As decommissioning of natural gas and coal power plants picks up steam, the opportunities for new revenues from the fossil fuel sector are dwindling, meanwhile digitalization is bringing greater efficiency and diversified application of distributed renewables.
According to the report by Bloomberg New Energy Finance (BNEF) titled Digitalization of Energy Systems, from today to 2025, there will be a big change in the sectors of the energy systems that use digital technologies, as the market size for digital technologies in energy reaches $64 billion.
With digital technologies becoming more intelligent and autonomous, owners of rooftop solar, batteries or EVs will become even more autonomous and derive greater value from their assets, such a through trading energy with neighbors or better management of peak power prices.
Noting that today, the biggest use of digital technologies like sensors, data collection and analytics in the energy sector is to improve the bottom line of fossil fuel generators, the BNEF estimates that revenue for digital services for fossil fuel operation and maintenance reached $24 billion in 2017 – some 44% of the total market size for digitalization.
“Home energy management technologies will see the most significant change in digital revenues, rising from $1 billion in 2017 to $11 billion in 2025. The largest driver for digital technology revenues in 2025 will be smart meters, growing 44% between now and 2025, to $26bn. This revenue increase matches the fall in digital revenues from fossil fuel O&M – 46% over that time period,” said Claire Curry, head of emerging technology analysis at BNEF.
Market size for digital technologies in energy
Source: Bloomberg New Energy Finance
In addition to cost reduction, additional revenue streams and streamlining operations and services, digital technologies like big data, analytics and machine learning, blockchain, distributed energy resource management, and cloud computing, can also mend overcome some of the key challenges in the energy sector – most notably intermittency, aging grids, balancing distribution-connected generation, managing consumer self-generation, and coping with increasing system complexity.
The BNEF notes that the countries with high penetration of distributed renewables, coupled with good communications network infrastructure, and robust venture capital investment in digital technologies, will reap the greatest benefits of energy digitalization by 2025, such as the U.S., Australia, and emerging markets that have supportive regulation for digital technologies for example Chile, Indonesia and Nigeria.