Long-term vision, short-term shocks: navigating the global energy crisis with digital solutions
It’s clear that the risks of maintaining a secure and affordable energy supply have been seriously exacerbated by the war in Ukraine. While the long-term vision for a decarbonized future remains the same, in the short term, there are shocks that governments, the energy industry and energy users must endure while accelerating the energy transition.
Given their reliance on energy imports, countries must strengthen domestic production of energy while decarbonizing. New EU plans, for example, have been announced to rapidly find alternative energy sources to Russian oil and gas while ramping up energy savings and renewables.
So what can energy companies and major energy users now do in response?
Digital as critical innovation enabler
One step is to review current risks, strategies and projects in the light of the challenging conditions. In all cases, there’s a need to increase the pace and scale of digital transformation and decarbonization.
The good news is that for companies in some countries there’s access to government funds as a stimulus for innovation. Yet let’s be clear, the challenges faced by the energy industry are significant – especially given the long-term nature of infrastructure projects.
What’s required is a mix of short- and long-term solutions, and conventional and more innovative transformation to optimize efficiency and safety while building resilience and security.
Key to an effective response is a focus on curbing demand; any strategy to curtail supply while demand remains strong is a recipe for further crisis. What’s more, the transformation of supply (via new renewable sources) is much slower than reducing demand (via energy savings)
Reducing and balancing energy demand
Much of the effort to curb and balance demand depends on manufacturing, transport and other energy intensive industries, as well as residential customers. To enable this, more innovative transformation must happen around use of IoT and edge to harness real-time data to optimize energy use and electrification using renewable sources.
Smart buildings and smart meters, having had a slow start in some geographies, are one way to increase energy efficiency. Smart plugs in homes will also help improve efficiency and curb demand before the arrival into the mainstream of smart goods and appliances.
Customer behaviors and decision-making remains key, enabled by energy industry data platforms. It’s not just about reducing quantity of demand; it’s about flattening peak demand through dynamic pricing. Meanwhile, energy prices continue their steep rise for households across Europe. While different countries are addressing fuel poverty in different ways, regulators’ and companies’ agility for adapting quickly to changing pricing and tariffs is essential.
Electrification of transport is another major contributor. Yet if you don’t change supply, then you merely shift the problem elsewhere. So EV infrastructure must be enhanced to better manage charging, utilization and load balancing.
Customer behaviors and decision-making remains key, enabled by energy industry data platforms. It’s not just about reducing quantity of demand; it’s about flattening peak demand through dynamic pricing.
Optimizing and managing energy supply
When it comes to supply, shocks in one sector or region can rapidly impact another; linkages between energy markets have become stronger. Fixed gas pipelines (such as those from Russia) create hard dependencies. And while the global liquified natural gas (LNG) market offers more flexibility, it may be impacted by market dynamics. It’s clear that LNG infrastructure is key for Europe to cope, in the short term, with the energy crisis. This increases the need for resilience in terms of energy generation and distribution. Transportation of gas between countries must be optimized.
Given the urgent need to increase domestic production and find alternative energy sources, investing in the capacity to generate and balance local renewables is critical. At the same time, with imperatives now to conserve national gas reserves, we’re likely to see more short-term reliance on fossil fuels. Digital innovation must ensure that fossil fuel-based generation is efficient and agile enough to be ramped up and down within the context of ambitions to be carbon neutral by 2050.
We know large greenfield infrastructure projects must continue and in many cases be stepped up (for hydrogen adoption for instance). Digital transformation of project lifecycle management, including wider use of digital twins, will help to accelerate these while minimizing cost and risks.
Sovereignty, security, resilience
Energy companies’ ability to optimize and adapt rapidly must grow in every domain. They must address and balance many different challenges (customer service, energy supply, energy poverty, decarbonization, security) within a combination of short-term and long-term timeframes. And they need to leverage a blend of transformational digital tools. Underpinning transformation is the accelerated secure move to the cloud and maintaining tight cybersecurity. Crucially in today’s global context, national sovereignty – of energy supply, ICT and data, infrastructure – has never been more important.
While security and resilience can be demanding, this is a price well worth paying as an insurance against price volatility and other risks. Investment in a secure critical national infrastructure and a decarbonized energy supply is quite simply vital in navigating such challenging and volatile times.
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