The energy industry is going through a massive transformation and a turbulent time. The sector’s incredible overhaul includes reducing dependence on fossil fuels, increasing and integrating renewable energy sources and decentralising energy grids whilst delivering on ambitious net zero goals. At the same time, the Russian invasion of Ukraine has shaken the markets and geopolitics of energy – driving oil and gas prices to their highest levels in nearly a decade and forcing most countries to reconsider their energy supplies.

What an exciting and equally terrifying time to be part of the sector! The profound impact of the war on a lot of Europe’s energy supplies means reducing reliance on natural gas. Whilst energy security has moved to the top of the agenda, there are incredible opportunities ahead for the sector. But transforming the industry is not going to be easy. One thing is for certain - change must happen, especially if the current players want to stay relevant in an increasingly competitive sector.

Often referred to as the fourth industrial revolution, digitalisation is already playing an important role in the sector’s transformation and will be absolutely critical in powering the sector’s future ambitions. It has an impact along the entire energy value chain from generation, transport, distribution, supply and consumption through to the end user customer experience. I want to look at three key areas where digital has an essential role to play.

Introducing fossil fuel production to the digital age
Since their discovery 4000 years ago hydrocarbon fuels have changed the world – and they’re not going anywhere fast. Despite the race to net zero, fossil fuels still supply over 80% of the world’s energy. Whilst the priority is to replace them with low carbon renewable sources, the next pressing priority must be streamlining hydrocarbon operations, driving operational efficiencies and cutting down on production related emissions.

The oil and gas sector has a relatively long history with digital technologies. Data holds the key to the greatest potential to enhance and streamline operations and to generate new services and opportunities, as well as to drive efficiencies for frontline workers. It’s estimated that for the oil and gas sector, widespread use of digital technologies could decrease production costs between 10% and 20%.

Digital technologies are also being applied throughout the coal supply chain – to reduce production, maintenance costs and planned interventions, as well as improve stability and enhance worker safety. When it comes to power plants, digital technology can be applied to reduce unplanned outages and downtime and extend the operational lifetime of assets – generating predicted savings in the order of USD 80 billion each year between 2016-2040.

For BP the transformation of the industry means redefining what the future of the organisation could look like and quickly driving value through modular functionalities and digital accelerators. Working with our partner Accenture BP is driving the energy transition by optimising productivity of its frontline workers. Digital innovations introduced in Australia include mobile enabled field workers using wearables and voice enabled inspections to improve the process.

RWE AG, one of Europe’s leading energy providers is investing €1.5 billion a year in renewables. We’ve been working with RWE to deploy a new cloud-based work environment that will provide the perfect foundation for building an agile enterprise using innovative digital technology.

Driving the clean energy agenda
With half of the UK’s nuclear power plants set to retire by 2025, demand for low carbon energy is increasing at a phenomenal rate. The UK’s low carbon economy could grow by an estimated 11% per year between 2015 – 2030. That’s four times faster than the rest of the economy! Whilst this presents many exciting opportunities for the sector and the planet, there are also many challenges ahead – challenges that digital technology are already addressing.

Technologies such as AI and digital twins can help run simulations of future energy systems, operations and production environments, as well as eco-systems and entire cities. They are also helping to integrate intermittent renewable energy sources into the grid by making it easier for prosumers to store and sell surplus energy. Digital twins are being applied to wind farms – to improve operations, maintenance and reliability and potentially increasing the annual energy production by up to 20%!

Digital twins sit at the heart of our work to drive sustainability and culture change with the UK’s premier low carbon power firm, SSE Renewables. The company is using real-time data to monitor local wildlife populations to understand the effect turbines have on local wildlife and systems. Currently, energy companies rely on manual ways of collecting data on how windfarms affect local environments, which can be inaccurate and quickly become out of date.

We’ve created digital twins of offshore windfarms and their local environment, designed to help the sector to develop renewable energy solutions that have a positive impact on ecosystems. The huge amount of data from monitoring devices is used to build a digital replica of sites that can be viewed on mobile devices and headsets to help SSE Renewables understand how a development is affecting an area in real-time, in addition to monitoring the ecosystem through the lifecycle of the windfarm to minimise any negative impact.

We have also been working with Hinkley Point C to help EDF realise its low carbon ambitions. When the new Hinkley Point C (HPC) station opens it will provide an estimated 20% of the UK’s electricity. We’re helping HPC to leverage the cloud to migrate and transform its existing applications and enable the development of new solutions.

With the International Energy Agency listing more than eighty technologies related to the digitalisation of energy – of which a third are still at the prototype or demonstration stage and a third only in early adoption, the future looks bright for the sector’s low carbon ambitions.

New markets, collaborations and partnerships
Decarbonisation, decentralisation, electrification and ever evolving customer expectations have forced the industry to undergo a paradigm shift away from a century of siloed thinking. More competition, more complexity and less predictability means that to survive and thrive in this bright future, power and utility companies must raise their game and achieve new levels of performance. If we are to see the step change that is required they must develop new capabilities, transform their working environments and form new partnerships. We are already seeing cities and countries forming strategic collaborations and joint venture agreements to accelerate international net zero goals.

Whilst courage is required to take on the complexity of these new partnerships, the return for the community and the planet must drive these collaborations and initiatives. Digital’s role in the formation and creation of new markets and partnerships will be significant and essential given the increasing intensity of the war in Ukraine. Perhaps the greatest transformational potential for digitalisation is its ability to break down boundaries between players within the sector and external organisations and communities. From leveraging hyperscalers cloud platforms to develop new digital services, to building data platforms that provide application and workplace services to empower collaboration and creation, digital technology will deliver the foundation for future success.

Transforming the energy sector is one of the biggest and most important challenges we face today. Overhauling the sector, won’t be easy, but by embracing digital technologies to improve processes, empower employees, generate efficiencies and improve the customer experience, utilities and power companies stand to reap colossal rewards.

Find out how Avanade can help you succeed in this ultra-competitive market with Avanade’s energy and utilities industry solutions.