Digitalisation
Why is it important?
In electricity systems, digital technologies can help integrate increasing shares of variable renewables and improve the reliability of grids, while for end-users they can improve energy and material efficiency and reduce emissions. Moreover, digital services like videoconferencing offer low-carbon alternatives to travel while also supporting behavioural change towards low-carbon options.
What is the role in clean energy transitions?
Integrating large quantities of variable solar and wind generation, whose peak output may not match moments of peak demand, requires more sophisticated management of electrical grids. Digital technologies and data hold tremendous potential to forecast and match electrical supply and demand, thereby cutting costs, improving efficiency and resilience, and reducing emissions.
Where do we need to go?
Advances in digital technologies and services, declining costs and ubiquitous connectivity have accelerated the digital transformation of energy in recent years, particularly in electricity networks. However, much of the progress so far is limited to developed countries and further efforts by policy makers and industry are necessary to realise digitalisation’s full potential to accelerate clean energy transitions.
Tracking Digitalisation
Digital technologies and data hold tremendous potential to accelerate clean energy transitions across the energy sector. In electricity systems, digital technologies can help integrate increasing shares of variable renewables and improve the reliability of grids, while in end-use sectors they can improve energy and material efficiency and reduce emissions. Moreover, digital services like videoconferencing offer low-emission alternatives to travel while also supporting behavioural change towards low-emission options.
Advances in digital technologies and services, declining costs and ubiquitous connectivity have accelerated the digital transformation of energy in recent years, particularly in electricity networks. Grid-related investment in digital technologies has grown by over 50% since 2015, and is expected to reach 19% of total grid investment in 2023. There is an increasing focus on the distribution segment, which now represents more than 75% of the total digital spend. There has also been a substantial upswing in investment in electric vehicle charging infrastructure, which doubled in 2022 compared to the previous year. However, further efforts by policy makers and industry will be necessary to realise the full potential of digitalisation to accelerate clean energy transitions. This includes the implementation of enabling standards, policies and regulations that prioritise innovation and interoperability while addressing risks to cybersecurity and data privacy
Countries are increasingly preparing their infrastructure for digitalisation
Countries are increasingly preparing their infrastructure for digitalisation
Countries and regions making notable progress in developing digitalisation include:
- The European Union launched an action plan for Digitalising the energy system in 2022 to promote connectivity and interoperability, foster co-ordinated investments in smart grid technologies, empower customers, enhance cyber security, promote greater efficiency, and design effective governance through joint planning.
- The United Kingdom launched a ‘digital spine’ feasibility study in October 2022, as a follow-up to the Energy Digitalisation Taskforce report initiated by the energy regulator (Ofgem), Innovate UK and the Department for Business, Energy and Industrial Strategy.
Digital technologies can help increase energy efficiency and reduce emissions across the energy system
Digital technologies can help increase energy efficiency and reduce emissions across the energy system
Digitalisation – the application of digital technologies – could have a major effect on emissions as an enabler in accelerating clean energy transitions. Across the energy sector, digitalisation can help cut costs, improve efficiency and resilience, and reduce emissions.
In electricity systems, for example, machine learning, smart meters and other digital technologies can help integrate higher shares of variable renewables and better match supply and demand from increasingly heterogeneous decentralised sources such as electric vehicles (EVs) and connected appliances. In end-use sectors, digital technologies can improve efficiency in buildings and transport while also enabling a shift to low-carbon options.
Digital technologies are directly responsible for around 2% of energy-related GHG emissions today
Digital technologies are directly responsible for around 2% of energy-related GHG emissions today
In addition to indirect effects on emissions in other sectors, digital technologies also have direct effects on energy use and emissions. The data centres, data transmission networks and connected devices that underpin digitalisation accounted for around 330 Mt CO2 equivalent in 2020 (including embodied emissions), equivalent to 0.9% of energy-related GHG emissions. Since 2010, emissions have grown modestly despite rapidly growing demand for digital services, thanks to energy efficiency improvements, renewable energy purchases by information and communications technology (ICT) companies and broader decarbonisation of electricity grids in many regions. However, to get on track with the Net Zero Emissions by 2050 (NZE) Scenario, emissions must halve by 2030.
Deployment of smart meters and connected devices continues to grow
Deployment of smart meters and connected devices continues to grow
The number of smart power meters worldwide exceeded 1 billion in 2022, a tenfold increase since 2010. Meanwhile, connected devices with automated controls and sensors are expected to reach 13 billion in 2023, up from fewer than 1 billion a decade ago. This number could reach more than 25 billion in 2030. Similar trends are being seen in power grids, with around 320 million distribution sensors deployed globally.
Global stock of digitally enabled automated devices, 2010-2021
OpenFurther progress on smart EV charging is also needed to tap into the major flexibility potential of the growing EV fleet. At the end of 2022, there were 2.7 million public charging points world wide, more than 900 000 of which were installed in 2022, an increase of about 55% on 2021 stock. However, only a fraction of these have smart charging capabilities. If made grid-interactive, other technologies such as heat pumps and air conditioners could also provide flexibility.
