Unlocking the power of Artificial Intelligence in the Energy IndustryExecutiveSummaryArtificial Intelligence (AI) is no longer the stuff of science fiction,it’s here now and has the potential to disrupt every industry.
The success of Alexa and Google Home have launched AI technology intoour lives. It’s now common place in people’s homes, pockets and daily routines.The ‘Big 6’ energy companies need to embrace technology advances such asAI to remain interesting and competitive within the market place – thesecompanies lost over 160,000 customers to smaller rivals in September 2017.
Thisfigure will only grow as new start-ups continue to develop their propositionusing agile methodologies to react to technological advances, increasingefficiency and driving down costs. This paper will demonstrate the need for the traditional Energy Marketand ‘Big 6’ companies to innovate or experience further loss of business – wewill discuss the impact of AI on the Energy Industry, with a particular focuson today’s trend for digital personal assistants, the connected home and theuse of drones; all of which rely on vast amounts of data in order to be fullyeffective. Introduction In September this year British Gas hiked the priceof their standard variable tariff by 12.
5%.1The reason for these price rises? According to energy companies it’s a rise inwhole sale cost. AI technology has the potential to help reduce costs across the board.Companies can use the technology to reduce maintenance, servicing andmanufacturing costs. Consumers can take advantage of AI to help reduce theirusage and optimise their consumption to use energy in the most cost effectiveway possible.
Trend As Futurism illustrates2,(AI) ‘has the potential to transform the world’. AI isn’t new, scientists and philosophers werediscussing some concepts as far back as Aristotle but perhaps for the generalpublic it has taken recent developments to promote it from the realms ofscience fiction. Microsoft’s Kinect for Xbox, Apple’s Siri and Microsoft’s Cortana couldbe seen to have prepared the way for the current trending AI products andservices like Amazon’s Alexa and Google’s Home range. The draw of such devicesseems to be on the ability to provide control, knowledge and connectivity to anincreasing range of other devices.”Amazon’s Alexa-controlled Echo speaker, now in its second generation…continuesto expand its music, smart-home, and digital-assistant abilities”.3With the rise in popularity of digital assistants,we are seeing increasing numbers of customers pairing these devices with smartlighting and thermostats to save money whilst easily controlling theirconnected home.
RecentInnovationsThe general public are getting smarter and areadapting to new technologies much quicker. Smart thermostats are a key exampleof this. According to Nest, ‘Yourthermostat controls 60% of your energy bill….Since 2011, it’s saved over 8billion kWh of energy in millions of homes worldwide.
Because it learns fromyou. It gets to know the temperature you like when you’re at home. And turnsitself down when you’re away. It even learns how your home warms up or howdraughty it is, so it only uses the energy it needs. That’s how the NestThermostat saves energy.”4Adding to the connected home are smart meters which will be offered toevery UK home by 20205.
The technology in these meters is using datato improve individuals’ abilities to monitor and optimise their householdenergy use. This data also helps suppliers to improve the standard of servicethat they offer and personalise communications through better understandingcustomers’ energy use6.This sharing of data between devices, customers, suppliers and wholesalers willsurely be key to the expansion of AI in the future.At scale, information collected from smart home devices (smart meters,thermostats and IOT) along with energy suppliers and wholesalers can be used byAI to help control energy distribution and efficiency across entire cities –and not just at a macro level, but right down to individual devices. In short, it can predict when the countrywill need more power and when it will need less.It is not just in the home where we are seeing growth in AI application.Energy producers are using technology to cut costs for example autonomousdrones capable of inspecting and analysing remote transmission assets are beingused to predict equipment problems that in turn prevent unplanned downtime.
Theusage of AI drones to inspect existing infrastructure has the potential to befaster, cheaper and more importantly, safer than traditional methods. Existing drone technology is already being used by companies for checksand routine maintenance7,just this year the New York Power Authority used a drone to inspect the NiagaraIce Boom. This process would usually cost more than £6000 once you includehiring a helicopter – a drone costs just $300 a day8.It’s not just ice that drones are being used to inspect, Duke Energy9are already looking to test their capabilities. They’ve used them to checkboilers at power plants, solar panels and identify storm damage.With savings such as these available it’s only a matter of time beforerobotics companies are putting more time into producing drones that areprogrammed to perform these checks routinely. Eventually AI technology can beused to allow the drones to perform the checks on an AdHoc basis.
