Impact of Digitalization

Yet for many energy sector players, digitalization equals hardware rather than software

Although energy sector – and especially utility – investment in digitalization has been growing, it has not grown equally. For many, investment in digitalization has so far translated into investment in hardware, rather than software. According to IEA numbers for 2016, hardware such as smart meters, smart grid infrastructure, and electric vehicle charging stations accounted for the majority of the nearly $50 billion invested. Meanwhile, electricity systems software and industrial energy management software accounted for just a tiny sliver of the overall digitalization investment pie.

To a degree, this investment lag is understandable. With energy sector digitalization still in its relative infancy, investment has first focused on enabling infrastructure—the hardware—which provides the basis for software and digital applications. But just as countries such as the United States saw a major wave of electricity grid infrastructure investment in the late-middle 20th century, it is now time to usher in a new wave of investment in digitalization, especially software.

Bloomberg New Energy Finance (BNEF) in fact expects that to be the case, with the energy sector digitalization market growing to $64 billion by 2025. BNEF expects the greatest growth in relation to energy management systems and customer-sited distributed energy resources (DERs).