To get in step with the NZE Scenario, the global inventory of flexible assets needs to increase tenfold by 2030, which means that all sources of flexibility – including batteries and demand response supported by smarter and more digitalised electricity networks – need to be leveraged. Enabling digital technologies such as smart meters and distributed monitoring and control devices is essential to fully exploit the flexibility potential of the growing number of connected devices.
In addition to ramping up deployment of key digital technologies, existing data and digital assets need to be better utilised to provide benefits for consumers and the energy system; in 2019 it was estimated that utilities were leveraging only around 2-4% of data collected.
Investment in digital grid technologies accelerated in 2022
Investment in digital grid technologies accelerated in 2022
Investment in digital-related grid efficiency continued to grow to a new high of USD 63 billion in 2022. Expanded EV charging infrastructure was the main source of growth, with global investment in public EV charging reaching USD 16.8 billion in 2022, a more than tenfold increase from USD 1.5 billion in 2018, reflecting the rapidly increasing number of EVs.
For the first time in a decade, total investment in smart meters slightly decreased in 2022. This reflects a plateauing deployment rate, as many countries have already achieved full or close to full roll-out.
Investment by distribution system operators and transmission system operators in analytics for grid operations, asset performance management and power quality has more than doubled since 2016, from USD 0.68 billion to USD 1.48 billion in 2022.
Digital-related investment in grid technologies, 2015-2022
OpenEntrepreneurs, companies and investors are pursuing digital opportunities in the energy sector
Entrepreneurs, companies and investors are pursuing digital opportunities in the energy sector
Digitalisation has become increasingly prominent within clean energy start-ups as more entrepreneurs seek to market new ideas based on digital tools and processes. For example, digitalisation enables new business models, such as energy as a service (EaaS) financial schemes and virtual power plant services for distributed energy resources. These business models provide new opportunities and revenue streams for companies while enhancing system-wide efficiency and demand-side flexibility. Moreover, big tech companies have become top investors in clean energy start-ups.
There is increasing focus on digitalisation in energy policy making, but further progress is needed
There is increasing focus on digitalisation in energy policy making, but further progress is needed
Several countries and regions have recently put forward strategies and action plans to facilitate the digital transformation of their energy systems, while others are beginning to mandate the use of digital technologies to support clean energy transitions.
- In Australia, Project EDGE (Energy Demand and Data Exchange) was initiated by the Australian Energy Market Operator to demonstrate the potential for aggregations of consumer-owned distributed energy resources to deliver energy services to the wholesale power system and at the local network level. In May 2023, a new toolkit was released to facilitate the secure and efficient integration of distributed energy resources into local and regional electricity markets.
- In the European Union, one of the key actions presented in the European Commission’s Recommendation for Energy System Integration is to deploy a streamlined Digitalisation of Energy Action Plan to accelerate the implementation of digital solutions. These should help better integrate the energy system by making use of seamless and interoperable data-driven interaction between stakeholders. Following the recommendation, in November 2022 the Enershare project received EUR 8 million to develop the first Common European Energy Data Space.
- In January 2023, the Federal Cabinet of Germany adopted a bill to relaunch the digitalisation of the energy transition, setting out a roadmap for the deployment of smart meters and expanding the scope of dynamic tariffs.
- The United Kingdom is developing a suite of regulations and requirements for smart charging. To combat peaks in electricity demand, all new chargers sold from 30 June 2022 onwards must be set by default to avoid charging during peak hours.
- Regulatory sandboxes are being implemented in a number of countries around the world, including Australia, Brazil and Spain.
View all digitalisation policies in the energy sector
A number of international initiatives aim to accelerate the deployment of digitalisation in the energy sector
A number of international initiatives aim to accelerate the deployment of digitalisation in the energy sector
International initiatives aiming to tackle challenges and accelerate the deployment of digitalisation in the energy sector include the following:
- The IEA Digital Demand Driven Electricity Networks (3DEN) initiative is developing analysis and policy guidance for emerging economies on digitalisation for power system decarbonisation and resilience, with a smart grid pilot programme administrated by UNEP and funded by the Italian Government. Unlocking Smart Grid Opportunities in Emerging Markets and Developing Economies, a major report by the IEA 3DEN initiative, was launched at a special event during the 8th Annual Global Conference on Energy Efficiency, in June 2023.
- IEA Technology Collaboration Programmes (TCPs) are informing policy-making related to digitalisation to accelerate clean, efficient and secure energy transitions, including on smart grids, user-centred energy systems, electronic devices and networks, industry and buildings.
- The Mission Innovation (MI) Green Powered Future Mission aims to demonstrate that by 2030 power systems can effectively integrate up to 100% variable renewables, with digitalisation playing an enabling role.
- The Energy Efficiency Hub’s Digitalisation Working Group is collating best practices on policies and measures.
