Today the pressure’s piling up on distribution network operators (DNOS) to save on consumer bills while meeting ambitious decarbonisation goals. With the deployment of network sensors, cloud computing and artificial intelligence accelerating, is ‘Energy 4.0’ just around the corner?
By Jorone Taylor-Lewis, Kelvatek
Until recently ‘Industry 4.0’ (or I4.0) was not often discussed in the context of utilities, however, it is a familiar term across mainland Europe and has been for almost a decade. It was first coined by the German government to describe the plans to digitalise the country’s manufacturing sector. I4.0 emphasised cutting-edge technologies like robotics, automation and intelligent systems as the enablers for business transformation. The name I4.0 is a nod to the idea of a ‘fourth industrial revolution’, building on earlier waves of technological innovation in the 18th, 19th and 20th centuries.
In some ways Industry 4.0 was an idea ahead of its time. Back in the early 2010s, it foresaw the ubiquitous use of technology such as artificial intelligence and machine-to-machine communications. Leaps forward in computing power and neural networks have fuelled developments that we now take pretty much for granted. Today, mind-blowing tech that would be right at home in the movie Minority Report is becoming a reality.
How does this relate to the UK electricity distribution? Well, maybe our industry can take a leaf out of I4.0’s book, as DNOs gear up to operate in a more challenging regulatory environment.
Back in September 2019, Ofgem signalled to the DNOs that average returns on equity are going to be much lower in RIIO-ED2, possibly by half. And now Citizens Advice has waded in with its own response to Ofgem’s ED2 draft determinations. The consumer organisation argued this month that the regulator has been ‘too generous’ to operators and a further £1.7 billion savings over the next five-year price control period could be realised.
So where does all this leave DNOs facing the prospect of considerable commercial pressure? Back in 2016, a survey by consultants PwC reported that companies successfully implementing Industry 4.0 could expect to increase their annual revenues by almost 3% per year, while reducing costs by an average of 3.6%. Could DNOs realise similar efficiency savings?
Tomorrow’s electricity networks will be smarter and greener, with a focus on efficiency and reduced consumer costs. To achieve this, we need to explore how competencies in augmented reality, big data analytics, cloud and cognitive computing can be applied practically to operating electricity distribution networks. Is it time to go back to the future and look at what can be learned from the vision and innovations of Industry 4.0 and how they can lend themselves to fresh thinking for RIIO-ED2? I will be considering this question for the rest of 2020, so watch this space!