The Role of Digital Transformation in the Just Energy Transition (Part 1)

What is the Energy Transition?

The Energy Transition is the process of gradually moving away from fossil fuels to renewable energy. Fossil fuels include sources such as oil, coal and natural gas, which can be exhausted. In contrast, renewable energy sources such as solar, wind, geothermal and hydro are constantly being replenished and are cleaner because of their low carbon emissions. The energy transition is in line with the UN 2015 Paris Agreement to limit the global temperature increase to 1.5 degrees Celsius above pre-industrial levels. The world can achieve this by reducing carbon dioxide emissions to net zero by 2050. The energy transition is also in line with Sustainable Development Goal #7— affordable and clean energy. The energy transition will be key to averting the adverse effects of climate change.

A ‘just’ energy transition means that the energy transition puts people and the planet at the centre. It not only looks at achieving net zero but also doing it without disadvantaging communities and marginalised groups.

Soaring energy prices, extreme weather events and the Russia-Ukraine war are all catalysts to the energy transition for the sake of affordability, sustainability and energy security.

The top contributors to carbon emissions are the electricity generation, transport and manufacturing industries that heavily use fossil fuels. The energy transition will affect these industries and the oil and gas industry that produces and refines fossil fuels.

5 requirements are key to the energy transition. They are known as the 5Ds of the energy transition.

What are the 5Ds of the Energy Transition?

1. Decarbonisation. It involves a reduction of carbon emissions to net zero by replacing fossil fuels with renewable energy.
2. Decentralisation. It involves a move away from a model where one monopolistic utility company distributes electricity to one where electricity is generated closer to the consumer and by many producers and consumers (prosumers). ?
3. Digitalisation. It involves using emerging digital technologies, such as big data analytics, artificial intelligence, machine learning, blockchain and the internet of things to manage the increasing complexity of the energy sources and large amounts of data to optimise the operations.
4. Democratisation. It involves a shift in decision-making from a few decision-makers to consumers of the energy who are actively involved in the decision-making.
5. Deregulation. It involves decreasing state regulations and opening up electricity generation to competition.

This article focuses on the third ‘D’, Digitalisation and how digital technologies will accelerate the energy transition.

What is the Difference Between Digitisation, Digitalisation and Digital Transformation?

People often use digitisation, digitalisation and digital transformation interchangeably, though they are different.?Digitisation?refers to the conversion from analogue or physical format to digital format, e.g. a bank scanning an account opening form and saving it as a PDF document. Digitalisation?refers to the use of digital technologies to improve business processes, e.g. application for a bank loan via online channels. It builds on digitisation.?Digital transformation?refers to the business-wide use of emerging technologies (artificial intelligence, machine learning, etc.) to create new business models. An example is digital banking platforms providing core banking services plus other third-party services such as financial management, budgeting tools, and integration with third-party service providers.

An easy way to remember the difference is that as you move from the smallest word (digitisation) to the second largest word (digitalisation) to the largest word (digital transformation), you are moving from the most basic form of digital technologies to the most advanced.

What is the Role of Digital Transformation in the Just Energy Transition?

We can see technology as the ship that gets us to the port called ‘just energy future’. Technology is not the destination but a mode of transport to help us get to our desired future.

In Part 2 of this article, we will look at the digital technologies, such as IoT, artificial intelligence, blockchain, etc., that will accelerate the world into the just energy future.