Unlocking innovate or experience further loss of business –

Unlocking the power of Artificial Intelligence in the Energy Industry

Executive
Summary

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Artificial 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 into
our 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 as
AI to remain interesting and competitive within the market place – these
companies lost over 160,000 customers to smaller rivals in September 2017. This
figure will only grow as new start-ups continue to develop their proposition
using agile methodologies to react to technological advances, increasing
efficiency and driving down costs.

This paper will demonstrate the need for the traditional Energy Market
and ‘Big 6’ companies to innovate or experience further loss of business – we
will discuss the impact of AI on the Energy Industry, with a particular focus
on today’s trend for digital personal assistants, the connected home and the
use of drones; all of which rely on vast amounts of data in order to be fully
effective.

 

Introduction

In September this year British Gas hiked the price
of their standard variable tariff by 12.5%.1
The reason for these price rises? According to energy companies it’s a rise in
whole sale cost.

AI technology has the potential to help reduce costs across the board.
Companies can use the technology to reduce maintenance, servicing and
manufacturing costs. Consumers can take advantage of AI to help reduce their
usage and optimise their consumption to use energy in the most cost effective
way possible.

 

Trend

As Futurism illustrates2,
(AI) ‘has the potential to transform the world’.  AI isn’t new, scientists and philosophers were
discussing some concepts as far back as Aristotle but perhaps for the general
public it has taken recent developments to promote it from the realms of
science fiction. 

 

Microsoft’s Kinect for Xbox, Apple’s Siri and Microsoft’s Cortana could
be seen to have prepared the way for the current trending AI products and
services like Amazon’s Alexa and Google’s Home range. The draw of such devices
seems to be on the ability to provide control, knowledge and connectivity to an
increasing range of other devices.

“Amazon’s Alexa-controlled Echo speaker, now in its second generation…continues
to expand its music, smart-home, and digital-assistant abilities”.3
With the rise in popularity of digital assistants,
we are seeing increasing numbers of customers pairing these devices with smart
lighting and thermostats to save money whilst easily controlling their
connected home.

 

Recent
Innovations

The general public are getting smarter and are
adapting to new technologies much quicker. Smart thermostats are a key example
of this.  According to Nest, ‘Your
thermostat controls 60% of your energy bill….Since 2011, it’s saved over 8
billion kWh of energy in millions of homes worldwide. Because it learns from
you. It gets to know the temperature you like when you’re at home. And turns
itself down when you’re away. It even learns how your home warms up or how
draughty it is, so it only uses the energy it needs. That’s how the Nest
Thermostat saves energy.”4

Adding to the connected home are smart meters which will be offered to
every UK home by 20205.  The technology in these meters is using data
to improve individuals’ abilities to monitor and optimise their household
energy use. This data also helps suppliers to improve the standard of service
that they offer and personalise communications through better understanding
customers’ energy use6.
This sharing of data between devices, customers, suppliers and wholesalers will
surely 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 by
AI 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 country
will 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 autonomous
drones capable of inspecting and analysing remote transmission assets are being
used to predict equipment problems that in turn prevent unplanned downtime. The
usage of AI drones to inspect existing infrastructure has the potential to be
faster, cheaper and more importantly, safer than traditional methods.

Existing drone technology is already being used by companies for checks
and routine maintenance7,
just this year the New York Power Authority used a drone to inspect the Niagara
Ice Boom. This process would usually cost more than £6000 once you include
hiring a helicopter – a drone costs just $300 a day8.

It’s not just ice that drones are being used to inspect, Duke Energy9
are already looking to test their capabilities. They’ve used them to check
boilers at power plants, solar panels and identify storm damage.

With savings such as these available it’s only a matter of time before
robotics companies are putting more time into producing drones that are
programmed to perform these checks routinely. Eventually AI technology can be
used to allow the drones to perform the checks on an AdHoc basis.

 

Strategy for
change and recommendations

Legacy energy companies must invest in Digital
Innovations, including AI – without this, they will continue to lose business
to smaller, more agile entrants within the Energy Market. 

