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Four major trends create the perfect storm in the power industry

Written by Editorial staff | Oct 29, 2024 6:24:34 AM

Increased demand, greater complexity and a focus on costs characterize today's power industry. In addition, security of supply has never been more important, while external threats are increasing. All in all, these are demanding times for the various players in the power industry.

"More of everything - faster" is the title of NOU 2023:3 - the Energy Commission's report. It provides a powerful assessment of the state of the power industry and the challenges facing players in the near future:

"We are in a situation that requires us to act quickly. The direction has already been set through climate targets and a desire to build up a new green industry. This implies increased electrification, increased power consumption and new renewable power generation. Over the past year, we have seen the catastrophic consequences of climate change both at home and abroad, and we have seen how the geopolitical situation creates great uncertainty.

From the report: More of everything - faster

Four key trends

Many factors affect the power industry today and require major changes and investments in the coming years. Overall, four major trends stand out:

1. Higher demand for electricity

Demand for electrical energy is growing rapidly. This growth is being driven by the electrification of society, including the electrification of transport, industrial restructuring, increased demand for electricity for computing power and digital services, and the green shift. At the same time, many power producers and grid companies have older infrastructure, both technically and technologically, that is not adapted to increased production requirements. The power industry is struggling to meet the growing demand. The queue for connection to the electricity grid is record long.

2. Increased complexity requires smarter technology

The majority of the existing infrastructure was designed for a time when power came from (large) hydropower plants that delivered to cities and towns and trickled down from there to the end of the road, so to speak. Today, the situation is different and we're seeing an increase in both the amount of distributed power generation and the amount of intermittent generation, such as from solar and wind. This, combined with increased consumption and new consumption patterns, adds to the complexity and requires more insight for many of the players. The balance between making the best use of existing infrastructure while making the right investment decisions requires smarter solutions and processes. The electricity grid must be adapted to a new reality with greater dynamics between supply and demand and more players who both buy and offer power. "Dynamic states" with flexibility markets, conditional grid connection dynamic capacity and 15-minute settlement are becoming the new normal.

3. Cost pressure and efficiency improvements

As in the rest of the world, increased costs and increased demands for efficiency are affecting the power industry. The industry has traditionally enjoyed stable and relatively predictable financial conditions, but is now being hit by volatile power prices, long delivery times for technical equipment and stricter regulatory requirements. Mergers and acquisitions lead to larger players chasing economies of scale, but reorganization, change and technical debt present challenges. Keeping the wheels turning in day-to-day operations while innovating and reaping the benefits of adopting new technology creates headaches for many operators.

4. Security of supply and threats

Power supply is critical infrastructure in today's society. If the power goes out, we risk losing key communication and IT systems, healthcare, security services, important parts of the transportation systems and much, much more. This places great demands on a stable power supply and on the systems that secure the infrastructure. International unrest, digital warfare and more advanced cyber criminals are part of a serious and complex threat picture. According to the Norwegian National Security Authority, national actors are behind advanced cyber attacks against national infrastructure.

More of everything - faster

Climate targets, green growth and technological development set the framework for developments in energy use. "More of everything - faster" emphasizes the need to make major changes in the industry quickly: "If the climate goals are to be achieved, this means a massive need for more renewable power. We are entering a new era that requires a comprehensive restructuring of the energy system, and we are running out of time. We are no longer talking about increasing the pace. We need to move at a pace we've never seen before. We can go from a situation with a surplus to a deficit of power in the course of a few years. We need to increase production, and we need to increase grid capacity to get the power through. In Norway, we will have a significantly greater share of intermittent power, such as solar and wind."

While the power industry must increase production and distribute more power, the Energy Commission emphasizes that the power system must become more robust. We need "a system that can cope with crises in a world with more intermittent power both in our own and our neighboring countries, and probably with greater uncertainty in the years ahead than we have seen in the last thirty years."

Can the storm be calmed with the right IT strategy?

Increased power production will require manufacturers to work in new ways and become more efficient. Increased distribution and a much "larger element of intermittent power" in the power grid mean that the grid must be utilized better and in new ways. At the same time, the entire power system must become more robust and more secure. If the above assumptions weren't difficult enough, today's and tomorrow's demands for efficiency, flexibility and digitization are hitting an industry with a long history, old technology and older, business-critical IT solutions and technical debt.

Digitization, IT strategy and technology choices can play a key role if the power industry is to meet the changes to come - especially if the need to do "more of everything - faster" is to be met. The Energy Commission also emphasizes that digitalization is necessary: "We need to further develop the entirety of the energy system and heating systems. We must achieve smart energy use that is more energy efficient, more digital, more flexible and responds to price.

The power industry is at a crossroads where the right technological choices can help prepare the grid for future needs to distribute more intermittent power and handle new consumption patterns and industrial needs.

The right IT strategy and technology can be the difference between success in achieving climate goals, the green shift and the industrial transformation we are facing.