Slowly, stealthily and almost unnoticed, energy utilities are transforming from engineering companies to technology companies. Where once the biggest technical challenges were electricity transmission, gas storage or the construction of bigger and better power plants, now they concern data and IT infrastructure.
When that happens, it stands to reason that data and IT infrastructure become some of the biggest cost centers or, at least, offer the biggest opportunities for efficiencies and improved business function.
And make no mistake, efficiencies and new business operations are exactly what utilities are looking for. This calls for a technological step-change that goes beyond tinkering around the edges and makes deep and broad improvements across their technological estate. That is precisely what cloud computing offers.
Cloudy on cloud?
Cloud computing is simply the delivery of IT services via the internet. Instead of buying huge IT estates to install multi-million pound software systems on and store untold petabytes of data, in the cloud model, the data and services are entirely handled by an external provider. This frees companies up to spend less on their IT infrastructure upfront, less on maintaining it and to worry less about having to update everything every few years.
For utilities, a typical current scenario is a collage of different IT systems of various different ages, function and design, spread around different corners of the business. But that’s true of a lot of different industries. How specifically can utilities stand to gain from cloud computing? As a starter, there are two existing and three imminent technology challenges that the cloud stands to transform for utilities.
ETRM and treasury risk management
Back-office systems like these are less glamourous, perhaps, than the business of generating power, but crucial nonetheless. Utilities today absolutely have to hedge against future price changes and ensure they can fulfil future contractual obligations (on both the energy supply side and the input commodities side, if both a retail and generating utility). They also need to monitor their credit and foreign exchange risks in order to run a tight and sustainable ship.
Large utilities will be familiar with energy trading and risk management (ETRM) and treasury systems used to manage and understand the risks involved here. They’ll also be familiar with the associated IT demands and intricate installation process. By shifting services to the Cloud instead, those demands disappear, and it becomes easier to keep systems updated and data flowing where it needs to.
In th near-future though, things are set to become exponentially more complicated for utilities in Europe. The smart grid is slowly morphing from in-the-ether buzzword to on-the-ground reality and with it will come data storage and analytics requirements such as the industry has never seen.
The smart grid will be all-encompassing eventually. But let’s start with just smart meters. The European Commission expects around 200 million smart electricity meters to be installed by 2020. If these send meter readings back to utilities every half hour, that’s 9.6 billion electricity meter readings every day. And then you have gas.
More than a utility
This influx of data creates both opportunity and threat to utilities. On the one hand, it makes new business opportunities possible. Smart meter data can form the crux of new services such as connected home technologies, time-of-use tariffs and energy saving solutions. This would allow retail utilities to elevate themselves from mere suppliers to multi-service partners – making customers stickier and potentially more lucrative. The threat is that more tech-savvy companies from adjacent industries get there first.
Balance in all things
A modern generation portfolio could include newer renewable assets, as well as gas and legacy coal generation plants. The utility may also own or have access to services such as demand-side response. At each given moment, that utility will have to decide how to meet its supply obligations. This involves balancing a lot of information. How much current demand can be met by sun and wind? Is there capacity to ramp up the gas or coal plant, if so how expensive are the input commodities at the moment? Would it be cheaper to cover some of it using DSR, or perhaps spot prices are low and the cheapest option would be simply to buy extra power?
It’s all a matter of bringing together huge amounts of data and advanced analytics. Utilities should seriously consider whether these functions are better built in-house or in the cloud.
And that’s just the tip of the iceberg. In all likelihood, there are going to be an array of other trends and developments that place ever-more intensive data demands on utilities. If they are to adapt and thrive, they’ll need to match the same intelligence and vigour they’ve poured for engineering challenges inro the IT field. That will almost certainly involve a gradual migration to the cloud.
About the author: Harry Nota joined OpenLink in 2012 where he was instrumental in building OpenLink’s Energy business across the APAC region. Since relocating from Singapore to London in 2014, Nota has been heading up new business sales in Energy and Commodities Sales for EMEA. Prior to joining OpenLink Mr Nota held several senior positions with some notable names in the energy sector