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How the energy transition is spurring industry digitization – and vice versa

Bnamericas Published: Thursday, December 01, 2022
How the energy transition is spurring industry digitization – and vice versa

The transition to renewable sources and greener production chains not only opens up business and investment opportunities for companies directly involved in the energy sector, but also has the potential to accelerate the relatively low digitization of the entire industry.

That is the opinion of Adriano Correia, head of energy, utilities & resources at PwC Brasil, for whom the opposite is also true: digital technologies help foster the energy transition.

“There's a lot of talk about using digital tools to optimize consumption, avoid waste and allow contracting of renewable sources, but we also see the possibility of their use for better measurement and predictability in generation, including investments in digitization to assess demand for intermittent sources,” Correia told BNamericas.

He added that these investments are starting to gain traction among wind generation companies in particular, rather than solar power firms, largely due to the characteristics of the energy sources.  

He said that are already several such early-stage projects in Brazil, such as for the deployment of sensors on wind blades to collect data to feed computer modeling.

This helps better control the power of the blades, warns of the need for preventive maintenance and generates insights into where winds are most concentrated, among other applications.

With artificial intelligence and machine learning, these data can be processed and sent in a more organized way to the companies’ network operations centers (NOCs) and, eventually, to the national grid operator.

LOW DIGITIZATION

Although renewable sources already comprise 84% of Brazil's energy matrix (hydro plants, wind and power), the electric power industry as a whole still has low levels of digitization in its processes and operations compared with other sectors.

“I think there's a lack of a great catalyst for the digitization in the industry – which already has good levels of service and operates with a robust structure – as the pandemic was for retail, for example,” he said.

Digitization bottlenecks tend to be more concentrated in grid operation and in generation and transmission rather than in distribution. Further integration of all these chains with shared systems will also take place.

However, this does not mean that the industry has few good examples of digitization.

Examples of successful implementations include startups focused on the energy sector, also known as energytechs, created in recent years mostly to facilitate access to contracting in the distributed generation model, particularly solar sources. 

The same is true of fintechs dedicated to financing the acquisition of solar panels or managing consumption from this energy source.

According to a survey carried out by Distrito Dataminer, there are over 160 energytechs already operating in Brazil. 

Investments in these energytechs grew 134% between January and October, compared with all of 2021. These companies received US$288mn in 15 investment rounds in the first 10 months of the year, up from US$123mn in January-December 2021. 

All of this also came while startups were generally having difficulty raising funds in the market.

Also according to the Distrito report, the increase in investments in the energy sector was driven by the renewables segment, with US$399mn in investments received since 2015.

MARKET OPENNESS

In Correia's view, one potential catalyst for further digitization of the power industry in Brazil is the promised greater openness of the distributed generation sector to less power-intensive consumers.

This should bring increased competition, the entry of new players and the creation of new tech-based solutions.

“The competition for the end-consumer will intensify and technology will be key to this. There's a lot of movement set to happen in the sector. Some assets are being offered for sale. I see very intense movement in commercialization, a lot of players coming in, including financial institutions. There's going to be an important reorganization there.”

Correia also predicts that there will be an increasing intersection between telecom services and energy/power services.

On the other hand, the PwC analyst agrees that there are still few tech-based companies dedicated to being a one-stop shop for industries to manage carbon emissions and as consultancies for the green transition.

Companies, potentially in partnership with consultancies such as PwC itself, could offer to prepare the green transition, from analysis of supply chains to monitoring internal power consumption, as well as provide dashboards for emission reduction targets, preparation of reports, and issuance of certificates, among other things.

Brazilian power distributors are expected to invest around 106bn reais (US$20bn) between 2023 and 2026. 

"With the resumption of economic growth and the technological evolution in the electricity sector, the distributors need to be prepared to meet their customers' demands. We have an excellent outlook for the sector," Ricardo Brandão, executive director of regulation of the Brazilian power distributor association Abradee, told BNamericas.

‘SAUDI ARABIA OF GREEN HYDROGEN’

Among the general energy transition trends in Brazil, Correia points to the growing shift towards the electrification of the economy, with the gradual switch from internal combustion to electric vehicles, but he particularly underlines the rise in investments in green hydrogen.

“On this front, there's still too much debate to take place for the operational viability of these projects,” he said, however.

In Correia's view, technologies for storing and transporting green hydrogen by ship, developed by the Japanese, would be great news for Brazil if they gain scale, as the country could export production to European countries from the northeast, a region that is blessed with abundant solar and wind energy resources.

“There are people who think that green hydrogen will be the natural substitute for oil. Some people say that Brazil can be the Saudi Arabia of green hydrogen.”

Hype aside, Correia believes that this is generally the way to go.

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