Five Ways Digital Transformation Impacts the Energy Industry
By Sean Baird, EMC Corp.
The energy production and distribution industry is changing. Oil and gas, coal, hydroelectric, nuclear, solar, electricity delivery and others face numerous challenges. Whether from oil prices dropping, the pressure to generate power from renewable energy sources or increasingly complex government regulations, today’s energy businesses encounter realities that are forcing new approaches to decades-long operational practices. To meet these challenges, organizations are looking for a fresh perspective on old problems; they are looking toward a digital transformation.
Adopting a digital transformation in the energy industry over the long-term makes sense: it promises to increase operating efficiencies and revenues while reducing operating costs. Current and critical business dynamics, however, are forcing companies to confront these challenges today. Companies are becoming much more interested in understanding what they can do to quickly digitally transform themselves and become more efficient, and ultimately profitable, organizations in the present.
This is a large undertaking for energy organizations, which frequently cannot keep pace in all facets of their business as technological innovations impact the entire enterprise. Power plants, extraction facilities or oil platforms that have been in the North Sea for decades might not have experienced significant technology and digital upgrades since they were constructed. Employees who have operated these plants for decades, relying primarily on the “tribal knowledge” of peers, aren’t receiving or taking advantage of technology to improve their efficiency.
While many areas have been identified as important factors by analysts, energy industry experts and other consultants, there are five key areas where the digital transformation is either forcing the energy industry to react or providing opportunities for the industry to transform itself:
1. Improving Customer Engagement
As with many other industries, the most pressing need for energy businesses is improving the ways it interacts with its customers. In 2014, an Altimeter Group study found that only 25 percent of companies surveyed have a clear understanding of the new digital possibilities and their applicability for their businesses. In addition, the study determined that nearly all of these same companies-88 percent of respondents-were aware that their businesses were undergoing digital transformations of some kind.
These findings are true for the energy industry. As the industry struggles with many of the previously discussed issues, customers are increasingly demanding that their utilities raise the bar with respect to customer interaction, real-time support and more, giving companies the opportunity to build a digital relationship with their customers.
Whether helping customers to understand a company’s offerings, simplify billing, providing better tools and insights that enable customers to make better choices or launch new touch points, allowing customers to better interact with customer service and support teams, customer engagement is an important facet of a company’s digital transformation.
2. Ensuring Regulatory Compliance
Digitizing information so it can be kept up to date and produced electronically improves facility management and helps keep operations compliant. When an operation incident that might require regulatory scrutiny occurs, companies that can’t produce standard operating procedures, specifications, historical data and additional information required by regulatory agencies often face heavy fines.
By transforming information from physical to electronic and then implementing a solution that allows document controllers, operators and design engineers access to that electronic information, organizations can ensure that data will be current and readily available to respond to regulatory inquiries when and if needed. This will not only reduce future fines, but can allow reductions on existing fines if information management improvements are made.
3. Establishing Intelligent Operations
With digital asset management comes the ability to more effectively use asset information, data and analytics to predict asset performance, identify changing conditions and evaluate investment options through real-time monitoring and data aggregation. As it applies to oil and gas pipelines, electricity distribution and smart grid, digital transformation principles promise to improve fault isolation and outages, optimize performance and more effectively integrate distributed assets. Real-time data analytics, increasingly available through cloud-based technologies, enable operators to more effectively manage real-time challenges, as well as to predict appropriate actions to improve productivity, anticipate maintenance requirements and identify fault locations and causes.
In addition, advanced analytics and integration with asset management tools provide more insight in market demand and corresponding productivity requirements. By increasing focus on customer requirements and patterns, companies can optimize their demand response and, ultimately, increase their revenues.
4. Increasing Worker Productivity
When workers have access to the latest information, they can verify that they are executing properly. Energy companies must look at how technology can provide better information to engineers and digital field workers, driving greater efficiencies through more effective work requirements, improved planning and scheduling and better logistics optimization.
Work order and information management solutions are critical to enabling these efficiencies and reducing the ad hoc and tribal knowledge on which many operations still rely. As the time to perform these operations decreases and there is less unplanned downtime, the overall organization becomes more productive.
5. Taking Advantage of the Cloud
Energy industries have lagged somewhat in overall digital transformation, but they appear especially slow in moving toward cloud technology. Some of this is understandable. For example, in the nuclear industry it is forbidden to put some content in the cloud. There is, however, an increased willingness to consider cloud technologies for managing information to help improve collaboration between various teams that are working on large-scale projects.
Building power generation plants, transmission lines, solar farms, windfarms and other complicated capital projects can involve hundreds of different companies. Instead of using email, FTP sites or even burning a DVD to send information, companies now are seeing the benefit of the cloud to rapidly share and collaborate, saving both time and costs.
Strategic IT investments enable physical assets to connect with the virtual environment. Business solutions and tools allow energy companies to create transparency across their daily operations. Digital transformation is not about just being able to see what is happening across an organization but also to allow control and predictive response to operations to maximize efficiency.
Sean Baird is director of product marketing at EMC and leads energy and engineering industry solution marketing and market development for EMC’s Enterprise Content division.