails to capture the value of technology due to fears surrounding security and compliance risk. Others sit by and watch stock prices drop, because organizational complexity makes it impossible to find solutions in-house. Fortunately, solutions can often be found by partnering with expert private sector partners.
Creating sustainable, meaningful change requires more than an occasional foray into the digital world. Energy companies need to create better methods, more effective services, and best-in-class relationships if they are to thrive.
By matching challenges to potential solutions it is possible to deliver what is needed by thinking outside of normal channels. Innovative solutions don’t arrive by repeating the same patterns.
Key Digital Transformation Themes
Digital disruption can impact all aspects of the energy sector. As a result, energy companies need a wide range of tools to counteract the effects. The following are some of the most common themes in the sector today.
Today’s technologies focus on storing energy and distributing it on demand. This alleviates the strain on the grid during peak times and allows consumers to buy energy for use later. Stored energy can ensure a better price for users if energy prices rise.
Internet of Energy (IoE)
The days of centralized power systems are giving way to intelligent distributed control. Internet technologies now allow companies to coordinate and optimize energy production, storage, and usage within much smaller, more easily managed grids. Big data will play an important role in energy analysis and planning and the development of energy policies, and investment decisions.
Power-to-X technologies convert energy and carbon dioxide into new products and materials. This can help lower emissions, diversify energy company offerings, and increase revenues.
Unifying data under a decentralized network offers many benefits, but also security challenges. Blockchain technology can unite stakeholders such as producers, distributors, and operators while ensuring a secure network for data exchange.
Distributed Energy Resources
Distributed energy resources produce energy at the source of consumption which eliminates the loss of energy transmission. An example is a household that produces more electricity than it can use due to solar panels. This surplus is sent to a common network for all users. Grids will become smaller and more focused on the consumer.
Blockchain and distributed energy resources are now morphing into energy-as-a-service solutions. Innovative energy companies have moved beyond just selling electricity to also include valuable services such as consumption tracking and production optimisation.
Demand Side Management (DSM)
Technology is also playing a role in the relationship between energy efficiency and demand. As systems shift between the peak and off-peak periods, technology adjusts processes and equipment for better energy efficiency.
Creating a Digital Transformation Strategy
Energy leaders make strategic investments in innovative technologies. For instance, GE has installed the 5MW Cypress platform, an offshore turbine and is now manufacturing the world’s largest offshore wind turbine. It now runs a renewable energy division and is setting new trends in the energy sector. It has diversified to include traditional power and lighting as well as renewables and other industries.
While long-term sustainable energy is vital for the future, change starts with near-term initiatives. This requires a commitment to a centralized budget that will create system-wide benefits.
Ad hoc technological change will not address pressing needs or fulfil long-term goals. Organisations need a clear roadmap for effective transformation as it affects processes, people, and the tools used within the energy sector. A cross-functional governance team and more flexible structures ensure quick executions.
Need for Commitment
Top management must be committed to change and be willing to explain why this is needed to the organisation, then support and drive the process. Leaders must identify skills gaps and encourage additional training for existing employees to fulfil advanced roles. They must also identify and quickly address new opportunities that arise from the changing business landscape.
Most importantly, the organisation must be willing to explore new ways of working and provide the tools needed for success. This may include creating more flexible policies and procedures, encouraging employees to suggest new ideas, and testing many novel ideas to discover what works best. Partnerships are often the best way to identify robust innovation solutions, realize innovation ambitions, and find budget value.
The EarlyBirds innovation platform and ecosystem is designed to enable innovation at an enterprise level by creating connections between early adopters and innovators, supported by independent subject matter experts.
At the heart of this ecosystem is the EarlyBirds Marketplace which currently hosts over four million innovators, including research organisations, private and public companies as well as start-ups, scale-ups and mature solutions. An opportunity exists for what are known as Early Adopters of technology working in the Energy Transition space to exploit this database and engage with Innovators in a highly cost-effective manner.
Organisations have many options available for technological transformation. Regrettably, many still believe they can undertake this task in-house despite the fact their resources are already strained due to the pandemic. A better choice for rapid change is an “outside in” approach.
External ideas and technologies can offer solutions outside of the slow traditional vertical integration approach. This approach involves partnering with experts for accelerated innovation and growth. With access to many innovations, some may address organisational challenges immediately. This can reduce costs, accelerate time to market, increase differentiation, and even create new revenue streams.
EarlyBirds can assist the energy sector in many ways including:
Our company offers several programs to suit your organization’s needs. Both offer expert guidance, however the Explorer program is a comprehensive, enterprise-wide alternative.
The Explorer program is designed to bring innovation to your entire organisation. It includes an enterprise-level subscription to the EarlyBirds platform. This open innovation ecosystem of innovators is a valuable source of proven technical solutions for business challenges.
The Explorer program also connects your business with an EarlyBirds dedicated Subject Matter Expert (SME). Your SME is an industry leader with a proven track record of achievement. They work closely with your organisation to identify opportunities and match challenges with innovator solutions through skilled facilitation.
This program also includes access to weekly innovation boost webinars and monthly and quarterly innovation days depending on your appetite to act.
In turn, organisations can:
- Reduce their overall innovation costs;
- Increase capability where and when required;
- Access the best innovators and consultants;
- Move from idea to action quickly; and
- Simplify the process.
The Challenger program helps you identify and tackle a single business challenge at a time. It is a great starting point for organisations that require immediate action. This is a short highly-focused program of activities specifically designed for actionable innovation. It is suitable for organisations that want to take the first step within the innovation transformation process.
An EarlyBirds SME clarifies the parameters of your challenge, explores innovators, and identifies the best potential solutions. The SME presents you with a roadmap highlighting the most promising for your organisation.
EarlyBirds has helped many organisations solve their business challenges through actionable innovation. We can help you build an innovation culture.
We offer a range of self-service and assisted program options tailored to meet your unique requirements. For more information, please visit our Early Adopter page which may answer many of your questions.
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