How Will Digital Technologies Boost the Power Sector?
Digital technologies could help boost efficiency and resiliency of power grids and “unlock innovation that will create new sources of revenue,” professional services firm EY said in a report published last month. How are governments and companies in the region integrating digital technologies in the power sector, and should it be an investment priority? What are the most significant ways in which Latin American nations can benefit from the digitalization of their power grids? What kinds of challenges should countries be prepared to face during and after the digital transformation, especially in terms of cybersecurity? What role can digital technologies play in the region’s transition toward renewable energy?
Andrés Chambouleyron, chairman of ENRE, Argentina’s federal electricity regulatory authority: “Digital technologies are being adopted throughout the electricity sector in Argentina. Distribution companies are deploying digital meters to reduce nontechnical losses, such as theft, and improve service quality by reducing both the frequency and duration of service interruptions. With digital technologies, both distribution and transmission companies can now learn exactly when and where the faults occurred and proceed to repair them more quickly. Digital technologies can also help distribution companies reduce electricity theft by allowing them to better monitor demand, quickly detecting load unbalances in the low-voltage grid. The massive adoption of distributed generation by more and more families will also require digital technologies to deal with bidirectional electricity flows and real-time pricing, demand side management (DSM) and storage. The deployment of renewable sources of electricity are also demanding that system operators adopt digital technologies to deal with intermittence. Solar and wind generation call for accurate coordination of different generating sources to accommodate in and out ramps in order to maintain network stability while at the same time minimizing generation costs. This coordination in turn requires system operators to be able to run precise weather forecasts to simulate day-ahead dispatch operations accommodating the entry and exit of wind and solar plants, while simultaneously allowing the exit and entry of traditional generation thus keeping load constant. In sum, the adoption of renewable (intermittent) sources of electricity and distributed generation and storage by more and more families would be impossible without the intensive use of digital technologies.”
R. Kirk Sherr, member of the Energy Advisor board and president of Clearview Strategy Group: “The speed of change in the power industry is wreaking havoc on traditional utility models worldwide, and Latin America is no exception. Energy and information no longer flow in just one direction. Digital technologies, the Internet of Things, renewable energy, battery storage and the electrification of transportation now allow infinitely complex combinations of energy and information delivery between customers and utilities. Implemented more broadly in the Americas, these smart digital systems will bring myriad benefits. Examples include improved system efficiency, new revenue streams and lower costs for small farmers and micro-producers that can install solar or wind systems, decreased corruption, less power theft and greener electric systems that help meet Paris Agreement targets. Digital adoption is critical in the building space, since buildings account for some 40 percent of global energy consumption. Application of digital systems in buildings alone would provide significant power savings in highly urbanized Latin America. At least four major challenges need to be overcome for successful adoption of digital technologies. First, regulatory and legal rules must be updated. Second, governments need to work closely with the private sector on cybersecurity, ideally creating a commission or task force as Europe has, to address these issues on a regional basis. Third, new financing structures are essential—especially those focused on smaller renewable energy projects. Finally, educational and technical training programs must be expanded. For Latin America to realize the benefits from digital technologies, the region must be able to produce the educated workers needed to design, install and maintain the systems.”
Cecilia Aguillón, director of the energy transition initiative at the Institute of the Americas: “Investments to date in technologies such as supervisory control and data acquisition (SCADA), smart meters and an increasing reliance on the so-called Internet of Things (IoT) have already demonstrated that companies view them as priorities. Indeed, the popularity and embrace of these and many other technologies throughout the Americas underscores that digitalization of the power sector is already a reality. From Mexico to Brazil to Argentina to Peru, electricity providers have been installing smart meters at homes and businesses. In addition, IoT tools are available through Internet applications, mobile phones and cable providers. These technologies help consumers and grid operators manage electricity demand and supply remotely, seamlessly and cost-effectively throughout the world. Investments in these technologies are made by the private sector, as costs are typically included in the power purchase agreements from large-scale projects. Consumers of distributed generation technologies invest in solar, batteries and IoT products to reduce their electricity costs. With surging technology-dependent systems and the reliance on remote data and digitalization have come growing concerns over security. In some cases, cyberattacks and threats are merely financial—that is, extortion—while others seek to leverage political agendas. However, just as smartphone and computer users manage to fend off myriad viruses and malware daily, new technologies are being used to safeguard the grid. Mature markets such as the United States have developed policies and technologies to deal with cyberthreats and offer important lessons learned for government and industry alike across the region. Investments in security technologies and know-how can help governments keep their grids safe while growing their renewable energy markets.”
Virginia Snyder, infrastructure and energy specialist at the Inter-American Development Bank: “The digital transformation of the energy sector should place citizens at the center, and for that reason, there must be a cultural transformation that goes hand-in-hand with innovation and digitalization. To benefit from this transformation, policymakers and regulators should transform their mindset in two fundamental ways: first, making consumers the active players; and second, being able to continuously adapt in a context of innovation policy and regulation. Energy services to improve people’s lives should come to the center of policies. Governments and businesses must rethink how they serve citizens and make sure they are able to provide the best regulation, policies and services so that citizens can benefit from all the potential of digital technologies. Governments must show leadership on this matter and encourage the public and private sectors to prioritize, invest and embrace digital technologies. The revolution is happening fast—let’s just imagine what will happen when the off-grid PV reaches cost and performance parity with grid connected energy, or when the EVs reach price parity with combustion vehicles, or when the cost of generating and storing onsite is cheaper than transporting the electricity from a generation site. Government and utilities must find the upside of this imminent transition by capturing new opportunities across the evolving value chain. Additionally, governments should raise awareness on the importance of proactive cyber defense and take measures to prevent cyberattacks on their power grids and mitigate the potential harm should preventive efforts fail. Finally, but not less important, we all need to make sure that the most vulnerable citizens are not left behind, and we must work together to bring the best solutions; for instance, to achieve universal energy access to energy and affordability, or access to clean fuels and technologies for cooking, or to reduce technical and nontechnical losses. The digital revolution should improve everyone’s lives. The IDB works closely with governments in LAC and is currently working to understand and analyze the innovation gap in the electricity sector in the region through an assessment and benchmark study on the innovation gap.”
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On March 7th, the Inter-American Dialogue and CAF-Development Bank of Latin America organized a roundtable with a diverse group of experts to provide input for a forthcoming report on US investment in Latin American energy.