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© OECD/IEA 2018
Digitalization & Energy
Webinar – 7 February 2018
IEA

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© OECD/IEA 2018
Speakers
Dave Turk Director (Acting) of Sustainability, Technology and Outlooks
Co-Lead, IEA Digitalization Working Group
George Kamiya Energy Environment Division
Thibaut Abergel Energy Technology Policy Division
Jacob Teter Energy Technology Policy Division
Kira West Energy Demand Outlook Division
Christophe McGlade Energy Supply Outlook Division
Carlos Fernández Alvarez Gas, Coal & Power Markets Division
Brent Wanner Energy Demand Outlook Division
Luis Munuera Energy Technology Policy Division
Jan Bartoš Energy Policy and Security Division

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Digital technologies are everywhere….

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Drivers of digitalization: data, analytics, and connectivity
Since 2008, data collection, storage, and transmission costs have declined by over 90%
Sources: Based on BNEF (2017), Utilities, Smart Thermostats and the Connected Home Opportunity; Holdowsky et al. (2015), Inside the Internet of Things; IEA (2017), Renewables; Tracking Clean Energy Progress; World Energy
Investment; Navigant Research (2017), Market data: Demand Response. Global Capacity, Sites, Spending and Revenue Forecasts.
0
20
40
60
80
100
2008 2010 2012 2014 2016
2008 = 100
EV batteries
Utility-scale PV
Data storage
Internet bandwidth
Sensors

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Internet data traffic is growing exponentially, tripling over the past five years
Sources: Cisco (2017). The Zettabyte Era: Trends and Analysis June 2017; Cisco (2015). The History and Future of Internet Traffic.
Entering the zettabyte era

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World electricity and backbone internet infrastructure

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Electricity use by data centres and networks
Sustained efficiency gains could keep ICT electricity demand largely in check over the next five years,
despite exponential growth in demand for data centre and network services
0
100
200
300
400
500
2014 2020
TWh
Data centres
Hyperscale data centres
Cloud data centres (non-hyperscale)
Traditional data centres
0
100
200
300
400
500
Moderate efficiency
improvement
High efficiency
improvement
2015 2021
TWh
Data networks
Mobile Fixed

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Poll Q1
Which sector do you think will be most impacted / transformed by
digitalization over the next 5-10 years?
a) Buildings
b) Transport
c) Industry
d) Oil & gas
e) Coal
f) Power

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Buildings: reducing global energy demand
Widespread deployment of smart building controls could reduce energy use by 10% to 2040
0
10
20
30
40
50
60
70
By sector By end use
PWh
Non-residential
Residential
Others
Appliances
Lighting
Water heating
Space cooling
Space heating
Cumulative energy savings in buildings from digitalization

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Buildings: enabling demand-side response
The growth in network-enabled devices presents opportunities for smart demand response
but also increases needs for standby power control
0
1 000
2 000
3 000
4 000
5 000
6 000
2010 2015 2020 2025 2030 2035 2040
TWh
Network-enabled Not connected
Household electricity consumption of appliances and
other small plug loads

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Buildings: broadening horizons
New business models for enhanced energy services could help overcome technical and economic
barriers to digitalization in buildings.
Measuring, reporting
and monitoring
Interoperability
Other opportunities Other barriers
Enhanced energy
services
Li-fi
Education
Training
Communication

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Digitalization and transport: trucks and logistics
Digital solutions for trucks and logistics could reduce energy use for road freight by 20-25%
-80%
-60%
-40%
-20%
0%
Energy
demand
GHG
emissions
Netchange
Systemic measures
Vehicle efficiency
Fuel switching
Approximate
contribution
of digital technologies
Source: IEA (2017). The Future of Trucks: Implications for energy and the environment.

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Impacts on road transport energy demand
Road transport energy demand could halve or double from automation and connectivity
depending on how technology, behavior, and policy evolve
-80% -40% 0% 40% 80% 120%
I) Optimistic scenario:
"Have our cake and eat it too"
-80% -40% 0% 40% 80% 120%
II) Pessimistic scenario:
"Dystopian nightmare"
Heavy-duty
vehicles
Light-duty
vehicles
Energy intensity
Travel demand
Energy demand
Total road
transport energy
• Automation, connectivity, sharing,
and electrification (ACES) to
dramatically reshape mobility
• Impacts on energy demand
difficult to predict
Source: Wadud, MacKenzie and Leiby (2016), “Help or hindrance? The travel, energy and carbon impacts of highly automated vehicles”.