‘More than 800,000 customers have turned their back
on British Gas parent Centrica since June 2017…putting shares on track for
what analysts are predicting to be their worst day in history.’10  It wasn’t just British Gas who have seen vast
numbers of customers move suppliers. 
‘The big six energy companies suffered a record exodus of more than
160,000 customers to smaller rivals in September alone, as British Gas
increased electricity prices for millions of households.’11

 

At the moment the conveniences, wants and needs of consumers, energy suppliers
and wholesalers work in separate silos with each wanting to save money, make
money and control energy in the smartest way. As the industry will gradually
become more connected data sharing will present significant opportunities.

According to energy law experts Foot Anstey’.12
‘Sharing data with rivals could save the UK’s
energy industry £4bn a year – it is reported that £70K is lost with every 1MW
produced due to energy owners, manufactures, and system operators simply not
sharing their information and harmonising activities for maximum efficiency. Companies
and consumers alike would benefit if this information was shared, which combined
with AI could carve the future in creating smart cities and make a significant
impact to the energy industry.

Data Sharing should be considered alongside the use
of cloud based technologies. Accenture’s recent survey identified digital
trends that will impact the energy industry. 
Trend five illustrated that greater use of cloud technologies will be
the key to getting the value out of digital: 
‘Use of cloud has become mainstream for oil and gas companies. It was
used mainly for cost reduction in IT infrastructure but now has become an
enabler to more quickly unlock the value that broader digital solutions can
provide. Oil and gas companies need to quickly adopt full hybrid cloud
solutions in order to accelerate the value that digital solutions can deliver.’13

Cloud technology presents the opportunity for full
interconnectedness between power sources, energy suppliers and people’s homes. It
may

not be long before Amazon Alexa is not only used to
take the consumer’s instruction to turn on the washing machine, but rather tell
the consumer when is the best or the cheapest time.

The use of Al and Smart technology currently operating in New York shows
how they can be used to assess upcoming energy needs based on data collected
from individual customers and location-specific weather forecasts. It then uses
this to buy power from its network of peer-to-peer energy providers, using
high-frequency, algorithmic trading to reduce or eliminate price spikes if
demand exceeds expectation.  This
framework has not yet been implemented in the UK14.
However, by adopting these practices we could optimise energy usage across the
country 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 has
made it to the energy industry. In a generation of millennials, they have grown
up in a data sharing environment and want real time information at the click of
a button. Millennials are so immersed in the digital world that the energy
industry simply cannot ignore the importance of sharing data. ‘By leaning into
this shift and creating clear road maps and guidelines for data-sharing, rather
than ignoring the trend, utilities have the opportunity to improve their
digital experience and create positive long-term customer relationships’.15

Harnessing the cost savings that the use of AI powered by data sharing
brings, and more importantly, passing on these savings to the customer, could
be the differentiator for energy companies and allow them to win customers back
and hold onto them.

 

A Future Scenario 

If the Legacy energy companies want to remain
competitive and attractive to consumers within the market place they need to
embrace technological advances and look beyond current capabilities to carve
out a niche in the market.  The online
world is transforming patterns of consumption, focusing less on ownership and
more on pay by use – this could present opportunities. 

A potential future scenario has connected homes notifying consumers of
the best time to use our washing machine or heat our water tanks based on
energy supply versus demand and costs. 
Reduced costs could be levied for off-peak usage, or when convenient for
the supply chain. This can only occur with the relevant data sharing and
hosting capabilities and agreements. 

With Artificial Intelligence paving the way for remote management of our
home appliances, we no longer need to be at home to run our home. 

If legacy energy companies don’t innovate, start-ups will continue to
win their business: Al integration is increasing in the energy industry, as
shown by looking at the BDO accounting firm stats.  They found mergers and acquisitions involving
energy companies and AI start-ups had soared in average value from around $500
million in the first quarter of 2017 to $3.5 billion in the second quarter16.

 

Benefits, Risks and Challenges

As discussed throughout this whitepaper, there are numerous benefits for
both customers and energy suppliers. 
Digital personal assistants offer ease of use for customers.  They are intuitive to customers’ needs and
offer time savings.  Linking these
devices to connected homes will offer greater efficiencies giving customers
cost savings and simplifying their energy use. On the supplier side the data
gathered from these connected homes will allow companies to ‘constantly monitor
demand and supply’ which will in turn allow them to ‘actively manage and avoid
disruptions’.  ‘Google recently applied
this AI technology to reduce its total data center power consumption, which
translated to millions of dollars in savings.’17  Added to this the use of drones to carry out
routine maintenance, will provide further cost savings on the supply side, as
well as a safer working environment.

