World energy issue monitor: 

The digitalization of energy systems worldwide has risen from nonissue to top priority in a relatively short time, according to Christoph Frei, Secretary General of the World Energy Council (WEC). Some aspects like mobile clouds are already well accepted, while new technology like blockchain raises hopes and concerns alike.

 

by Marc Engelhardt

Change in the world of energy is coming at an astonishing speed: What a difference five years can make, Christoph Frei can’t help but marvel. “Digitalization wasn’t on the global map back then, for most energy leaders it simply was an irrelevant issue,” the Secretary General of the Council recalls. “Today, five years down the line, the picture has completely changed: Digitalization is a solid issue that energy leaders are interested in and dedicated to.”

 

That reflects in the key issues that keep the global energy elite busy. Some of them are intuitive, like energy efficiency or renewables being among the global top action priorities, based on data from more than 1,200 energy leaders exceeding 90 countries, as well as over 100 innovators in the Council’s latest World Energy Issues Monitor.

Big opportunities and some concern

The fact that mobile clouds have joined the top priority list might come as a surprise to some, if not to Frei. “I think that energy leaders have understood the opportunity of mobile clouds in electricity solutions, and at the same time concerns have diminished due to the fact that there are already many business cases successfully in place.” That is, for instance, the case in rural electrification where cloud-based data solutions have been helpful for some entrepreneurs who have created new business models. Frei explains, “The technology and its uses have proven themselves.”

 

However, challenges remain. When asked what keeps energy leaders awake at night – apart from obvious concerns like global growth or commodity price volatility – blockchain technology features on top of the list. “I have to say I was surprised about that finding: You might have expected such a prominent importance for blockchain in Europe, North America or Eastern Asia, but what we have found is a clear position all over the world map,” Frei remarks.

 

Frei sees energy managers torn between the potential massive opportunities on the one hand, and potential risks on the other. “If you say that blockchain is the key to unlock the decentralized Internet of Things (IoT) in energy, then that beautiful vision requires more progress in some technologies, but mostly in regulation.”

 

The challenge according to Frei is both technical and cultural, requiring massive regulatory changes from governments. “But while some developments in blockchain might be uncertain, we’re at a stage now that we can see matured use cases which companies take to application, so for an energy leader the moment to actually get his hands dirty with things is now.”

A shake-up and Uberization

According to Frei, energy leaders can learn from start-up innovators, who surprisingly share the same priorities as established energy leaders: Renewables are their top action priority, while blockchain is the most important concern for them as well. “But even if you recognize that digitalization has become so dramatically more important to energy leaders, start-ups have even more absorbed digitalization as the key enabler of their business models, it’s vital for them.”

 

While start-up businesses are often disruptive in nature, energy leaders are looking rather for improvements of proven business models and enabling the integration of renewables, i.e. in e-mobility. “However, the transition has lately been of a speed that the energy industry also feels this sense of urgency and a shake-up in innovation that hasn’t been seen before.” For energy leaders, the key question today is how, and not if, to innovate. According to Frei, “Do you ramp up your whole company? Do you create a venture or do you organically put innovation in place? Those are the types of questions we see.”

 

In a process he calls the “Uberization” of energy, he sees a clear trend that those companies who have the trust of the consumer, as an aggregator, will secure the biggest reach. “We’ve seen that in other industries, and the same will happen in energy: It’s critical to be close to your client, to make sure you understand the dynamics and then to build your business model around that, be it big data, blockchain or other enabling services.” That is potential good news for established energy players with a sound customer base, despite the fact that a lot of competition is coming up.

It’s critical to be close to your client, to make sure you understand the dynamics and then to build your business model around that.

Christoph Frei, Secretary General of the World Energy Council

 

 

In a process he calls the “Uberization” of energy, he sees a clear trend that those companies who have the trust of the consumer, as an aggregator, will secure the biggest reach. “We’ve seen that in other industries, and the same will happen in energy: It’s critical to be close to your client, to make sure you understand the dynamics and then to build your business model around that, be it big data, blockchain or other enabling services.” That is potential good news for established energy players with a sound customer base, despite the fact that a lot of competition is coming up.

Resilience remains key

The same goes for resilience strategies, which Frei says are needed to weather the storms to come. And that can be understood quite literally, since extreme weather events remain one of the three most potent challenges for the energy industry, Frei emphasizes. “This is a trend we have seen continuing over the years, think of massive hurricanes affecting energy infrastructure – if anything, we have seen a further acceleration of extreme weather events.”

 

In an earlier interview with the Magazine for energy leaders, Frei spoke of a staggering fourfold increase of extreme weather events over the past 30 years. “An engineer who built a power plant some 30 years ago might have accounted for security margins, but not in the size of factor four!” Frei called for resilient energy systems, which bend rather than break, including individual black starting capabilities for critical components.

 

Frei emphasizes that the energy-water-food nexus remains another prominent challenge, with water shortages in cities like Cape Town, Beijing or Moscow showing the urgency of the issue. “The growing concern about water availability will ultimately affect everything in energy terms, because 98 percent of electricity supply directly depends on access to fresh water.”

 

Finally, there’s cybersecurity, a challenge that has been highlighted in political discussions recently, but more action is needed, Frei warns. “A lot of effort has been put into better cybersecurity for the energy infrastructure, but not enough: I’m afraid it might need a massive cyberattack to reach the necessary breakthrough.”

Christoph Frei, born in Switzerland in 1969, has been at the helm of the World Energy Council WEC since April 2009. With more than 3,000 members from government, private, and state corporations in over 90 countries, the World Energy Council is the biggest network of leaders and practitioners in the energy field. Its aim is to provide information for energy strategies on all levels, focusing on three main challenges: energy equity, including access and affordability; energy security and growth; and environmental sustainability, including mitigation and adaptation.

2018-08-16

Marc Engelhardt reports from Geneva on the UN and business news.

Picture credits: WEC

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