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0
100
200
300
400
0
100
200
300
400
1987 1991 1995 1999 2003 2007 2011 2015
USD(2010)million
CumulativesavingsUSD(2010)millions
Energy savings (left axis) Cumulative investment cost (right axis)
Energy savings from improvement to industrial process controls
Improvements to industrial process controls produce substantial energy and associated cost savings
Energy efficiency measures relating to improved process control in small to medium US manufacturers
Source: IAC database

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Illustrative case study: aircraft component light-weighting
The use of 3D printed components in commercial aircraft could lead to significant material
demand and fuel savings
0
5 000
10 000
15 000
20 000
25 000
Conventional
components
AM components
Tons
Metal demand
in 2050
Aluminium alloys Nickel alloys Titanium alloys Fuel savings
0
250
500
750
1 000
1 250
1 500
1 750
Slow
adoption
Mid-range
adoption
Rapid
adoption
Million GJ
Cumulative aircraft fuel savings
to 2050
Source: Huang et al. (2016)

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Digital plant twins
Virtual feasibility and durability testing of real process plants can accelerate the innovation cycle by
saving time and resources
Source: Siemens UK
Source: GE

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The oil and gas sector has a complicated relationship with digital technologies
but multiple opportunities are available
Examples of digital oil and gas supply technologies
Digitalization and oil and gas supply
Source: Courtesy of Shell Global Solutions International B.V.

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Digitalization could increase recoverable resources, decrease production costs, improve health and
safety, and reduce the environmental impact of production
Impact of digitalization on global technically recoverable oil and gas resources
Digitalization and oil and gas supply
0
100
200
300
400
500
Oil Gas Oil Gas
Conventional Unconventional
billion toe
Absolute increase in resources
% Increase in resources
3% 3%
3%
15%

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Coal: Multiple opportunities to improve efficiency throughout the supply chain

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2%
1%
20002015
Increasing performance step by step
Drones, data processing and remote operation may optimize the use of big and expensive machinery

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Mechanization of underground mine and use of super-giant machinery in surface mines removed most
of the mining jobs. Driverless trucks and shovels and remote longwalls will reduce further
Safety will be the main benefit of digitalization

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Electricity generation and networks
Digitalization
in the power sector
“Data and analytics”
Provides forpredictivemaintenance,
planningand operationalchanges
“Connectivity”
Enablesbroadstructuralchange
ReducedO&M costs Improvedefficiencies
Reductionof
unplannedoutages
Extendedasset
lifetimes
Reducedinvestment
needs
Reducedfuel
consumptionand
costs
ReducedCO2
emissions
Reducedinvestment
needs
Improvedsystem
stability
Improvedsystem
planning
Digital data and analytics in existing systems can deliver benefits to the owners of power sector assets,
the wider electricity system, consumers and the environment
*Green = benefit to asset owner, red = system benefits and consumers, blue = global environmental benefits

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Electricity generation and networks
Digitalization could save around USD 80 billion per year,
or about 5% of total annual power generation costs
0
10
20
30
40
5% lower
O&M costs
Efficiency:
5% more
electricity output
per unit of fuel
Efficiency:
5% lower total
network losses
5-yr life
extension
for power plants
5-yr life
extension
for networks
USD billion (2016) OPEX CAPEX

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If every car today was an EV, how much would…
• Electricity demand increase?
A. 110%
B. 55%
C. 12%
• Generation capacity increase, if everyone charged when it was best for them?
A. 12%
B. 40%
C. 20%

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Pre-digital energy systems are defined by unidirectional flows and distinct roles,
The digital transformation of the energy system

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Pre-digital energy systems are defined by unidirectional flows and distinct roles,
digital technologies enable a multi-directional and highly integrated energy system
The digital transformation of the energy system

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Providing system flexibility from the demand side
0
10
20
30
40
50
0 24 48
GW
Uncontrolled demand process, no system optimisation
0
10
GW
Uncontrolled demand profile

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0
10
20
30
40
50
0 24 48
GW
Providing system flexibility from the demand side
0
10
GW
Optimised demand profile

