Is the missing link in utilities innovation a human one?

Until recently, ‘utilities’ and ‘innovation’ were not words that were typically synonymous with each other. But times are changing fast. The utilities sector is now characterized by radical transformation, and utilities are now on a countdown to change.

But technology is only part of utilities’ innovation story. Transformation as a result of changing consumer trends is perhaps just as profound as the impact that technology is having on the energy sector.True innovation will require utilities to take greater strides toward diversity

And understanding consumers, and what drives them, is one of the key areas in which utilities are still lagging. This is because energy consumers are diverse – and energy leaders, in most cases, are not. Essentially, this is an issue of firm culture; as the business landscape evolves, utilities must pivot to become more agile and inclusive from the ground up.

The findings of EY research into gender diversity at the world’s biggest utilities over a three-year period have not been encouraging. In 2016, women made up just 5 per cent of executive board positions of the top utilities by revenue. Since 2014, the number of women on boards has increased by a disappointing 1 per cent year-on-year. This means it would take the sector until 2058 for women to make up just 30 per cent of boards … that’s 40 years away!

Diversity goes far beyond gender alone, and we know that diversity of ethnicity, sexual orientation, socioeconomic background and age all make for the highest performing teams. Yet anecdotal evidence suggests that utilities are still primarily led by men from similar ethnic, social and educational backgrounds, and who’ve spent most of their careers in the sector.

Leadership lacking in diversity does not reflect the broad base of consumers that utilities serve. How can businesses understand a customer base that they cannot always relate to? In the future energy world, companies will grow value – not from the kWh – but from selling new products and services enabled by a digital grid platform. Getting under the skin of consumers is critical if utilities are to offer the kind of products and services that meet their needs. If utilities are unable to quickly determine what consumers want, they will lose out to those that can from other sectors, such as retail and telecoms.

Adoption of AI

Outside of the boardroom, technological innovation itself also calls for diversity. A lot of the innovation we are seeing across the sector is borne out of the data produced by businesses, which is used to automate decisions via artificial intelligence (AI).

However, there is a risk that a lot of this data could generate unconscious biases toward certain demographics, thereby potentially skewing the decisions themselves. The only way to overcome this is to build a diverse team that is trained to mitigate the potential for such bias.

Indeed, it is important that utilities equip their people with the skills and confidence required to lead and team inclusively to maximize everyone’s contributions. The workforce engenders a wide range of perspectives and solutions to the issues utilities are facing in today’s competitive landscape. By embracing the notion of making each employee feel valued for who they are and by what they contribute — regardless of their race, culture, lifestyle, gender or age — teamwork and innovation will result.

Lack of diversity and inclusiveness ultimately hinders utilities’ ability to effectively address the complex changes they face. Indeed, numerous studies prove that diversity boosts profitability, innovation and problem-solving. So just as disruption demands that utilities act fast and be bold in aspiring to develop innovative solutions, it is critical that their boards are sufficiently diverse to successfully drive that forward.

True innovation will therefore require utilities to take greater strides toward diversity – to attract more women, as well as people from a range of ethnicities and backgrounds with different and fresh perspectives.

We’ve seen the energy world make great progress in its adoption of technology: now it’s time to focus on the human element of innovation and build a better – more diverse – working world.Benoit Laclau is EY Global Power & Utilities Leader

Benoit Laclau is EY Global Power & Utilities Leader. The views reflected in this article are his views and do not necessarily reflect the views of the global EY organization or its member firms.

This article is an extract from a longer exclusive interview that will appear in PEi magazine later this month. Subscribe now to be sure of receiving your issue.

Utility transformation is a key topic of the conference programme at Electrify Europe in Vienna in June. For more details click here.

 

 

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LightFair 2018: Reflections on the Ever-Changing Lighting Industry

The annual LightFair trade show and conference is always an interesting measure of where the lighting industry is headed, as many exhibitors showcase new products still a few months away from their official launches into the marketplace. Over the past 20 years, LightFair has reflected the rapid penetration of LEDs into virtually all niches within the lighting market. The transition has been nothing short of remarkable.
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Siemens Gamesa wind turbines destined for Japan

Siemens Gamesa has been contracted to supply two wind turbines to Japan, adding to the existing install base in the country.

Both nacelles and hubs will be manufactured in Denmark, while the blades will be produced in China and Denmark.

Siemens Gamesa logo
The turbines will be delivered in 2018-19 and the first batch has arrived at the port in Hokkaido last April. Siemens Gamesa will also handle the operations and maintenance services at these facilities for the next 20 years.

