17/02/11
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December 2009 (PDF, 3.5 MB)
Supply of energy requires complex interactions of generation, transmission and distribution facilities, which can be greatly facilitated through information and communication technology (ICT). Smart metering, smart grids, demand management, intelligent power plants are currently some of most prominent issues in the energy supply industry (ESI).
The level of adoption of smart metering is low but increasing. Plans for investments in smart metering represent the unique positive exception in the investment plans examined in the SeBW Energy Supply Survey 2009. Barriers related to interoperability and regulations still need to be addressed.
Health, safety & environment systems and carbon management systems have not yet a widespread diffusion. The ESI is not fully exploiting the potential of ICT in contributing to the reduction of environmental impacts.
An econometric analysis conducted for this report found that greater ICT capital intensity significantly decreased emissions per output in the energy supply sector across all sample countries.
This study provides insights into current trends of ICT and e-business activity in the energy supply industry (ESI). It explores to which extent companies in the ESI sector use such ICT systems for managing their processes and the potential they attribute to ICT in these areas. Most importantly it provides a detailed analysis of the most innovative and promising area that will affect ESI evolution in the upcoming years, depicting the role and the impact on ICT.
The ESI as defined for the study is included in NACE Rev. 2 Group 35 (in the following short: NACE 35), "electricity, gas, steam and air conditioning supply". Thus this study focuses on the value chain of the utility business that includes: production, transmission, distribution and trading of energy as well as its supply to final consumers Section 2.1).
The EU-27 ESI is an economically important sector: about 31,000 firms employed nearly 1.6 million people and generated a turnover of 932 billion euros in 2006. Moreover, the energy industry is pivotal to any other industrial and private activity Section 2.2).
A competitive, reliable and sustainable energy sector is essential for the EU, which is presently coping with a vast array of challenges. The EU is highly dependent on imported products and is subject to volatility of prices. The national markets lack integration, as indicated by the absence of price convergence and the low level of cross-border trade.
There are still large differences in market structure, competitiveness, public service and customer protection between European countries. The EU is also mandating to fight against climate chance, and the European energy supply industry is aiming to shift towards decarbonised power. The deployment of smart grids, including the pilot and rollout of smart metering, is a key strategic element in order to meet these challenges.
To stay competitive, ESI companies would benefit from increased process efficiency along the entire value chain. Integrating infrastructures and migrating systems to more cost-effective platforms, both for electricity and gas (Section 2.3) would also be beneficial.
Among the solutions supporting enterprise business processes, Enterprise Resource Planning (ERP) currently have the widest adoption within this industry. ERP is used by two thirds (67%) of firms in the industry's employment, followed by computer-aided design systems (CAD, 63%) and document management (DMS, 61%). Supply Chain Management systems are less diffused (15%) (Section 3.2.1). It appears that ESI companies reach a fairly good degree of automation in single processes, while they have still a way ahead before reaching cross process integration.
Survey findings indicate that out of the companies currently employing ICT practitioners, 46% had job openings for ICT practitioners in the past 12 months and about half of them experienced difficulties in finding qualified people for open positions. Companies representing 91% of employment stated that demands on employees regarding their computer/software skills have noticeably increased. This is obviously related to the overall increased importance of ICT in this sector. Many of them also experience insufficient computer skills; this, however, for most companies affects only a minor part of their employees (Section 3.8).
A virtual power plant (VPP) is the distributed and coordinated operation of several small generation units, acting virtually as a single power plant. A VPP may be an effective approach to energy generation as it may significantly enhance the efficiency and reliability of production processes, bring environmentally interesting options and make it possible to deliver value added services to customers. The survey found that ICT solutions for managing distributed energy generation units (monitoring, forecasting and dispatching energy) are in place in a percentage of companies representing from 40 to 52% of total employment. Still many companies generating energy through distributed units run these units as "islands" of activity rather than in an integrated way. Leading edge pilot projects, like the one depicted in the RWE case study (Section 5.2), have been implemented in the EU. However, it is not yet possible to illustrate a standard architecture, nor is there consensus about costs and benefits of such implementations (Section 3.2).