Strategy forchange and recommendations Legacy energy companies must invest in DigitalInnovations, including AI – without this, they will continue to lose businessto smaller, more agile entrants within the Energy Market. ‘More than 800,000 customers have turned their backon British Gas parent Centrica since June 2017…putting shares on track forwhat analysts are predicting to be their worst day in history.’10 It wasn’t just British Gas who have seen vastnumbers of customers move suppliers. ‘The big six energy companies suffered a record exodus of more than160,000 customers to smaller rivals in September alone, as British Gasincreased electricity prices for millions of households.’11 At the moment the conveniences, wants and needs of consumers, energy suppliersand wholesalers work in separate silos with each wanting to save money, makemoney and control energy in the smartest way.
As the industry will graduallybecome more connected data sharing will present significant opportunities. According to energy law experts Foot Anstey’.12’Sharing data with rivals could save the UK’senergy industry £4bn a year – it is reported that £70K is lost with every 1MWproduced due to energy owners, manufactures, and system operators simply notsharing their information and harmonising activities for maximum efficiency. Companiesand consumers alike would benefit if this information was shared, which combinedwith AI could carve the future in creating smart cities and make a significantimpact to the energy industry. Data Sharing should be considered alongside the useof cloud based technologies.
Accenture’s recent survey identified digitaltrends that will impact the energy industry. Trend five illustrated that greater use of cloud technologies will bethe key to getting the value out of digital: ‘Use of cloud has become mainstream for oil and gas companies. It wasused mainly for cost reduction in IT infrastructure but now has become anenabler to more quickly unlock the value that broader digital solutions canprovide. Oil and gas companies need to quickly adopt full hybrid cloudsolutions in order to accelerate the value that digital solutions can deliver.’13Cloud technology presents the opportunity for fullinterconnectedness between power sources, energy suppliers and people’s homes. Itmaynot be long before Amazon Alexa is not only used totake the consumer’s instruction to turn on the washing machine, but rather tellthe consumer when is the best or the cheapest time. The use of Al and Smart technology currently operating in New York showshow they can be used to assess upcoming energy needs based on data collectedfrom individual customers and location-specific weather forecasts.
It then usesthis to buy power from its network of peer-to-peer energy providers, usinghigh-frequency, algorithmic trading to reduce or eliminate price spikes ifdemand exceeds expectation. Thisframework has not yet been implemented in the UK14.However, by adopting these practices we could optimise energy usage across thecountry and see a real shift in the way consumers use and pay for their energy In an article by Green tech media, it states that Zuckerberg’s law hasmade it to the energy industry. In a generation of millennials, they have grownup in a data sharing environment and want real time information at the click ofa button. Millennials are so immersed in the digital world that the energyindustry simply cannot ignore the importance of sharing data. ‘By leaning intothis shift and creating clear road maps and guidelines for data-sharing, ratherthan ignoring the trend, utilities have the opportunity to improve theirdigital experience and create positive long-term customer relationships’.
15Harnessing the cost savings that the use of AI powered by data sharingbrings, and more importantly, passing on these savings to the customer, couldbe the differentiator for energy companies and allow them to win customers backand hold onto them. A Future Scenario If the Legacy energy companies want to remaincompetitive and attractive to consumers within the market place they need toembrace technological advances and look beyond current capabilities to carveout a niche in the market. The onlineworld is transforming patterns of consumption, focusing less on ownership andmore on pay by use – this could present opportunities. A potential future scenario has connected homes notifying consumers ofthe best time to use our washing machine or heat our water tanks based onenergy supply versus demand and costs. Reduced costs could be levied for off-peak usage, or when convenient forthe supply chain. This can only occur with the relevant data sharing andhosting capabilities and agreements. With Artificial Intelligence paving the way for remote management of ourhome appliances, we no longer need to be at home to run our home.
If legacy energy companies don’t innovate, start-ups will continue towin their business: Al integration is increasing in the energy industry, asshown by looking at the BDO accounting firm stats. They found mergers and acquisitions involvingenergy companies and AI start-ups had soared in average value from around $500million in the first quarter of 2017 to $3.5 billion in the second quarter16. Benefits, Risks and ChallengesAs discussed throughout this whitepaper, there are numerous benefits forboth customers and energy suppliers. Digital personal assistants offer ease of use for customers. They are intuitive to customers’ needs andoffer time savings.