 

We need to be mindful that as with any emerging trend there will be
risks and challenges associated with these benefits.  There is still some work to be done to
increase customer perception of the value that digital personal assistants can
provide.  Connected homes may experience
some downtime due to software updates which may add some friction to the
customer experience.

 

The use of drones and data sharing both open the
door to the possibility of hacking and cyber-attacks.  Companies will need to ensure that they have
stringent controls in place to mitigate this risk. Energy UK Data law also
advised that data collected from smart meters puts strict control on: Your
Data, Who can access it and how you chose to share it.’18

For data sharing to work and be beneficial there
needs to be a willingness to share between customers and suppliers, and also
between competitors. For this to be successful there must be transparency
around how data is shared and for what purpose. This should be helped by the
new GDPR guidelines.

 

Conclusion

Although AI is in its early
stages of implementation, it is poised to revolutionize the way we produce,
transmit, and consume energy’19
This said, making clean, affordable, renewable energy
will be beneficial to those who can’t afford it and essential to climate
change. AI will be the brains behind future power grids, digesting information
from smart meters learning from consumer algorithms and make real time
decisions on when best to use energy ‘Additionally, the advances made from ‘deep learning’ algorithms, a system where machines learn on their own
from spotting patterns and anomalies in large data sets, will revolutionize
both 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 “fully
automated power delivery network that monitors and controls every consumer and
node, ensuring a two-way flow of electricity and information.” The energy industry cannot afford to ignore the trend of AI and data
sharing.  It’s the Key to
powering the world.

 

The Energy Market and ‘Big 6’ companies need to
Innovate, or experience further loss of business.

1
http://www.independent.co.uk/news/business/news/uk-energy-bills-fastest-rate-since-2014-money-saving-consumer-electricity-british-gas-a7957971.html

2
https://futurism.com/artificial-intelligence-is-our-future-but-will-it-save-or-destroy-humanity/

3
https://thewirecutter.com/reviews/what-is-alexa-what-is-the-amazon-echo-and-should-you-get-one/

4
https://nest.com/uk/thermostats/nest-learning-thermostat/overview/

5
https://www.smartenergygb.org/en/how-to-get-a-smart-meter/energy-suppliers

6
http://www.energy-uk.org.uk/customers/about-smart-meters/why-are-smart-meters-a-good-idea.html

7
http://www.bbc.co.uk/news/av/uk-scotland-23130820/drones-making-oil-rigs-and-pylons-safer

8
https://www.techemergence.com/industrial-uses-of-drones-applications/

9 https://illumination.duke-energy.com/articles/drones-go-where-man-has-gone-before

10
http://www.independent.co.uk/news/business/news/british-gas-centrica-lose-customers-june-2017-since-energy-provider-a8071116.html

11
https://www.theguardian.com/business/2017/oct/13/energy-firms-customers-british-electricity-gas-edf-eon-npower-sse-scottish-power

12 http://www.energydigital.com/waste-management/uk-energy-industry-could-be-saving-ps4bn-year-sharing-data-says-foot-anstey

13
https://www.accenture.com/us-en/insight-2016-upstream-oil-gas-digital-trends-survey#block-explore-the-trends

14 https://www.drax.com/technology/artificial-intelligence-will-change-energy/

15
https://www.greentechmedia.com/articles/read/how-utilities-can-meet-millennials-needs-in-a-data-sharing-economy

16 https://www.greentechmedia.com/articles/read/big-data-and-ai-deals-in-energy-are-up-10-fold-in-2017#gs._Abt_Iw

17

How Artificial Intelligence Will Revolutionize the Energy Industry

18 http://www.eurelectric.org/media/278067/joint_retail_dso_data_report_final_11may_as-2016-030-0258-01-e.pdf

19 http://sitn.hms.harvard.edu/flash/2017/artificial-intelligence-will-revolutionize-energy-industry/