No successful energy trading without automation
Digitalisation is forcing the energy industry through a fundamental change. Its future will be determined by increasing electrification, automation and small-scale connectivity. Energy trading, in turn, is now facing completely new challenges, as a result of the growth of renewable energy and through the inclusion of market partners and consumers, some of whom also operate as producers and traders. Only the companies that recognise and take advantage of the opportunities of automation and digitalisation will be successful in the long term.
Three important trends are currently dominating and transforming energy trading:
- Increased use of renewable energy – flexibility is thus increasingly important
- growing electrification of mobility
- rising numbers of market participants – causing increased complexity.
Trading power from renewable energy has become so fast and complex that it is barely feasible without automation. Electromobility and the expected new market participants are pushing change even further. In the future, many decentralised production and consumption facilities will need to be managed through a centralised or decentralised IT system. In this way, energy trading will become even more short-term, more complex and more granular than it is today. A simple example makes this clear: assume each of the ten occupants on a street has an electric vehicle. If all of them charge up at the same time, up to 1.5 MW peak power will be drawn from the grid. The result: without automation the street will experience a blackout. This example shows that grid operators of the future will have to take on a much more active role. It won’t be practical to keep increasing grid capacity.
Intelligent IT systems are needed to control supply and demand from both the production side and the grid. Thus, it must be expensive to quickly charge an electric vehicle on demand when the sun isn’t shining and the wind isn’t blowing. Likewise, on a sunny, windy day when no one else is charging, charging must be correspondingly affordable. Consumers don’t want to try to understand complex market mechanisms – they want to charge their cars and drive. So IT systems will have to take over these tasks. Whether they will use the much-hyped Blockchain technology or other distributed or centralised systems remains to be seen.
Politicians and regulators need to step up
Naturally politicians and regulators must step up to create a framework to make such developments possible. Today, grid prices are regulated – logically so, due to the natural monopoly of the grid operator.
However, this approach in its current form will not be sufficient in the future – for example due to the growth of electromobility. Because why should a regular user of public transportation pay for grid improvements to support the infrastructure needs of a Tesla driver?
So how do we address the challenges that come with electromobility? In the future, will every electric vehicle become its own energy trader? Can every homeowner produce, store and sell electricity – taking on all roles in the energy industry and actively taking part? From a purely technical perspective this is possible, because in automated energy trading it doesn’t really matter how granular the transactions are. It is rather a question of energy companies’ desire and ability to innovate. Will they define these developments themselves, or will game changers come in and completely shake up the market, as in many other industries? And naturally it is also a question of how politicians respond to and orchestrate these developments.
Digitalisation, Blockchain, big data, personalisation, IT security – all these technology themes will or may play a role in the future. Will Blockchain actually be implemented so that, for instance, every electric car is its own energy trader? Could be. But there are countless other technical options that are more proven and resource-efficient than energy-intensive Blockchain solutions.
At any rate, the topics of big data, automation and IT security will be mandatory for every energy company. Google and Facebook already impressively show what can be achieved with big data. Energy companies should not put it on the back burner, but should instead analyse customer behaviour, in order to offer the optimal products and services.
The data flood will certainly grow. Automation will thus already be necessary, just to deal with this complexity. No one needs to fear for his job, because professionals with energy industry know-how will always be desperately sought after.
Last but not least, IT security is an enduring issue. After all, essential infrastructure for society is at stake. All market participants must follow the highest security standards.
When carrying out innovative IT projects, three big issues often stand in the way:
- less pronounced innovativeness of long-established energy companies
- fear of the impact of automation on one‘s own job
- failure of the most routine underlying tasks, such as collection of data.
When it comes to innovation, many energy companies come across as very conservative. Paradoxically, automation of energy trading requires exactly the expertise of the employees whose jobs seem most in danger from automation. And many innovation projects fail from the start. Big data analysis is only possible when complete, structured data sets are available. This is often not the case, so that innovation projects are often simply cancelled and the plans shelved. Finally, the widely varying formalities of the European energy markets have a negative impact on innovative development.
In spite of all the obstacles and uncertainty, it is clear that the energy industry, and with it energy trading, is at the threshold of major change – and not just of a technological nature. Energy companies need to act quickly and align their business processes on the new circumstances. Because the danger that fast, innovative game changers recognise the opportunity and turn the industry on its head is real and must be taken seriously.
Johannes Püller, Head of Product Management & Marketing, VisoTech
Opinion piece published in: ew 02/2018; © 2018 EW – Magazin für die Energiewirtschaft. EW Medien und Kongresse GmbH, Offenbach am Main.
You can download the original article (in German) in PDF form.
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