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What’s next, Energy? - An Interview with Jan Hermann

12-06-2020Opinion

Jan Hermann, who works as a Director for Corporate Innovation at Futurice, has more than 10 years of experience in digital ventures and consultancies. Having worked for companies like Mainova, Enercity or E.ON, he has a solid understanding of the Energy business and its complex dynamics. He is convinced that Energy is the backbone of modern society as it’s strongly linked to how we live, how we move and how we produce.

Below he shares his view on the challenges and opportunities of the energy sector with us.

Christina Klein

Marketing & Communications Manager

Digital transformation is one of the key innovation drivers in the energy industry. Where should energy companies focus on when starting the transformation process?

There are different levels to focus on. From a strategic point of view, you should have a strong vision of where the company is heading and how you differentiate yourself from competitors. Think about your strengths, the most important assets, and megatrends like sustainability to get going. Methods like Futures Thinking are an excellent tool to develop strategies for different scenarios.

Besides, you need to think about data. The first step is to get an overview of the available data sets and to understand what you can do with them, before setting up a concrete data strategy. Devices like Smart Meters and Sensors have sparked many interesting cases on how to transform energy companies towards data-centric organizations.

From an operational perspective, energy companies should ask themselves what the biggest problems are that they are facing in different areas. Focus on customer and business user needs and look into benchmarks. How is the competition tackling certain problems and which impact will these problems have on customer satisfaction?

An innovation framework with matching tools will help you to address these problems. Take Lean Service Creation (LSC) for example: Starting from a problem worth solving and going over an MVP to scalable products, services, and new ways of working, LSC offers practical guidance on how to facilitate transformation projects, while focusing on a human-centered approach at all times.

Why is human centricity so important in securing business growth?

The world is changing at rapid speed - and Energy is no exception. Just think of the shift from coal, gas, or nuclear power towards renewables. To cope with this fundamental change, to transform the former core business and to open up new business opportunities, we have to be sure that the actions we take are matching the needs of clients and employees. For this reason, new business models should be tested as soon as possible with business users and clients to seek their feedback and insights. This will not only increase the acceptance of new tools but also test underlying assumptions.

Smart grids empower customers. How do they change the dynamics between producers and consumers?

In the last years, classic roles of producers, consumers, and grid providers have changed to a more collaborative model. One example is the rise of prosumers like homeowners and industrial plants with photovoltaic panels on their roofs. As they produce and consume energy at the same time, they get some autonomy from classic energy providers.

Another example is the rising popularity of smart meters. They help consumers to get an overview of their consumption profile and to detect saving potentials through changing routines or gearing up the infrastructure, e.g. with storage facilities. The backbone of this transformation is a grid that thinks one or two steps ahead and gives players data-based recommendations on when to store, sell, transform, or consume energy.

However, we are still at an early stage of this development. To become more efficient, our goal should be to modernize the infrastructure, to support existing practices with data-driven services, and to build new storage facilities. This setup would give us more flexibility when it comes to grid expansion or balancing peaks. Yet all of this will be in vain if we lose sight of the people. To make grids really smart, we have to connect stakeholders and build communities around them.

You mentioned data-driven services. Which role do data and AI play for smart grids?

It’s not only about smart grids. Data and AI have a great impact on nearly every aspect of the energy business - from production to transportation and consumption. For instance, demand prediction and digital twins as well as predictive maintenance are gaining traction in production. However, none of them would be possible without data and AI.

In general, digital solutions and physical infrastructure are increasingly linked. Individual data analysis shows how companies and private households can optimize their energy mix or consumption profile. On a bigger scale, the energy data of cities like Berlin or Munich can illustrate how to optimize the local infrastructure to lower CO2 footprints or increase revenue streams. Blended datasets can also help to open up new opportunities: Elenia, for instance, uses a situational awareness tool that combines disparate data sources and historical data to predict possible damages to electricity networks, which reduces the impact of power cuts on all levels.

Which further developments do you expect in the context of smart grid?

This is a tough question as the concept of smart grid involves many different layers: From the physical layer (e.g. production plans and cables) over data production (e.g. IoT devices) to services and communication (e.g. client-facing digital services).

On the physical layer, I expect a rise in the efficiency of renewable energy production entities. Costs for photovoltaic (PV) modules have already decreased significantly over the last couple of years. Tesla’s sunroof hints that those kinds of technologies will become even cheaper and less invasive than today's PV modules. In the near future, everyday objects like pavements, streetlights, or cars will have their own component to produce energy. Ideally, they will also be linked to a storage facility.

Besides, storage is an area where we can expect some radical shifts. At the moment, the predominant battery technology is lithium-ion batteries - which comes with a huge cost on the environment. And although the price for storage units has dropped significantly over the last years, it is still very expensive to store larger amounts of energy. This has to change. IBM for example has been experimenting with seawater as a storage component. The first results have been very promising, and their approach might go into serial production.

When it comes to IoT, the second generation of smart meters are currently being installed. However, this is just the beginning. In the future, almost all components in grids will generate data. This opens up new questions: How will we deal with these large amounts of data? Who owns it? And what can - and should - we do with it? This illustrates the importance of communication and transparency. It will become central to reduce complexity and empower users to make informed decisions. By connecting relevant stakeholders and transforming existing processes and tools, we will boost collaboration and create resilient ecosystems.

What role do smart grids play in connecting rural and urban areas?

Over the last years, there has been a strong focus on smart cities and their future. By contrast, the development of rural areas gained little attention. Nevertheless, it seems like the debate is changing and that energy companies are looking more into the needs of rural areas now.

Although the infrastructure of cities and villages is arguably different, people’s needs stay basically the same - especially when it comes to mobility, energy, information, health, or safety. Just imagine the future of mobility: A cost-efficient and customer-centric solution might look very different in a rural area than it does in a city; however, the underlying requirement remains to travel safely and quickly from A to B. Companies will have to adjust their mindset accordingly.

A deeper connection between rural and urban areas would also benefit the energy business. Building areas in cities are traditionally scarce and expensive, while there is plenty of land in the countryside. Link in agriculture, rural areas could provide electricity for the cities - especially if we think of onshore wind generation, large solar parks, or big storage facilities. By contrast, problems of connectivity and glass fiber coverage are typical problems of rural areas. Investments from energy companies could lead the way to solve this problem - or at least to finance the transition.

One of the greatest challenges when transforming the grid is balance. What can energy companies do to make the grid more resilient?

Resilience comes from preparing for different scenarios and training on how to react to them. Energy companies - just like all other companies - need to prepare for changes, to review their ways of working, and to foster collaborations with other companies. Besides, there are many ways how technology can make grids more efficient and resilient.

If they create digital twins, energy providers can run simulations and test different scenarios to detect possible bottlenecks and potential improvements to the grid, which creates better services and makes planning more cost-efficient. In addition, they can use digital tools that support collaboration, coordination, and transparency when different stakeholders like energy providers, telecommunication companies, workforces, or local authorities work on the modernization of the grid. Furthermore, drones can be used to inspect the grid, which makes the work on high voltage pylons safer and more efficient. Lastly, cloud technologies enable companies to share information in a faster and more comprehensive way, while also improving the safety and resilience of the grid.

However, all of this is just a start. We are entering uncharted territory, and it will be exciting to learn what else we can do with the opportunities that new technologies hold for the energy business.

To learn more about our energy approach, check out our energy page.

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