European transmission systems are ageing and massive investments will be necessary in the next years both to replace assets and to solve congestion problems. Key ICT technologies for transmission grid management include tele-measures and tele-controls systems, aimed at supporting sector-specific functionalities related to real time measurement, analysis, forecast and monitoring of operations
Presently, ESI companies are fairly well equipped with systems supporting management and control of their activities in energy transmission and distribution although smaller companies slightly lag behind. Companies representing 71% of the industry's employment said they have adopted systems for energy network automation and control. Plans for further investments, however, indicate that a low percentage of companies (firms representing 3% of employment) that presently do not have these solutions plan to adopt them. There is evidence that further enablement of smart grids, a pillar of the EU energy policy, would need to be supported by adequate ICT (Section 3.3).
Companies representing about half the employment in the sector reported that they are either installing or testing smart meters and further 21% said they plan to do so in the next two years. These plans for investment represent the unique exception in the investment plans examined in the SeBW Energy Supply Survey 2009: no other application or technology is regarded with the same attention. However, companies representing 36% of employment that implement or test smart metering reported to face barriers related to the interoperability of the devices and systems and 37% indicated that they need to cope with regulation deficiencies. These challenges are to be met in order to fully exploit the potential for energy savings, process efficiency and new value added services (Section 3.4.1).
On the supply side, companies installing, controlling, managing and monitoring energy distribution grids can use ICT for purposes such as remote meter reading and advanced metering infrastructure solutions. On the demand side, ICT may have a potential to increase energy efficiency among businesses and private households. The potential benefits of ICT for demand side management have been demonstrated in various pilot projects (see, e.g. business examples about SINTEF's, ADDRESS and GridWise in Section 3.5.2). These benefits are also clear to ESI companies, as about three out of four of the surveyed companies perceive the potential of ICT in increasing efficiency of business customers as high or medium. However, companies representing only 19% of the EDI industry's employment stated to have ICT solutions to support demand response programmes. The set up of real time communication channels with end users is, instead, becoming a more common practice (firms representing 38% of employment, for instance, use web portals to inform their customers about consumptions). Outsourcing services are offered by companies representing 41% of employment.
The transition towards a more climate-friendly energy sector is supported by a range of ICT solutions that respond to changing regulatory, safety, and security requirements, while enhancing value chain visibility and ensuring continuity of operations. Overall, the SeBW Energy Supply Survey 2009 found that the diffusion of ICT solutions for monitoring and reducing environmental impact is low, if compared with the general market trends in the ESI and the regulation in place. Health, safety & environment systems that maximise compliance for electric utility industry facilities, have been adopted by companies, representing 50% of employment, and corresponding to only 32% of firms. Carbon management systems have been adopted by companies, representing 25% of employment. It appears that a relevant share of firms still do not fully exploit the potential of ICT in contributing to the reduction of environmental impacts. For instance companies representing 41% of employment said that ICT has no or little potential for reducing greenhouse gas emissions in the ESI.
The entire ESI sector is undergoing profound changes leading closer to the vision of the "intelligent utility" to which users can actively participate. Innovation in smart grids, smart metering, demand response require enhancing and upgrading of existing infrastructures and implementing new ICT. It is therefore not surprising that within this industry ICT is perceived as a major innovation enabler. Companies representing 53% of this industry's employment said they introduced new products or services in the past twelve months, and 76% introduced new processes. The vast majority of these innovators said that the new products or services have ICT components (Section 3.5.2).
An econometric analysis was carried out to determine the impact of ICT on greenhouse gas emissions in the ESI (Chapter 4). This analysis assesses the relationship between the ICT capital intensity of production and GHG emissions per output in the European energy supply sector.