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0
10
20
30
40
50
0 24 48
GW
Optimised demand process
Providing system flexibility from the demand side
0
10
GW
Optimised demand profile
System peak reduction
Reduced net load ramping
Use coincident with PV output

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Demand response programs – in buildings, industry and transport - could provide 185 GW of flexibility,
and avoid USD 270 billion of investment in new electricity infrastructure
Smart demand response
1 billion households and
11 billion smart appliances
could actively participate in
interconnected electricity
systems
Residential sector

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EVs smart charging would provide further flexibility to the grid
saving between USD 100-280 billion investment in new electricity infrastructure
Smart charging of electric vehicles
EVs standard vs smart charging
Capacity requirement
150 million
EVs
140 GW
75 GW
500 million
EVs
300 GW
190 GW
Standard charging
Smart charging

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Digitalization can help integrate variable renewables by enabling grids to better match
energy demand to times when the sun is shining and the wind is blowing.
Integration of variable renewables
Curtailment of solar PV and wind
7%
2040
Digital
flexibility

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© OECD/IEA 2018
Digitalization can facilitate the deployment of residential solar PV and storage,
making it easier to store and sell surplus electricity to the grid or locally
Distributed energy resources
Blockchain could help to facilitate
peer-to-peer electricity trade
within local energy communities

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© OECD/IEA 2018
Poll Q2
What will be the biggest barrier to achieving the benefits of digitalization?
a) Data ownership / data privacy
b) Cybersecurity
c) Economic disruption and transformation (e.g. job losses)
d) Market design challenges (e.g. ensuring accurate price signals)
e) Lack of public acceptance / trust with new technologies

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© OECD/IEA 2018
Building digital resilience
• To date, cyber disruptions to energy have been small
• But cyber-attacks are become easier and cheaper – malware, ransomware,
phishing / whaling, botnets
• Digitalization also increases the “cyber attack surface” of energy systems
• Full prevention is impossible, but impact can be limited:
- Raised awareness, cyber hygiene, standard setting and staff training
- Coordinated and proactive preparation by companies and governments
- Design digital resilience in technologies and systems
• International efforts can help raise awareness and share best practices

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© OECD/IEA 2018
Industroyer / Crash Override
Cybersecurity:
The ability to protect or defend
the use of cyberspace from cyber-
attacks and cyber incidents,
preserving the availability and
integrity of networks and
infrastructure and the
confidentiality of the information
these contain.
Commonly also refers to the
safeguards and actions available
to do this.
Ukraine, December 2016 (reported May 2017)
• A second brief but significant attack on the Ukrainian electricity
system.
• Thought to have been a test run for malware “Industroyer” (also
known as “Crash Override”): a versatile malware enabling attackers
to view, block, control or destroy grid control equipment, including
circuit breakers.
• Malware design suggested expert knowledge of several
standardised industrial communication protocols widely used to
control infrastructure – not only electricity grids – throughout
Europe, Asia and the Middle East.
• This was an example of a cyber intrusion into the control systems
of critical infrastructure.

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© OECD/IEA 2018
Preparedness
Key message: The handling of some attacks falls within the capability of
companies themselves, while larger-scale attacks by sophisticated actors
may require more active government responses.
Beyond capabilities
of most companies
Capability level of large,
well-prepared companies
Most companies can handle
Amateur hacker
Ambitious hacker
Professional cyber
attackers
State actors
Top 10
cyber forces
Limiting impact (resilience) is
particularly important for critical
infrastructure: the physical and
institutional assets that are essential
for an economy to function, such as
large-scale energy systems.
• Mexico: identified 3 000 “strategic
installations”, half of them owned by
the national oil company PEMEX and
another 13% by the Federal Electricity
Commission.
• Germany: any infrastructure on which
more than 500 000 people (1/160th of
population) depend is considered
critical. This includes all gas power
plants and electricity transmission grids.

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Managing privacy concerns
Source: Newborough and Augood (1999), “Demand-side management opportunities for the UK domestic sector” (reproduced courtesy of the Institution of Engineering and Technology).

