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How the Internet of Things could change the energy market

How the Internet of Things could change the energy market

One of the most important technological developments currently transforming society is the rise of the Internet of Things. No longer are laptops and phones the only devices connected to the internet. Smart appliances are taking over the home with smart dishwashers, TVs, fridges and more entering the market.

These appliances can be programmed to run when energy is at its cheapest or when a consumer is generating surplus energy and doesn’t need to buy any from the grid. This function, alongside the advent of the smart grid, rooftop solar and energy storage, is enabling customers to take control of their energy consumption, generating their own and trading it with each other to balance supply and demand across their communities – making a profit while they’re at it.

Of course, this is a threat to traditional power producers’ commercial interests. But they must not shy away from the challenge. They should dare to be digital. Because it’s only by embracing transformation that the energy industry will be able to meet consumers’ demands for affordable, sustainable and reliable energy on-demand now and in the future.

If the power sector gets it right, digitalisation could have a huge impact on the way the industry operates. But such change can’t be done half-heartedly.

What is digital transformation?

Digital transformation is more than just implementing technology; it is also about people and processes that enable you to reshape your business models in order to provide more value to customers. This entails using data and analytics across an extensible platform to generate insights, drive better decisions and deliver business outcomes. More importantly, it is now about being able to adapt quickly and continuously improve across the electricity value network, from generation, to grid, to consumption.

A power business could begin by connecting and capturing existing data already streaming from its equipment in order to understand the health of an asset, predict when it might fail and schedule preventative maintenance accordingly. The company would then be able to both more accurately forecast, and so increase, its availability to the market and reduce maintenance costs by fixing issues before they arise.

This approach could begin to play into a broader business strategy that isn’t about implementing single solutions but aims to use an IIoT (industrial internet of things) platform to tie them together – yielding aggregate gains as small efficiency improvements add up to much bigger benefits.

Such an approach can be gradually improved over time. Digital systems enable the mass roll-out of new solutions. Historically an employee might find a fix for an issue using Excel or a home-grown solution.

But that ingenuity wouldn’t be disseminated more widely across the business. Connected companies can quickly share solutions so that good ideas can have a great impact.

More importantly, digital transformation can help businesses build better relationships with consumers. And this doesn’t mean merely capturing customer data to send them a birthday message. Already we’re beginning to see simplified billing statements delivering real value to consumers. But it’s the next step that is really exciting.

Digital connectivity and the IoT means that power providers can measure the energy usage of individual appliances and notify consumers if something goes wrong. So if the freezer in a smart home shuts down for a few hours when a customer is at work, technology exists that could let a business inform them that their food may not be safe to eat. Utilities providers should want to play that role.

That is the sort of value-add that can make a real difference to consumers’ lives – and move energy businesses away from selling kilowatt hours towards becoming a service provider at the centre of modern home life. But power providers will need to be bold in rolling these services out if they’re to seize the opportunity.

Taking the plunge

Of course, change is never easy. Especially without regulatory guidance. But on the other hand, it’s difficult for governments to regulate something before they have seen how it works. The industry shouldn’t wait for governments to tell it what sort of industry to develop. It should take the opportunity to carve out the space in which it wants to operate. In short, it should take the plunge. Regulation will follow.

Many businesses are understandably daunted by the scale of the challenge. But going digital can start with the low-hanging fruit that both keeps regulators onside and provides an immediate return on investment. Such returns should become apparent before long. Many available cloud solutions are relatively quick and cost-effective to implement – and don’t take long to pay for themselves.

The real risk comes from the potential cost of lost opportunities. Power providers have been presented with an opportunity to not only improve how they utilise and operate their generating assets, but a unique chance to provide their customers with new and real value-adding services– becoming a central part of their lives in the way that the banks and tech giants have. Sooner or later, somebody will seize it. Energy businesses have no choice but to be bold.

As the old saying goes, ‘who dares wins’.