Why digitalisation is a key enabler of the energy transition


Smart Energy International caught up with Frauke Thies, executive director, smartEn, to talk about digitalisation and the session she will be moderating during European Utility Week. Read our interview with her below.

Digitalisation has become a key focus in the utility sector. Why is this so important at this particular time in our history?

I think it’s clear that our energy system has to change and is undergoing a big energy transition at the moment. And much of this wouldn’t even be possible without digitalisation.

Whether it’s to integrate decentralised renewable energy sources, to activate and unlock the flexibility to complement the increasing variability in the system, to enable people to choose the services that they need, or help them become active participants in the energy system with their own projects, with their own resources. Digitalisation is essential to keep this increasingly decarbonised, decentralised energy system running in a stable and affordable way.

From a utility perspective – it allows them to monitor the system, to determine where there’s pressure and to procure the services and solutions that they need in order to keep the system running.

Obviously much has been said about the benefits of digitisation but where is it that utilities should actually be exercising caution?

There are general elements that are always mentioned – cybersecurity and data protection or privacy. Of course, these are of very high importance. I think there’s at least a lot of awareness in the utility sector – especially when it comes to cybersecurity – that all necessary measures need to be taken in order to minimise that risk; even if it will always be a challenge to identify and take these measures. I think there’s another question beyond these two very typical ones. And that is the question of who controls data and information and how it is used. From a market participants’ and flexibility providers’ perspective, digitalisation and data collection shouldn’t lead to a situation where you have one mighty entity that makes arrangements with individual market players but instead, should enable an open, transparent and nondiscriminatory market.

Digitalisation should enable the utility to collect the information that it needs for its system and then go to market and say: “Here are the problems I need to have fixed” and then it should be the market providers who offer their solutions.

When it comes to the issue of who owns the data, what is the current thinking in the EU?

What’s always said is that the customer owns the data and service providers should be able to access the data based on the customer’s consent. In practice, some utilities and suppliers have relevant data access by default, which is less obvious for other service providers.

So, is it less about who owns the data and more about who is allowed to use that data?

Yes, that’s a very good way of framing the question. The use of the data should be fully non-discriminatory. That means that if, for example, a system operator collects data there should be equal access to the data for all service providers that the customer may choose to work with. And this is a challenge in the European system, especially in cases where unbundling is not implemented. This needs to be very carefully monitored to ensure privileged access to data for integrated companies.

There is also a difference between the types of service providers. In the past, energy suppliers got data simply because they were seen as the only party interacting with customers. Today we have various service providers that the customer may choose to interact with – be they aggregators of self-generated power or demand response, or both, or other types of service providers – and they need equal access conditions as the suppliers. The new European Electricity Directive creates some clarity in that direction.

Is the concept of a central market system similar to what they’ve got in the UK with the DCC and in the Netherlands and Belgium likely to become the default operating model?

Yes and no. Generally ‘yes’ in terms of creating equal access conditions for all market participants, but there will be different ways in which the system is set up and operated. We see examples where there’s a central data hub that’s operated by the system operator or by an independent operator, or there are decentralised systems of data collection and provision. Whatever the setup, it needs to be fully neutrally managed and provide equal access.

How can regulation help facilitate digitisation? And is regulation needed?

Yes, the right regulation is needed, and I think regulation plays an essential role. But when we talk about regulation, I’m thinking not just about regulation of digitalisation itself. Of course, there is some needed as well, especially when it comes to issues like cybersecurity and data protection.

But above all, we also need regulation in the energy market that can facilitate digitalisation by allowing and enabling innovation and innovative services and technology solutions. What we need from regulation is that it creates open and transparent markets that will help these innovative digital solutions to develop.

At what point do you draw a line and say ‘enough is enough’ in terms of digitisation? Do you think that we will continue finding new ways to digitise? At what point does the utility of the digitisation fall away and it becomes digitalisation for the sake of digitisation?

The last part of the question is already part of the answer because in my view digitisation is not an end in itself. But it’s an ingredient for many of the solutions for the energy transition. It’s difficult to draw a line and say: “Here is where we have enough digitalisation.”

I think the question is more likely: “Do we have the digital infrastructure in place to make use of the different solutions that are necessary for a decarbonised, competitive and inclusive energy system and energy market?” And I would say that today digital infrastructure for many of these solutions is still insufficient or even missing.

Where are those kinds of infrastructure missing? Where is it that we are missing an opportunity to make it open and inclusive?

It starts with the information about what the system needs for a reliable operation.

Today, systems are largely passive and the common response to congestion challenges is to build new infrastructure and ‘put copper in the ground’. Digitalisation can help system operators monitor the challenges they have in the system and determine when they occur or where they occur. It can also help them provide the information to the market about what these challenges are, so the market can then come up with offers and solutions that may go beyond conventional grid and power generation infrastructure, but provide the relevant service to resolve the problem. This includes for example, demand response and storage.

Beyond identifying the challenges and operating the markets, digitalisation is essential also for many of the solutions needed to resolve the challenges. For instance, demand response needs to be hassle-free for consumers to adopt it. These new solutions will not develop if people have to completely change their behaviour and organise their lives around demand response or other energy requirements. Digitalisation and automation can make this happen in a seamless way.

Regulation and innovation are seldom two words that are spoken in the same sentence. So how do you think that that is going to happen? It is going to be a real challenge for regulators that have been used to putting a very strong framework in place. How do you do that in a situation where you have to be fluid but reliable, open but secure.

Regulation in the energy sector is a fact – not least because of some of the specific physical characteristics of the sector. The most important thing is to move from a technology-specific approach to a service-specific approach. Regulation needs to be very open-minded in terms of technology choices, fully non-discriminatory. Break out of the silos of thinking in terms of asset class or this specific plant or type of plant. Less prescriptive, much less technology focussed – much more solution focussed.

What is the overriding message that you’re wanting people to take away from the session at European Utility Week?

Digitalisation will change the energy system in ways that we weren’t even able to imagine a couple of years ago – and we may not even fully be able to imagine today.

The energy sector is used to thinking in terms of decades and the energy world is a slow-moving entity. Digitalisation brings a completely different dynamic.

We will need to change the mindset within the industry and force a change in the types of timescales we operate in. We can’t imagine what’s next. But we need to make sure that we’re open to whatever changes could happen and what innovation could bring about. This means we cannot regulate the energy system and operate in the manner we are used to, namely a very technology-specific approach.

We have so much more complexity in the system now and digitalisation helps us accommodate that complexity. Instead of power plants and networks only, new solutions – that are typically digitally-enabled – may include combinations of smart network operation, decentralised and variable generation, storage, demand response or whatever else it may be.

So I’m coming back to the theme that regulation needs to encourage open and transparent markets. A market that allows for digitalisation is a market that doesn’t pre-determine the technology that it needs, but a market that is entirely open to all innovative solutions.