Digital Transformation in the Energy and Utilities Sector

The energy and utilities sector is facing significant disruption from changing supply and demand, along with increasing regulatory and competitive pressures. Market shifts such as multi-source renewables, end-user power cogeneration and electric vehicles (EV) present fresh opportunities for value creation but require new capabilities and business models. Addressing these market challenges while aligning with regional energy and climate policies requires digital infrastructure that can support intelligent grids and agile collaboration with supply chain partners.

Trends driving change in the energy industry

Transformation is not a new phenomenon in the industry. Smart meters capable of collecting real-time data on power consumption were introduced over two decades ago, and renewable energy generation, like solar and wind, has an even longer history.

Recent increased government support and corporate demand for climate neutrality is pushing the energy sector to move to clean energy even faster. Over 110 countries have pledged climate neutrality by 2050 with over 5,500 supporting policies currently in place. And nearly 300 companies have pledged to achieve 100% renewable energy by 2050 or sooner.[i] This combined with the fact that the cost of renewables has fallen dramatically in the past ten years – solar and onshore wind now cost less than traditional energy sources[ii] – is accelerating the push to clean energy sources.

These developments are also driving a massive shift in the electrification of sectors traditionally based on fossil fuels such as mobility.  Global electricity demand from (connected) EV’s is expected to reach 550 terawatts per hour (TWh) by 2030, a six-fold increase from 2019 levels,[iii] requiring more grid capacity to meet the demand. And while EV and other environmental initiatives will decrease fossil fuel-based, noncircular power generation, they will increase demand for supporting IT, such as equipment, applications and services. Addressing these requirements will require utilities to shift to modern, distributed digital infrastructure.

Renewable energy challenges

Supply is less predictable with renewable energy – you don’t always know when the sun will shine or the wind will blow. At the same time, energy generation is rapidly evolving from the traditional one-way production from large suppliers to power cogeneration with energy consumers also acting as micro suppliers. For example, local homes and businesses may contribute power back to the grid from solar roof panels. Managing this increase of local (renewable) power generation with fluctuations in energy demand is a real challenge for Transmission System Operators (TSOs). To maintain grid stability and avoid the risk of cascading failures and blackouts, TSOs may run existing (fossil-based) grid infrastructure on high capacity as a buffer. However, this is not efficient and does not meet the recommendations of the Paris Climate Accord to fully decarbonize over the next three decades, which several utility companies have already committed to. Emerging innovations in power storage and grid forecasting will help, but will require agile digital infrastructure to make the transition.

Data management challenges

Digitization can modernize the entire energy value chain, from generation and transport, distribution, supply and consumption, as well as orchestration of the grid. Internet of things (IoT) sensors and smart meters, paired with machine learning (ML), enable utilities to distribute intelligence across the grid to manage supply and demand more efficiently. By pairing these technologies with a distributed business architecture, energy companies can capture real-time insights for optimal product development and delivery. The adoption of new digital technologies in adjacent sectors like smart cities is adding an extra dimension to the potential of smart grids

However, IoT environments such as smart grids utilize vast amounts of data from different sources, including high-resolution data from sensors. Companies must manage this explosion of data in terms of transport, storage and accessibility. Moving data from data sources to a data lake, where artificial intelligence (AI) and ML can extract actionable insights for grid management, has an inherent cost that grows with the volume of data collected and exchanged. Time and flexibility are also key aspects of data performance for grid management. Energy demand and supply can vary sharply over time, but demand and generation must match at all times to avoid a blackout. Achieving this match depends on data being collected and processed in real time.

Solving the utility IT challenge

There are two digital infrastructure models available to modern utility companies who want to leverage the benefits of IoT and ML: cloud-centric and edge computing. They address network latency, bandwidth, resilience, scalability and application security and privacy in different ways. But which one is better for utility companies?

In fact, utilities can gain real benefits by applying both models. By integrating their edge infrastructure with digital ecosystems available on a globally distributed interconnection platform such as Platform Equinix^®, utility companies can achieve an agile, distributed digital infrastructure for cloud and edge computing IoT applications. Edge infrastructure improves performance, costs and insights. Data processing is closer to data collection, which reduces latency and network transport cost. Proximity to the edge also enables real-time data exchange for local renewable energy markets and micro grids, while maintaining data sovereignty. At the same time, edge locations can be directly and securely connected to public clouds through Equinix Fabric^TM software-defined interconnection. This enables utilities to integrate real-time IoT data at the edge with cloud-centric analytics and ML for trend analysis over time and to improve AI models. It also provides on-demand burst infrastructure for both applications and data (i.e., extending the data lake).

A hybrid approach like this provides lower cost access to multiple clouds, more connectivity choices, and a simpler path for edge and cloud integration. By leveraging interconnection on Platform Equinix at digital core, edge and ecosystem exchange points, utilities can improve efficiency, expand digital services and unlock new value.

• Digital Edge: Extend IT capabilities to global locations at the digital edge to support your need for expanded reach, proximity, quality of the user experience, compliance and performance.
• Digital Core: Deploy digital (core) infrastructure in strategic hubs adjacent to dense network and cloud ecosystems to modernize IT systems while gaining efficiency and reducing cost.
• Digital Exchange: Discover, access and exchange data with partners, platforms and digital ecosystems on demand to innovate, collaborate and build new capabilities and services.

Learn more about how energy companies can leverage interconnection to drive better outcomes.

[i] United Nations, Secretary-General’s address at Columbia University: “The State of the Planet”, Dec 2020; IEA, Global Policies Database; RE100 Members, as of Mar 2021.

[ii] Our World in Data, Why did renewables become so cheap so fast? And what can we do to use this global opportunity for green growth?, Dec 2020.

[iii] IEA, Global EV Outlook 2020, June 2020.