Hauke Warscheit, Senior Enterprise Account Manager, VMware
The energy and utility industry is currently facing its greatest upheaval in decades after some key challenges have put the industry in a tight spot. Read this article to see how to drive innovation – and why VMware is the right partner to do it.
The energy industry is currently undergoing transformation due to the significant growth in societal challenges over recent years. On top of the climate change debate, demanding the move toward CO2-neutral forms of energy generation, there are now also the current geopolitical challenges in Ukraine contributing further to the energy crisis. Power outages need to be prevented and critical infrastructure must be protected against attacks and overloads – and, for the long term, power grids and the existing IT infrastructure need modernisation.
Four business drivers for the transformation of the energy industry
VMware has a variety of solutions to address these issues, helping drive and guide the transformation to a modern and sustainable industry. But there are four urgent challenges in particular that undercut the energy industry’s need to act quickly and purposefully:
By 2050, according to the forecast experts at consulting firm McKinsey, our electricity consumption will double and renewable energies will grow by a factor of three. This is due to ongoing electrification in the transport sector, for example, but also stems from changing technology in the heating sector. The shift away from fossil fuels like oil and gas, in particular, to heat pumps and other more sustainable technologies is actually leading to higher electricity consumption. On the other hand, this increase is also a result of growth in the standard of living in many emerging countries and the increasing digitalisation of our daily lives.
This also means that annual global investment in energy efficiency will need to reach $900 billion by 2030 to be consistent with the International Energy Agency’s Net Zero emissions scenario level by 2050. This poses a particular challenge for investment in wind farms and photovoltaics, as well as in hydropower and other CO2-neutral forms of energy generation – and not least for the expansion and conversion of power grids. Grids have simply been unable to cope with changing underlying conditions in view of the completely different rules for power generation. Yearly global spending on power grid modernisation, new lines, and digitisation efforts will rise to more than $500 billion as early as 2025 – always with the goal of optimising load balancing in the grid and keeping critical infrastructure stable. After all, the ability to provide the population and the economy with the reliable energy they need begins and ends with infrastructure stability.
But there is another aspect in which we will see a change in the next few years. As early as 2025, half of the population in industrialised countries will be over 50 years old – we are already seeing a shortage of skilled workers in many industries as the population ages, especially in IT professions. The answer here can only be to move forward with automation efforts in IT administration and in all IT needs. The more efficiently IT administration as a whole can be made, the more easily companies will be able to keep their increasingly complex operations running, even with a smaller number of skilled employees.
New business models and approaches to modernisation and digitisation
These changes ensure that the energy industry will and must transform. Even now, we can see that numerous new business models and solutions will emerge, some of which will be cloud-native, that is, born and developed directly in the cloud, but they will all have to communicate and interact with existing applications and devices. Examples of this could be predictive maintenance, or pricing for energy customers based on supply and demand. All of this requires processing large, ever-growing volumes of data in near-real time.
An energy company is not just a single large corporation, however, but rather a conglomerate of several hundred plants and individual companies that exist as subsidiaries or are joint ventures with local utilities. And the large number of sustainably producing plants in particular demonstrates the diversity and complexity of the energy industry. This applies to both the operational and IT environments and the secure exchange of data with partners in the ecosystem.
At the same time, it also shows that sustainability in plant planning and operation (as well as in the modernisation and retrofitting of existing plants) goes well beyond the energy production itself. The potential gains in CO2 footprint reduction afforded by reductions in hardware in operations and IT as well as energy efficiency from optimisation of application and data management must also be exploited. After all, sustainability can also be achieved by means of optimised and virtualised infrastructure and edge-to-cloud solutions.
Many companies have already taken this path towards cloud solutions. But whether a utility decides to entrust its entire IT infrastructure to a specific hyperscaler or cloud provider, works with a multi-cloud strategy, or wants to continue to keep some of its critical infrastructure in its own data centre, VMware can cover all of this efficiently in the Software-Defined Datacenter (SDDC). Thanks to virtualisation, any device – and that can be not only a notebook or mobile device, but even a wind or steam turbine – can be mapped into any cloud or data centre environment to create a consistent infrastructure.
Digitalisation for a Sustainable Industry
Comprehensive digitalisation strategies are at the top of the agenda for the major German energy companies, just as in other industries. But awareness of the need for digital transformation alone is not enough. The shift to modern and flexible IT that is efficient, meets the requirements of new business models and, above all, focuses on sustainability is not something that the energy industry can do overnight. However, it is important that companies set their course to that goal at the earliest possible stage. We’ll take a look at the technologies and solutions that VMware can bring to bear on the situation in the second part of this article.
