IEA unveils first study into digitalization

Report suggests increased use of data and analytics could save billions and have huge benefits for all areas in the power and T&D sectors

Increased use of data and analytics in the energy sector could save power companies close to $20 billion per year and also save $270 billion of investment in new electricity infrastructure.

That’s one of the conclusions of a new report on digitalization from the International Energy Agency.IEA unveils first study into digitalization

Digitalization is “blurring the lines between supply and demand” said Dr Fatih Birol, Executive Director of the IEA, at the report’s launch yesterday in Paris.

And he added that while “the electricity sector and smart grids are at the centre of this transformation, ultimately all sectors across both energy supply and demand – households, transport and industry – will be affected”.

The report, Digitalization & Energy, states that digital technologies are set to transform the global energy system in coming decades, making it more connected, reliable and sustainable. “This will have a profound and lasting impact on both energy demand and supply”, it adds.

It predicts that more than one billion households and 11 billion smart appliances could participate in interconnected electricity systems by 2040, thanks to smart meters and connected devices. “This would allow homes to alter when and how much they draw electricity from the grid,” the IEA said, adding that demand-side response in building, industry and transport could provide 185 GW of flexibility, and avoid $270 billion of investment in new electricity infrastructure.

With the help of smart thermostats, the IEA report finds that smart lighting and other digital tools, buildings could reduce their energy use by 10 per cent by using real-time data to improve operational efficiency.

And it adds that massive amounts of data, ubiquitous connectivity and rapid progress in artificial intelligence and machine learning are enabling new applications and business models across the energy system, from autonomous cars and shared mobility to 3D printing and connected appliances.

Dr Birol said that digital technologies could help integrate higher shares of variable renewables into the grid by better matching energy demand to solar and wind supplies. Energy supply sectors also stand to gain from greater productivity and efficiency, as well as improved safety for workers.

Conventional power benefits

However, the report stresses that digitalization also has a key role to play for conventional power, explaining how digital technologies are being used throughout the coal supply chain to reduce production and maintenance costs and enhance workers’ safety.IEA executive director Fatih Birol

“The increased availability of low-cost sensors and computer-aided simulations will bring new opportunities for coal operations,” the report states. “For example, sensors can provide the exact status of various components of the essential equipment in real time and analytics can compare the actual configuration with the ‘optimal’ situation as designed so that the process can be optimised. Digital technologies, data analytics and automation will be increasingly adopted to improve productivity while enhancing safety and environmental performance through multiple applications.”

The IEA says that digital data and analytics can reduce power system costs in at least four ways: by reducing operations and maintenance costs; improving power plant and network efficiency; reducing unplanned outages and downtime; and extending the operational lifetime of assets.

And it adds that the overall savings from these digitally-enabled measures could be around $80 billion per year between now and 2040, “or about 5 per cent of total annual power generation costs based on the enhanced global deployment of available digital technologies to all power plants and network infrastructure”.

“Digital data and analytics can reduce O&M costs, enabling predictive maintenance, which can lower costs for the owner of plants and networks and ultimately the price of electricity for end users. Over the period to 2040, a 5 per cent reduction in O&M costs achieved through digitalization could save companies, and ultimately consumers, an average of close to $20 billion per year.”

The report states that in the long term, one of the most important potential benefits of digitalization in the power sector is likely to be the possibility of extending the operational lifetime of power plants and network components, through improved maintenance and reduced physical stresses on the equipment.

And it adds that if the lifetime of all the power assets in the world were extended by five years, investment in power plants would be reduced by $34 billion per year and in networks by $20 billion per year.

Increasing flexibility

However, the report states that “the greatest transformational potential for digitalization is its ability to break down boundaries between energy sectors, increasing flexibility and enabling integration across entire systems”.

The IEA says digitalization is enabling four inter-related opportunities: smart demand response; the integration of variable renewables; the implementation of smart charging for EVs; and the emergence of small-scale distributed electricity resources such as household solar PV.

The IEA believes smart demand responseà‚ could provide 185 GW of system flexibility, roughly equivalent to the currently installed electricity supply capacity of Australia and Italy combined. “This could save $270 billion of investment in new electricity infrastructure that would have otherwise been needed. In the residential sector alone, one billion households and 11 billion smart appliances could actively participate in interconnected electricity systems, allowing these households and devices to alter when they draw electricity from the grid.”

The report says that digitalization can helpà‚ integrate renewablesà‚ by enabling grids to better match energy demand to times when the sun is shining and the wind is blowing. “In the European Union alone, increased storage and digitally-enabled demand response could reduce curtailment of solar PV and wind power from 7 per cent to 1.6 per cent in 2040, avoiding 30 million tonnes of carbon dioxide emissions in 2040.”

Rolling outà‚ smart charging technologies for electric vehiclesà‚ could help shift charging to periods when electricity demand is low and supply is abundant, according to the report. This, it states, would provide further flexibility to the grid while saving between $100 billion and $280 billion (depending on the number of EVs deployed) in avoided investment in new electricity infrastructure between 2016 and 2040.

The IEA also believes that digitalization can facilitate the development ofà‚ distributed energy resources, such as household solar PV panels and storage, by “creating better incentives and making it easier for producers to store and sell surplus electricity to the grid. New tools such as blockchain could help to facilitate peer-to-peer electricity trade within local energy communities.”


While digitalization can bring many positive benefits, the report acknowledges that it can also make energy systems more vulnerable to cyberattacks. The IEA says “building system-wide resilience depends on all actors and stakeholders first being aware of the risks. Digital resilience also needs to be included in technology research and development efforts as well as built into policy and market frameworks.”

The reporet calls for digital energy security to be built around three key concepts:

Resilience, i.e. the ability of a nation, system or institution to adapt to changing contexts, to withstand shocks, and to quickly recover or adapt to a desired level of stability, while preserving the continuity of critical infrastructure.

Cyber hygiene, i.e. the basic set of precautions and monitoring that all ICT users should undertake. This includes awareness, secure configuration of equipment and networks, keeping software up to date, avoiding giving staff and users unnecessary system privileges or data access rights, and training.

Security by design, i.e. the incorporation of security objectives and standards as a core part of the technology research and design process.

The report adds that international efforts can also help governments, companies and others to build up digital resilience capabilities. “A variety of organisations are involved, each contributing its comparative strengths, including to share best practices and policies as well as to help mainstream digital resilience in energy policy making.”

IEA unveils first study into energy sector digitalization

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