The global pandemic has become the defining issue for every industry over the past year. The power industry is trying to balance the demands of delivering a vital service to the community while trying to implement remote working and social distanced operations as quickly as possible.
In many cases, these new developments should have been implemented far sooner to increase efficiency and profitability. Fortunately, these emergency investments will yield long-term benefits, allowing power and utilities operators to increase operational and organizational flexibility.
But there is another important issue that has been temporarily side-lined while the power industry had been COVID-proofing their operations: Decarbonization.
Emissions targets won’t wait
When national governments signed up to the Paris Agreement, there was a commitment to limit global temperature increases to just 1.5ºC. In the European Union, member states are legally obligated to reduce greenhouse gas emissions by 40% of levels in 1990.
This ambitious reduction is due to be completed by 2030. That’s just under ten years to radically alter every aspect of the power industry to achieve the mandated savings.
A fundamental change is required
Before the pandemic brought trade to a virtual standstill, energy generation and distribution firms were making significant gains in their adoption of renewables to help reduce emissions. Coal and oil usage continues to decline as alternative energy sources become more viable.
There is a significant problem, however; in order to achieve the Paris Agreement targets, energy use must fall by 66%. At the same time, demand for energy is expected to grow by 1.3% every year until at least 2040.
Simply reducing energy output is not an option. Instead, generation and distribution need to be greener and more efficient to balance supply, demand and costs.
Renewable sources are increasingly viable, particularly as prices begin to fall. Yes, significant investment in generation and distribution will be required, but the cost of solar has fallen by 80%, wind by 40%, making these renewable alternatives economically competitive to fossil fuels.
Looking beyond the energy source
Investment in new technologies and infrastructure are essential to achieving CO2 reduction targets, but this will significantly impact profits. The power and utilities industry must increase operational efficiency to protect margins.
Following the lead set by other sectors, generators and distributors must implement systems that increase the visibility of data across all of their operations. Sharing data across business units allows for better strategic planning and helps to shorten time to action.
As digital transformation programs mature, it will be possible to offer enhanced, personalized services to customers that enable greater control of personal energy use. Smart meters and tariffs allow clients reduce their bills and manage their consumption, in a way that helps the power industry towards Net Zero.
Successful, profitable carbon reduction efforts need to build systems and processes that encourage operational flexibility. They will also need to equip your business to better personalize services to the needs of the individual customer.
Learn more about these challenges – and how to face them
To learn more about the challenges facing the power generation and distribution industry as we exit lockdowns – and how digital maturity can help to overcome them, download our free eBook Digitalization in the Power Industry. The eBook discusses the current industry landscape, how COVID has changed the game and the role of digitalization in helping the changing energy landscape and helping firms achieve their emissions targets without compromising the service offered to customers.
Peter is a senior industry consultant at Hexagon’s PPM division. He is highly experienced in analyzing business processes and then managing business transformation through operational excellence. He has managed business transformation projects across Europe, The Middle East and Asia within aerospace, FMCG, defense and energy, in both the public and private sectors. He lives in Scotland.