Managing Director & Senior Partner
Continuing declines in costs for wind and solar generation, coupled with a phase out of supportive regulatory policies and additional market forces, have added new opportunities and challenges for generation owners, project developers, and transmission and distribution companies. Digital is at the center of today’s struggle for sustainable competitive advantage.
The rapid growth of renewable energy has added new levels of complexity to the power and utilities business. As the penetration of nondispatchable PV and wind power exceeds thresholds of 20% and 30%, market mechanisms and the way participants interact are fundamentally changing. Capabilities and greater reliance on big data and advanced analytics are critical for market participants to create long-term value and avoid being outmaneuvered by fast-moving technologies and competitors.
Tender prices for offshore wind generation in Europe have declined significantly in recent years, and further reductions are forecast, according to BCG research. The Continent’s leading players are using digital to extend their global leadership in offshore wind, creating strategic challenges for mid-market players.
In the US, the onshore wind buildout continues apace, driven by favorable government policies, declining costs, and rising expectations about sustainable energy from consumers and corporations. And solar, while earlier in the cost-reduction curve than wind, is also making impressive gains and in some places is now competing with wind on cost.
Moreover, rooftop solar installations and other forms of distributed energy resources (DERs) continue their brisk pace of growth. Battery storage of electricity is just beginning its deployment and cost-reduction journey, aided, once again, by supportive regulators. Most experts, including our own, expect battery storage to go through the same hockey-stick growth pattern that characterized wind and solar deployments.
The embedding of digital solutions in the renewable space is well underway. Successful companies don’t think of big data and advanced analytics as “IT projects” but as enterprisewide platforms that will enable current and future business success. They are embracing a digital and agile way of working by driving processes to deliver a minimum viable solution and then push through rapid cycles of improvement.
As the sector of utility-scale renewable energy grows and becomes more mature, the use of digital solutions is becoming more prevalent. Along the full wind and solar value chain—where minimizing operating costs while maximizing effectiveness is the key to winning—digital solutions are a crucial part of the strategy. Increasing the penetration of renewables will require solutions in the energy management and storage space, which are digitally enabled. Digital’s greatest impact will be on the operation of renewable assets. Here are the larger trends:
• The amount of data generated is growing exponentially. Operating data from wind turbines and PV systems is increasing quickly as these systems are built—and sometimes retrofitted—with higher-resolution sensors. New inspection systems, such as drones—service technicians with cameras and laser-based measurements—are becoming more and more pervasive.
• Data lakes—accessible by analytics—are also growing at a rapid pace. Marginal costs of data transmission and storage allow for the uploading of data from local control loops to data lakes. More high-quality data sources are becoming available, including meteorological data, demand forecasts, and price forecasts. Furthermore, the consolidation of industry players gives access to data from a larger portfolio.
• Data analytics provides deeper insights in real time. Analytics tools are becoming much better at processing both structures and unstructured data. And real-time results are available with ample computing power.
Operators need to build or buy digital capabilities and redesign all their service processes in order to make use of the insights provided by digital. This is a prerequisite for bringing down operating costs by as much as 60% to 70%, increasing the lifetime value of the assets and feeding the financial models that will bring future success.
Centralized, utility-scale renewable energy is not the only challenge facing power and utilities companies. They also face a competitive threat from decentralized DERs, chiefly rooftop solar installations.
Those on the forefront of this sector have made digital an integral part of their core business strategy. By redesigning core processes, leading companies are using big data and advanced analytics to create significant value today and tomorrow, something investors are recognizing and rewarding.
For utilities, rooftop solar and other DERs provide a variety of integration challenges on the grid since they are intermittent and operate “behind the meter”—thus typically not controlled by the utility. Digital is playing an increasingly important role in managing these challenges. Tools such as DERMs (distributed energy resource management) and other real-time sensors and controls on the grid provide utilities companies with the data and flexibility they need to integrate DERs.
Developers and installers of DERs have been plagued by the high cost of customer acquisition and installation, and digital can offer a range of solutions to these and other problems. Through digital channels, as well as smarter microtargeting of customers, installers can better reach customers. Satellite mapping and LIDAR (light detection and ranging) tools allow for more efficiently designed systems. And digital tools can improve the dispatching of installation crews and the management of inventory, thus lowering the cost of installation. In addition, real-time tracking and monitoring can provide updates for the customer, utility, and installer on the performance of the system—improving overall operations.