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Digitalization In Energy Sector To Grow To $64bn By 2025

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New energy innovations will be centered on digital
technologies and the strategic use of data, according to new research published. A shift is coming in the energy industry from a focus on hardware to the
increased importance of software in order to make systems more efficient,
resilient, and digital.

Digitalization of Energy Systems, a report by Bloomberg New
Energy Finance (BNEF), predicts significant shifts in the intelligence of
digital technologies used in energy from today to 2025, and a big change in the
sectors of the energy system that most benefit from these technologies.

Today, the biggest use of digital technologies like sensors,
data collection and analytics in the energy sector is to improve the bottom
line of fossil fuel generators. Revenue for digital services for fossil fuel
operation and maintenance, or O&M, are estimated to be $24 billion in 2017
"“ some 44% of the total market size for digitalization measured by BNEF.

However, as natural gas and coal plants come offline, and
those that remain become digitalized, the opportunities for new revenues from
the fossil fuel sector will shrink. By 2025, digital technologies will be more
intelligent and more capable, helping home owners that own rooftop solar,
batteries or EVs (often termed "˜prosumers'), to become more autonomous and
derive greater value from these assets. This could be through trading energy
with neighbors or better management of peak power prices.

Claire Curry, head of emerging technology analysis at BNEF,
said: "Home energy management technologies will see the most significant change
in digital revenues, rising from $1 billion in 2017 to $11 billion in 2025. The
largest driver for digital technology revenues in 2025 will be smart meters, growing
44% between now and 2025, to $26bn. This revenue increase matches the fall in
digital revenues from fossil fuel O&M "“ 46% over that time period."

Digital technologies like big data, analytics and machine
learning, blockchain, distributed energy resource management, and cloud
computing, can help overcome some of the key challenges in the energy sector
"“ most notably intermittency, aging
grids, balancing distribution-connected generation, managing consumer
self-generation, and coping with increasing system complexity.

"Countries with high penetration of distributed renewables,
good communications network infrastructure, and robust venture capital
investment in digital technologies are likely to take rapid advantage of energy
digitalization," said Julia Attwood, associate on the emerging technology
analysis team and lead author of the report.

"Italy, for instance, is one of the global leaders in
small-scale PV, has almost 100% high speed network coverage, and supportive
regulation for digital technologies," Attwood added.

The U.S. will also do well, having long been a leader in
digital technologies and early-stage fundraising. Australia, although ranking
lower today, will move near the top of the group in 2025 due to high forecast
levels of decentralized energy production. In emerging markets, countries that
have beneficial government policies, foster innovative start-ups and are
rolling-out network infrastructure are likely to digitalize soonest "“ for
example Chile, Indonesia and Nigeria.

The motivation for industry digitalization will be different
for each player. Generators and "˜prosumers' are motivated by cost reduction,
additional revenue streams and new services. Utilities face pressure from
customers, government policy and regulation to improve their businesses. They
can use digitization to streamline operations and enhance customer services.

Michael Wilshire, head of strategy at Bloomberg New Energy
Finance, commented: "The power sector has traditionally been served by large
industrial companies selling primarily hardware, but innovation is increasingly
centered on software and advanced technologies such as machine learning.
Whether the winning solutions will come from industrials, start-ups, or
technology companies remains to be seen."

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