Energy efficiency: Digitalisation

Energy efficiency is changing, with new digital technologies enabling greater control, optimisation and analytics. Harnessing digital technologies to enhance energy efficiency will require new policies and business models.


Digitalisation is set to transform the global energy system with profound impacts on both energy demand and supply

Digitalisation describes the growing application of ICT across the economy, leading to increasing volumes of data, rapid progress in advanced analytics, and greater connectivity between humans, devices and machines (including machine-to-machine).

From sensors in oil and gas reservoirs to the rise of automated vehicles, digitalisation has significant implications for how the world produces and consumes energy.

Digitalisation’s impact on the demand side is complex. On one hand, digital devices potentially offer large improvements in energy efficiency for the transport, buildings and industry sectors. On the other, the prevalence of more devices—and servers to house the data they produce—could cause large net increases in energy use, if not managed carefully.

However, the process of digitalisation is unlikely to stop. The key challenge for policy makers is to steer it in a way that maximises the benefits for the energy system and minimises negative impacts.

With that in mind, the IEA has launched a cross-agency initiative to explore the potential for digitalisation to increase energy efficiency and draw out recommendations for policy makers.

Digitalisation can improve energy efficiency through technologies that gather and analyse data to effect real-world changes to energy use

Digitalisation offers the potential to increase energy efficiency through technologies that gather and analyse data before using it to make changes to the physical environment (either automatically, or through human intervention).

Data gathering technologies such as sensors and smart meters collect data on energy use and other conditions affecting energy use (like climate). Data are processed into useful information through data analysis technologies such as artificial intelligence algorithms. Finally, the processed information is sent to devices that can effect physical changes to optimise energy use. Some devices require human action to optimise energy use: For example, a smartphone app can suggest an energy efficient route to work but the commuter must act on that advice. Other devices are capable of optimising energy efficiency more autonomously: For example, switches in a building's cooling system or robots in a production line.

Figure 1: How digitalisation can improve efficiency through a comination of technologies 

Digital technologies are already widely used in all energy end-use sectors. More and more residential and commercial buildings are equipped with smart appliances and intelligent energy management systems. In the industry sector, advanced robotics and 3D printing are becoming standard practice. The interaction between automated, connected, electric and shared (ACES) mobility will shape the future energy consumption in the transport sector.

For more information on how digital technologies are being used today, see our Digitalisation Resource Library.

Digital technologies expand our view of energy efficiency: from end-use efficiency to system efficiency

Digital technologies have the potential to optimise the energy used for many energy-using activities: from constructing an industrial product, to cooling a home. This represents an increase in energy efficiency as traditionally defined: A reduction in energy used per unit of activity. Increasing end-use efficiency continues to be a critical ingredient in energy transitions globally, with benefits in both developed and emerging economies.

However, the connectivity benefits of digitalisation allow digital technologies to both increase end-use efficiency and the efficiency of the entire energy system.

The world’s energy systems are undergoing an immense transformation: Centralised and decentralised variable renewables continue to be added to the grid, the electrification of energy consumption is increasing, while “prosumers,” (people who both consume produce energy) are emerging. In this context, demand side flexibility is increasingly important to ensure the energy system runs as efficiently as possible, with energy supplied when it is needed, and consumed when it is available.

Digitalisation enables “smart” buildings, vehicles and industrial facilities to provide new sources of flexible load to the energy system, which can help to reduce renewables curtailment on the supply side and support communities to consume energy produced themselves, "behind the meter". With more renewables in the system, and more community self-consumption, the end result is a more efficient energy system, thanks to reductions in losses associated with producing and distributing energy.

The power of digital technologies to both improve end-use efficiency and system efficiency ultimately benefits the overall energy system through avoided investments in energy infrastructure (such as peaking plant), improved integration of renewables, and enhanced energy security, amongst other impacts.

Figure 2: How digitalisation potentially changes traditional conceptions of energy efficiency and demand-side flexibility

By offering both end-use and system efficiency benefits, digitalisation also forces us to re-examine perceptions that energy efficiency and demand response are separate, or in conflict; digitalisation suggests a holistic, system-wide perspective of energy efficiency is needed, encompassing both traditional end-use efficiency and demand-side flexibility.

For more information or to share case studies or data, contact us at energy.efficiency@iea.org.