We would like to thank the following external reviewer:
We would like to thank the following external reviewer:
Steven Beletich, IEA 4E TCP, Electronic Devices and Networks Annex (EDNA), Contributor and Reviewer
Recommendations
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As digital technologies are developing at a much faster pace than the regulatory measures that govern them, forward-looking strategies and innovative frameworks are needed to promote experimentation with new technologies and the deployment and use of digital technologies in the energy sector. Innovative approaches include regulatory sandboxes, as covered for example in International Smart Grid Action Network (ISGAN) research and policy guidance.
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Modern power systems require cross-disciplinary knowledge, and growing evidence indicates a lack of ICT skills and access to digital solutions as the main barriers to the digitalisation of the energy sector. Governments and companies can collaborate to identify critical skills needs (ensuring resiliency and adaptability) and to avoid labour bottlenecks, while also pursuing capacity building, reskilling and upskilling. Policies should prioritise the skills needs of vulnerable and underrepresented groups, thereby simultaneously addressing employment, equity and inclusion
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Digitalisation can enhance access to new, more granular and real-time data and provide useful insights from large and multiple data sources. The benefits of data-sharing are often overlooked, underestimated or resisted and there is a lack of incentives to invest in data and develop solutions.
Privacy and data ownership are also major concerns for consumers, especially as more detailed data are collected from a growing number of connected devices and appliances. Policy makers will need to balance privacy concerns with other objectives, including promoting innovation and the operational needs of utilities. Policy makers developing overarching data strategies should include energy sector considerations.
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Realising the full potential of smart devices and sensors requires high levels of interoperability to allow them to connect, communicate and seamlessly integrate across the system, including through open-source software and data licensing. Policy makers will need to pursue a system-wide approach to promote increased interoperability.
Common international standards could help to ensure that all assets focused on a particular use case, such as delivering demand flexibility, are compliant with interoperability and data sharing principles. This could also support faster deployment on a global scale. For guidance see the OECD Going Digital Toolkit and the Energy Systems Catapult report on Interoperability in the Energy Sector.
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Policy makers need to increasingly focus on data governance and high speed secure digital networks and accompanying market systems to enable the design and management of the complex, data intense and dynamic operating system inherent to a decarbonised grid and electrified economy. International collaboration will be instrumental in accelerating progress and reducing costs and redundancies.
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International initiatives can help coordinate, identify and target areas where increased investment in R&D is most needed to foster digital innovation. Pilots and demonstration projects should address major challenges, cover replicability and scalability aspects, and disseminate useful learning and results. In September 2022, at the Clean Energy Ministerial, the UN Environment Programme (UNEP) and the International Energy Agency (IEA) announced grant support for pilot projects in Brazil, Colombia, India and Morocco, which includes these elements.
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Cybersecurity risks are growing as energy systems become more digitalised. Policy makers play a central role in enhancing digital resilience by raising awareness, facilitating partnerships and sector-wide collaboration, developing information exchange programmes and supporting research initiatives across the energy sector and beyond. The rapidly changing nature of risks and threats calls for the continuous review and adaptation of policies.
Digitalisation has implications for jobs and skills in the energy sector and beyond. It is changing work patterns and tasks, causing job losses in some areas and creating new jobs in others. Measures to ensure just transitions are highlighted in the recommendations of the IEA Global Commission on People-Centred Clean Energy Transitions.
While digitalisation can help to reduce emissions, some applications can increase net emissions by inducing greater consumption or enabling more carbon-intensive energy production. Strong climate policies are vital to ensure that digitalisation helps to accelerate – not hinder – clean energy transition.
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Proprietary communication protocols can be a serious stumbling block in the path to leveraging digital solutions for decarbonisation and energy system resilience. Industry also has a key role to play in enabling interoperability of technologies and systems.
A number of international initiatives and alliances aim to drive progress towards open, secure and interoperable systems, including the OSGP Alliance and LF Energy. Further efforts are needed to create and share testing and verification environments.
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The private sector must play a leading role in reducing the direct environmental impacts of data centres, data transmission networks and connected devices, to align with the International Telecommunications Union’s standard and guidance on reducing the sector’s GHG emissions by 45% between 2020 and 2030. Companies can play a major role in deploying digital technologies to reduce emissions across the energy sector and beyond, through initiatives such as the European Green Digital Coalition.
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Industry must play an important role in ensuring digital resilience across the energy value chain. For example, utilities and equipment providers can conduct active monitoring of the supply chain to detect vulnerabilities. Digital resilience must be incorporated by design into research, development and product manufacturing.
Unlocking Smart Grid Opportunities in Emerging Markets and Developing Economies
The clean energy transition requires a fundamental transformation of power systems, including much higher levels of digitalisation at scale across all grid domains, from generation to transmission and distribution to end-use. Strong policy attention is required to scale up investments in smarter and more resilient grids in emerging and developing economies where electricity consumption is set to grow at a rapid rate while also providing greater levels of electricity access. Investments in smarter and more resilient grids will be necessary to accommodate the greater deployment of renewable energy and enhance energy security.
Lead authors
Vida Rozite
Contributors
Emi Bertoli
Brendan Reidenbach
Kevin Lane