Álvaro Bilbao, CEO of Siemens Gamesa’s APAC Onshore said, “Siemens Gamesa is strongly committed to the Japanese market. We were pioneers in this market and we have established ourselves as the leading supplier thanks to our ability to adapt to our customers’ needs”.

Since entering the Japanese market in 1999, Siemens Gamesa has installed 188 wind turbines in the country (more than 323 MW). The company is also an active player in the operation and maintenance segment.

In addition to Japan, Siemens Gamesa’s footprint in Asia Pacific extends to China, South Korea, Indonesia, the Philippines, Thailand, Vietnam, Australia and New Zealand, where it has already installed more than 6.6 GW.

 

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Blockchain: From disruption to new business models

Blockchain has the potential to change the business world as we know it today. Entire value chains can be shortened by it – including in the energy industry.

In the field of renewables, this shift can lead to new business models, from peer-to-peer trading to flexibility schemes or investment incentives to name just a few. Although startups and even classical utilities are increasing their efforts in developing blockchain-based applications and processes, nevertheless the number of scalable case studies is marginal right now and developers have difficulties realising their promising ideas.

So how does the blockchain vision translate into the world of energy, utilities and renewables?How does the blockchain vision translate into the world of energy, utilities and renewables?

As a digital transaction system that allows for secure data storage and execution of smart contracts in peer-to-peer networks, blockchain can eliminate the need for intermediaries in transactions. Instead, they are performed peer-to-peer in near real time, as integrity and security are guaranteed by the blockchain.

From an IT perspective, blockchains solve the double spending problem – a phenomenon of the current state of the internet where a copy of each set of data is sent from server to server when information is transferred. For any transaction system this issue needs to be eliminated, which so far has been the job of trusted institutions.

By taking over this task blockchains make any intermediary superfluous and are therefore referred to as the Internet of Value – an evolution of the current Internet of Information. A next step might be the application of blockchains in the energy sector as the Internet of Energy, which leads us to the ever-growing startup scene around the technology.

Blockchain technology gained relevance for the energy sector at the beginning of 2016 with an experiment in Brooklyn, New York, when owners of PV systems sold their power in the neighbourhood using the Ethereum blockchain without a utility.

A recent survey indicates that today, around two years after the launch of a major blockchain microgrid research project, there are 122 organizations involved in blockchain technology and 40 deployed projects. Between Q2 2017 and Q1 2018, over $300 million was invested in the blockchain in the energy industry.

While it is still much too soon to speak of a triumph as blockchains must continue to evolve, the technology has the potential to radically change the energy industry. It provides the opportunity for new or more efficient business models and thus the opportunity for entirely new companies entering the market.

Starting points

The years 2015 and 2016 were starting points for blockchain in the energy sector. The last month was marked with relevant infrastructure layers like the Tobalaba test network of the Energy Web Foundation or IOTA – a blockless distributed ledger, so in the coming years we will see numerous rollouts of new, relevant application layer and business models.

There are at present many new players who are currently developing entirely new areas of value creation, with a variety of startups and established utilities working hard to test blockchain technology. These possible platforms and distributed database systems are striving for acceptance in order to become the leading player in the decentralized world.

Following the example of over 70 banks and financial institutions and their R3 consortium, utilities could also attempt to enable a decentralized power grid and compensate for lost revenues by providing the business platform as a service via such community chains — a kind of consortium. Since the consortium’s participants are known and thus have a particular level of trust to each other, the integrated governance of these kind of blockchains is much easier than for free accessible public blockchains. This, in turn, also leads to the advantage of a less energy intensive performance.

There are many indications that blockchains will gain a foothold in the energy sector — an efficient decentralised energy world requires appropriate decentralized technologies. Blockchains could represent and execute various business processes of the energy world and would be an ideal instrument for IoT devices to manage their transactions.

Blockchains are also useful as a trust-building element to provide transaction logs for energy to manage power flows and the accounting of cellular systems, automate proof of origin, enable P2P trading and the administration of asset registers. Companies and foundations are currently developing the next generation of blockchains for the energy industry, which protect privacy, are fast enough, and have the usual interfaces.