Key findings from the analysis are that greater ICT capital intensity is found to significantly decrease emissions per output in the energy supply sector across all sample countries, with significant differences in the magnitude and form of this impact depending on whether new EU Member States are considered in the analysis. This suggests that there has been both a strong development of ICT innovations that reduce emissions and a sector-wide implementation of these innovations in the ESI among older EU Member States.
ESI firms largely recognise that ICT can provide a relevant contribution (for instance for reducing greenhouse gas emissions) and that its impact on energy management will increase in the future. The majority of companies, however, also indicate that presently most of their processes are only partly managed as e-business. According to the opinion of the interviewees, the main constraint to a wider adoption of e-business is that business partners along the value chain are not prepared for e-business. Costs, the second problem, lag far behind. Larger players apparently do not act as a driving force to broaden the adoption of ICT technologies (Section 6.2).
The economic crisis has largely affected the decision for investments in ICT in 2009. Companies representing 52% of the industry's employment said they decreased their ICT budgets in 2009. 42% indicated that the economic crisis has an impact on ICT investment plans and out of these 51% actually cut or cancelled their ICT projects.
One of the most striking results from the SeBW Energy Supply Survey 2009 is the very low percentage of companies that plan investments in sector specific ICT applications that they do not have currently. For instance, firms representing only 4% of employment declared that they plan to introduce renewable energy information systems. Similarly low figures were found for systems for energy network automation and control (planned by 3%) and outage management systems (planned by 1%).
Investments in more sector-specific devices and applications, such as smart handheld devices, electronic billing and integration monitoring and control systems with business systems continue to receive attention by ESI, due to their relevance for competition (Section 6.3)
Findings of this study suggest that there are technological developments that may be particularly helpful in supporting the ESI.
There is a need for need to better and further conceptualise, design and demonstrate technical architecture and commercial implications of Distributed Energy Resources (DER) and VPP. Further research would be needed for ICT for planning monitoring and control of the decentralised units. Further efforts are needed for the standardisation of the interfaces.
Improving energy efficiency on the demand side calls for actions in the areas of: standardisation, i.e. open and agreed standards for integration of devices, harmonisation of regulatory framework and the development of business models demonstrating the benefits for the various stakeholders involved.
The enablement of smart grids, a pillar of the EU energy policy requires the widespread adoption of ICT for monitoring, and control. There is a need for open and agreed standards for integration of different tools and devices in place. It is also necessary to improve architectures for integrating the data communications networks and the intelligent equipment in place. Besides mere technology, there is also a need for methods and tools that can assure interoperability, flexibility, effective security and expandability of the systems. Decision support systems to increase predictive reliability would also be needed. As smart grids involve various players along the value chain, this calls for coordination and harmonisation both at technical and at regulatory level.
The picture of smart metering in the EU leads to recommendations for actions addressing technical standards that may support interoperability between different systems and devices, and the definition of the required functionalities.
Overall, the analysis leads to the conclusion that efforts for ICT developments should address the areas of monitoring and control, system integration, interoperability standards and standardisation of interfaces.
Well-defined policy measures may help to support the development and widespread adoption of ICT in this industry, as well as the related business and organisation changes that are necessary for achieving the goals of a competitive, reliable and sustainable energy sector. The Edison Consortium case study and PHEVs technologies and standardisation (see Sections 3.4.2 and 5.3) suggest that there is a need for multidisciplinary and cross-sectoral cooperation including industry, scientists, academia, public administrations and the consumers (both business and final consumers).
Increased visibility and awareness of the benefits that can be achieved through the usage of ICT could be an important pillar of energy policies. This should lead to a deeper engagement of the demand side. Various actions could be recommended, including the development and dissemination of ICT-based platforms and users' tools. The availability of user-friendly and easily accessible tools of this kind may significantly impact on behaviour changes and, ultimately, on the level of consumptions. Another implication arising from this report is that more research may be helpful for establishing and disseminating knowledge and good practices for the most innovative technologies, such as VPP and smart metering for which a clear business case has not been established yet. Finally there is a need for continuing support of education and training activities especially in the areas where ICT can enable energy efficiency.