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© OECD/IEA 2018
1. Build digital expertise within their staff.
2. Ensure appropriate access to timely, robust,
and verifiable data.
3. Build flexibility into policies to accommodate
new technologies and developments.
4. Experiment, including through “learning by
doing” pilot projects.
5. Participate in broader inter-agency
discussions on digitalization.
6. Focus on the broader, overall system benefits.
7. Monitor the energy impacts of digitalization
on overall energy demand.
8. Incorporate digital resilience by design into
research, development and product
manufacturing.
9. Provide a level playing field to allow a variety
of companies to compete and serve
consumers better.
10. Learn from others, including both positive
case studies as well as more cautionary tales.
1. Build digital expertise within their staff.
2. Ensure appropriate access to timely, robust,
and verifiable data.
3. Build flexibility into policies to accommodate
new technologies and developments.
4. Experiment, including through “learning by
doing” pilot projects.
5. Participate in broader inter-agency
discussions on digitalization.
6. Focus on the broader, overall system benefits.
7. Monitor the energy impacts of digitalization
on overall energy demand.
8. Incorporate digital resilience by design into
research, development and product
manufacturing.
9. Provide a level playing field to allow a variety
of companies to compete and serve
consumers better.
10. Learn from others, including both positive
case studies as well as more cautionary tales.
1. Build digital expertise within their staff.
2. Ensure appropriate access to timely, robust,
and verifiable data.
3. Build flexibility into policies to
accommodate new technologies and
developments.
4. Experiment, including through “learning
by doing” pilot projects.
5. Participate in broader inter-agency
discussions on digitalization.
6. Focus on the broader, overall system benefits.
7. Monitor the energy impacts of digitalization
on overall energy demand.
8. Incorporate digital resilience by design into
research, development and product
manufacturing.
9. Provide a level playing field to allow a variety
of companies to compete and serve
consumers better.
10. Learn from others, including both positive
case studies as well as more cautionary tales.
1. Build digital expertise within their staff.
2. Ensure appropriate access to timely, robust,
and verifiable data.
3. Build flexibility into policies to accommodate
new technologies and developments.
4. Experiment, including through “learning by
doing” pilot projects.
5. Participate in broader inter-agency
discussions on digitalization.
6. Focus on the broader, overall system benefits.
7. Monitor the energy impacts of
digitalization on overall energy demand.
8. Incorporate digital resilience by design into
research, development and product
manufacturing.
9. Provide a level playing field to allow a variety
of companies to compete and serve
consumers better.
10. Learn from others, including both positive
case studies as well as more cautionary tales.
1. Build digital expertise within their staff.
2. Ensure appropriate access to timely, robust,
and verifiable data.
3. Build flexibility into policies to accommodate
new technologies and developments.
4. Experiment, including through “learning by
doing” pilot projects.
5. Participate in broader inter-agency
discussions on digitalization.
6. Focus on the broader, overall system benefits.
7. Monitor the energy impacts of digitalization
on overall energy demand.
8. Incorporate digital resilience by design
into research, development and product
manufacturing.
9. Provide a level playing field to allow a variety
of companies to compete and serve
consumers better.
10. Learn from others, including both positive
case studies as well as more cautionary tales.
1. Build digital expertise within their staff.
2. Ensure appropriate access to timely, robust,
and verifiable data.
3. Build flexibility into policies to accommodate
new technologies and developments.
4. Experiment, including through “learning by
doing” pilot projects.
5. Participate in broader inter-agency
discussions on digitalization.
6. Focus on the broader, overall system benefits.
7. Monitor the energy impacts of digitalization
on overall energy demand.
8. Incorporate digital resilience by design into
research, development and product
manufacturing.
9. Provide a level playing field to allow a variety
of companies to compete and serve
consumers better.
10. Learn from others, including both positive
case studies as well as more cautionary
tales.
No-regrets policy recommendations

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© OECD/IEA 2018
Digitalization: A New Era in Energy
• The energy system is on the cusp of a new digital era
• This first-of-its-kind “Digitalization and Energy” report will help shine a light on
digitalization's enormous potential and most pressing challenges
• But impacts are difficult to predict; uncertainty in technology, policy and
behaviour
• Much more work needs to be done…
• Next steps for IEA, especially to focus on high impact, high uncertainty areas:
- Automation, connectivity, and electrification of transport
- Digitalization, electricity, and smart energy systems

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© OECD/IEA 2018
iea.org/digital
digital@iea.org
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