For a wide implementation, developers still struggle to identify the specific business model for the different use cases and simultaneously comply with regulatory requirements. A tremendous regulatory hurdle is the European General Data Protection Regulation and the right to be forgotten. Blockchain is actually not designed for meeting the current state of regulation since one of its major features is immutability. Another hurdle is the handling of personal data. With peer-to-peer deliveries one can draw many conclusions on the personal behaviour. From this aspect a way to aggregate and de-personalise data has to be found. In addition, energy law varies from country to country, which means that the application must be adapted to national law or national law has to assimilate to the principles of blockchain.

Euphoria and reality

In truth, blockchain technology can barely justify the current hype around it. Blockchains are not a panacea, but should rather be seen as one of many technologies that could form the basis for next-generation service infrastructure in the energy sector.

Many digital services are already possible today without blockchains. While many ideas are being developed around the technology, a clear direction of where and with what economic benefits blockchain-based applications could be used is still far from apparent. Most of the current applications are attempting to solve fractional parts of the energy market problems, being far away from the often-named vision of a blockchain of everything.Blockchain has the potential to change the energy industry

Meanwhile, research and use would clarify limitations of the technology in the state of the art, for example, limited rate of transactions, long response times between the connected network peers, or the ever-growing volume of data. We are currently experiencing a phase where the blockchain energy pilots from a few years ago are under pressure to deliver concrete results and pathways for commercialisation.

The blockchain euphoria alone is not sufficient to maintain the funding for projects in eternal proof of concept stage. Therefore, the priority at the moment should be to prove the existence of a viable business model by focusing on a real, existing problem that consumers or energy actors are facing.

Disruption vs Enabling

Although utilities should actively engage with blockchain technology, there is no reason to be alarmed as the technology is still young for use in the energy sector. Blockchain technologies work wherever transaction costs exceed the transaction value – for energy trading, processes in high temporal resolution (real-time energy economy) become necessary. However, both the related opportunities and risks are already apparent. They should be examined with respect to each company’s own position and strategy in order to derive strategic options. For the majority of companies, the fast-follower strategy is possibly the most appropriate one, but future-proofing the business is even more important.

As with any new technology, the existing market players should invest time and resources to understand the potential and develop use cases. The incumbents can be disrupted if they stop innovating and adapting to new business models. A number of European utilities have understood this and they are actively researching this area.

Another relevant question that remains unanswered is “will blockchain enable a renewable future?” Interestingly enough, the majority of the existing projects, especially crowdfunding-focused startups, are somewhat exaggerating the greenness in their communication.

Despite this, the reduction in market friction by the future blockchain application will have a positive impact on the future of renewables. The current electricity market is still struggling to integrate a high share of intermittent generation and operate the grid in a smarter way. The blockchain applications that we are seeing today could create the basis for a more digitalised and automated market where it will be easier to trade flexibility, cheaper to balance intermittent generation, or perhaps even remove the need for balancing by implementing real time nodal pricing.

Although the technology is not yet sufficiently scalable and regulatory hurdles have to be overcome, these examples set the vision for a number of passionate players to develop the market of the future."

Stephen Woodhouse, Chief Digital Officer at Poyry, is one of the speakers in the Blockchain Arena at Electrify Europe in June. To register click here.

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Why data is key in the energy convergence

As a partner specialising in emerging energy and greentech markets at international law firm Pinsent Masons, Peter Feehan has a bird’s eye view of the changes that are sweeping the energy sector.

He and his colleagues are helping power and utility companies adapt to the blurring of lines between the traditional energy arena and an increasing number of so-called disruptors.

“We are in interesting times,” Feehan tells me. “The energy sector has never been more exciting. We are seeing a very changing landscape across all the sectors that form the energy environment.

“There is a real shift in terms of dynamics. In conventional power, it’s moved from efficiency of kit to looking at how quickly machinery can be started.

He says this need for speed has come about “as a result of the way that we are utilizing power. People are more immediate now in their power demands. It’s not about baseload now – it’s about how companies can respond to price signals.”

He says there is no “predefined shape around the usage of power” – it’s more localized.

“A lot of the power now is at a more distributed and localized level. There’s a changing landscape in how we are using power and there’s a changing landscape around where that power is generated. And there’s changing demand profiles as well. So somehow all generators, infrastructure providers and energy suppliers have got to respond to that.”

He says that how companies plan a strategy for that response depends on the size of that company.

“Each of those market segments that make up the energy sector are trying to respond in the best way that they can. What we are finding is that the pace of that change is very rapid, and the ability to respond to those market changes is difficult at times, given the size of some companies that need to maintain shareholder value and investor confidence.

“Given that some of the larger players in the power market can’t move as quickly as some of the disruptors, we are seeing a convergence in the marketplace between the energy sector and the tech sectors.”