Linking thesedevices to connected homes will offer greater efficiencies giving customerscost savings and simplifying their energy use. On the supplier side the datagathered from these connected homes will allow companies to ‘constantly monitordemand and supply’ which will in turn allow them to ‘actively manage and avoiddisruptions’. ‘Google recently appliedthis AI technology to reduce its total data center power consumption, whichtranslated to millions of dollars in savings.
’17 Added to this the use of drones to carry outroutine maintenance, will provide further cost savings on the supply side, aswell as a safer working environment. We need to be mindful that as with any emerging trend there will berisks and challenges associated with these benefits. There is still some work to be done toincrease customer perception of the value that digital personal assistants canprovide. Connected homes may experiencesome downtime due to software updates which may add some friction to thecustomer experience. The use of drones and data sharing both open thedoor to the possibility of hacking and cyber-attacks. Companies will need to ensure that they havestringent controls in place to mitigate this risk. Energy UK Data law alsoadvised that data collected from smart meters puts strict control on: YourData, Who can access it and how you chose to share it.’18For data sharing to work and be beneficial thereneeds to be a willingness to share between customers and suppliers, and alsobetween competitors.
For this to be successful there must be transparencyaround how data is shared and for what purpose. This should be helped by thenew GDPR guidelines. Conclusion Although AI is in its earlystages of implementation, it is poised to revolutionize the way we produce,transmit, and consume energy’19This said, making clean, affordable, renewable energywill be beneficial to those who can’t afford it and essential to climatechange. AI will be the brains behind future power grids, digesting informationfrom smart meters learning from consumer algorithms and make real timedecisions on when best to use energy ‘Additionally, the advances made from ‘deep learning’ algorithms, a system where machines learn on their ownfrom spotting patterns and anomalies in large data sets, will revolutionizeboth the demand and supply side of the energy economy’. In the United States the Department of Energy (DOE) ‘has made supporting the ‘smart grid’ a national policy goal, which entails a “fullyautomated power delivery network that monitors and controls every consumer andnode, ensuring a two-way flow of electricity and information.
” The energy industry cannot afford to ignore the trend of AI and datasharing. It’s the Key topowering the world. The Energy Market and ‘Big 6’ companies need toInnovate, or experience further loss of business.1http://www.independent.co.uk/news/business/news/uk-energy-bills-fastest-rate-since-2014-money-saving-consumer-electricity-british-gas-a7957971.html2https://futurism.com/artificial-intelligence-is-our-future-but-will-it-save-or-destroy-humanity/3https://thewirecutter.com/reviews/what-is-alexa-what-is-the-amazon-echo-and-should-you-get-one/4https://nest.com/uk/thermostats/nest-learning-thermostat/overview/5https://www.smartenergygb.org/en/how-to-get-a-smart-meter/energy-suppliers6http://www.energy-uk.org.uk/customers/about-smart-meters/why-are-smart-meters-a-good-idea.html7http://www.bbc.co.uk/news/av/uk-scotland-23130820/drones-making-oil-rigs-and-pylons-safer8https://www.techemergence.com/industrial-uses-of-drones-applications/9 https://illumination.duke-energy.com/articles/drones-go-where-man-has-gone-before10http://www.independent.co.uk/news/business/news/british-gas-centrica-lose-customers-june-2017-since-energy-provider-a8071116.html11https://www.theguardian.com/business/2017/oct/13/energy-firms-customers-british-electricity-gas-edf-eon-npower-sse-scottish-power12 http://www.energydigital.com/waste-management/uk-energy-industry-could-be-saving-ps4bn-year-sharing-data-says-foot-anstey13https://www.accenture.com/us-en/insight-2016-upstream-oil-gas-digital-trends-survey#block-explore-the-trends14 https://www.drax.com/technology/artificial-intelligence-will-change-energy/15https://www.greentechmedia.com/articles/read/how-utilities-can-meet-millennials-needs-in-a-data-sharing-economy16 https://www.greentechmedia.com/articles/read/big-data-and-ai-deals-in-energy-are-up-10-fold-in-2017#gs._Abt_Iw17http://sitn.hms.harvard.edu/flash/2017/artificial-intelligence-will-revolutionize-energy-industry/18 http://www.eurelectric.org/media/278067/joint_retail_dso_data_report_final_11may_as-2016-030-0258-01-e.pdf19 http://sitn.hms.harvard.edu/flash/2017/artificial-intelligence-will-revolutionize-energy-industry/