Scanning the 188 page report, ‘Digitalization & Energy’ (D&E) from the Paris-headquartered International Energy Agency (IEA*) made us think of a classroom of students confronted with an awkward topic. In 2016, IEA director Fatih Birol tasked his employees with the preparation of this investigation-cum-forecast of ‘how digitalization is transforming energy systems.’ The result is a compilation of observations and imaginings, most of which any causal reader of the FT or WSJ will have heard before.
The authors ask rhetorically, if digitalization heralds a new era. For oil and gas the answer is both no (‘oil and gas companies have long used digital technologies to model exploration and production assets’) and yes (‘use of digital technologies could decrease production costs between 10% and 20% ... and boost global reserves by around 5%’). What exactly are these digital technologies? They are ‘advanced processing of seismic data,’ the use of sensors, and enhanced reservoir modelling. Wow!
Elsewhere the report highlights the usual stuff, analytics, big data, machine learning, and the internet of things. Examples of these ‘4th industrial revolution’ technologies include the inevitable blockchain (with 34 references) that ‘could facilitate peer-to-peer electricity trading.’
D&E is dismissive of the energy costs of using blockchain citing ‘one report’ that puts current bitcoin energy use at ‘less than 1/40th of 1% of the world’s electricity.’ Concern is expressed for the increasing use of electricity in data centers and networks, currently a combined 2% of worldwide consumption.
A section on interoperability and standardization speaks of the need for an ‘alignment of physical, semantic and organizational elements.’ Here, a balancing act is needed between ‘overly narrow one-size-fits-all standards’ and ‘standards that might prove burdensome or conflicting.’ D&E concludes lamely that standardization ‘should build on synergies between the various players rather than lead to fragmentation of the market and duplication of efforts.’
With 140 references, the transport sector is clearly considered a key target for digital energy. But here, the preference is for trendy apps for ride hailing, car sharing and truck ‘platooning.’ Digitally-enabled platooning, (trucks driving along highways nose-to-tail to save energy) is presented in an unquestioning gee-whizz manner. We are not sure that passing a 500 meter long truck convoy in the rain will be all that popular with other road users who might think that the freight would be better traveling by rail.
The IEA’s essayists excel themselves in a section on digitizing the carbon capture and storage ‘value chain.’ Here, ‘digitalization will be increasingly important in the future when CO2 emissions from smaller and more dilute sources will need to be captured and stored.’ ‘As in the oil and gas industry, the nascent CO2 storage industry will be dealing with large volumes of time-series information/data captured from instruments that monitor and control plant processes.’ CO2 storage will benefit from key technology innovations that are revolutionizing the oil and gas industry. What would these be? ‘3D seismic, smart drilling and … multi-stage hydraulic fracturing!’ Wow again, CCS and fracking? Tell that one to the inhabitants of Schleswig-Holstein**!
* An OECD unit.
** Citizens of this German Lander have rejected CCS following injection-related earthquakes.
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