He says it would “be imprudent from an investor profile for big energy companies to go head-first into these new markets”, so instead they are looking at joint ventures, partnerships and even acquisitions where appropriate to respond and keep ahead of the market change.

He explains that what established energy actors are trying to do is “work out where they best fit in the energy landscape. What is their play? Is it around agility in retail and commercial supply? Is it around operation of assets? Or is it asset ownership?

“In the European marketplace it is very much a sense of ‘where best do we see the future of our business’? Tech acquisition or partnership is a part of that. Utility players are considering how they best resize and reshape their business to respond to market pressure and forces.”

He says the energy sector is essentially asking itself one key question: “Is the way we have done things for the last 100 years a market that is future-ready for the next 100 years? And do we need to perfect that marketplace in order to respond to these greater challenges?

“The key to all of this is actually understanding more how we use energy – and that comes from the data. Only once we better understand how we use energy can we deploy assets at the distributed level, as well as at the transmission level, far more effectively, both in the marketplace and indeed from an energy solutions position. The use of data has increased in tandem with the need for more technical solutions and the need for an ever-smarter grid.

Peter Feehan is speaking at Electrify Europe in Vienna in June, alongside several other energy lawyers from Pinsent Masons. For more details and to register, click here

This article is an extract from a longer exclusive interview that will appear in PEi magazine later this month. Subscribe now to be sure of receiving your issue.

 

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Norway presses ahead with CCS development

The Norwegian government has announced that it will invest
an additional $34m in developing its carbon capture and storage (CCS)
capability. The funding is aimed at the country’s large-scale industrial CCS programme.

The Carbon Capture and Storage Association has welcomed the news with Dr Luke
Warren, Chief Executive of the CCSA, commenting, “ “We are encouraged to see
that the Norwegian Government has today moved a step closer to realising a
Norwegian industrial CCS cluster.”

The commitment to further studies for both the Norcem cement plant and the
Klemetsrud waste-to-energy facility is globally significant – as both of these
would represent world-first low-carbon industrial projects through CCS,
enabling these industries to contribute to clean growth.

Norwegian CCS project

“The Norwegian Government will also take forward the development of CCS
transport and storage infrastructure on the west coast of Norway. Developing
CO2 storage assets for Europe is of vital importance to meet Paris Agreement
climate targets and to decarbonise some of our most important industrial
sectors.”

The Norwegian government proposes to fund FEED studies (Front End Engineering
and Design studies) with $9.8M in 2018. The total funding for the demonstration
project in 2018 amounts to $34m, including funds transferred from 2017. The
proposed funds for 2018 will cover FEED studies of CO2 transport, storage and
up to two capture facilities.

Both the Intergovernmental Panel on Climate Change (IPCC) and
the International Energy Agency (IEA) point to CCS as a necessary option to
reduce global greenhouse gas emissions in line with the climate goals at the
lowest possible costs.

The UK is due to publish its CCUS Deployment Pathway by the end of this year. The
CCSA asserted that Britain must ensure that this Pathway delivers a strong new
approach to CCS that places the UK alongside Norway as a global leader in this
vital technology and makes full use of the UK’s expertise and strategic CO2
storage assets.

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Doosan signs up to providing energy storage systems

Doosan has signed a contract with SK E&S, a Korean gas and power company, to deliver a power demand management energy storage system (ESS) facility.

Doosan Heavy Industries & Construction will be responsible for supplying the ESS, and SK E&S will handle the investment and operation side. The company will be applying its ESS control software technology and engineering capabilities to handle the entire process starting from design to equipment and material supply and construction. The 70MWh ESS is expected to be completed by September.
Doosan logo
The Korean engineering giant will be working together with SK E&S to implement a FEMS (Factory Energy Management System) and solar power plant as part of its efforts to establish a factory-based microgrid operation, while also pursuing an energy efficiency demonstration project.

In addition, Doosan Heavy’s US-based subsidiary, Doosan GridTech, signed a contract with Consumers Energy to implement an ESS at a substation in Kalamazoo, Michigan

Doosan Heavy is also rolling out the solar power-linked ESS at the sites of its major affiliates. Following the construction of a ESS-linked solar power facility at the learning center of its Changwon headquarters last year, it started on the construction of a 3.5MW solar power plant linked to a 8MWh ESS at the main building and main entrance area at the Changwon headquarters, as well as at Doosan Infracore’s Gunsan plant.

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