The renewable energy sector is characterized by a large number of relatively small players. In fact, between 80 to 90 percent of the global sector comprises businesses that operate a relatively limited number of assets. The sector is highly fragmented, with many different owners ranging from utilities to investment funds.
While there is some movement to consolidate, to date most players have lacked the scale required to invest in developing mature technology or digital capabilities. That means they tend to be highly dependent on third parties, specifically OEMs, for services related to production, operations and maintenance activities. And given the business case for the many investment funds in the sector, they are unable to make the long-term investments required to develop the capabilities and technology infrastructures that are needed to drive higher performance across operations and maintenance (O&M).
The renewables sector is, however, expanding rapidly, achieving double-digit growth. As it does, it is coming under pressure to improve performance across a number of areas. In the recent past, the industry was focused on capital investment in order to build capacity and secure market share. Now, however, the pendulum is swinging back to a focus on reducing costs and improving the performance of assets.
With the golden era of public subsidy largely over in all developed markets, to improve their financial returns, renewables operators need to find ways to enhance performance and reduce O&M costs. The key lever for success? Digital. But that raises the challenge of how to develop the relevant digital capabilities.
Achieving the extra mile of performance requires better use of available data. Wind turbines are equipped with sensors that generate huge amounts of information; access to this data is not the challenge. But currently, only in the range of 20 to 25 percent of data available from turbines is collected, and of that, as little as 1 to 2 percent is used to improve decision making. The key to improving performance is more effectively using the data that is already available.
So how should renewables businesses go about that? They need the data and the ability to collect it, the technology infrastructure to manage it and advanced analytics to derive insights from it. But rather than trying to build those capabilities independently, renewables operators should seek to leverage as-a-service solutions that harness the power of the cloud and platform plays to provide a faster, lower-risk path to digital.
By bringing these capabilities together in an integrated digital hub, it is possible for renewables operators to drive performance improvements in three key areas: asset performance management, production optimization and enhanced energy management.
Data and analytics services available via the digital hub can centrally monitor each asset in a portfolio to understand how well it is performing in real time, at all times. Production optimization enables predictive maintenance that can transform costs by scheduling activities in order to maximize productivity. What’s more, applying analytics to maintenance activities enables a far more efficient approach to supply chain management.
Finally, digital energy management capabilities enable generators to focus on more than production. External factors such as weather, market information and other demand drivers can be factored into how the fleet is managed to maximize financial performance.
Our analysis shows that harnessing digital capabilities across the dimensions above could potentially, over five years, drive additional revenues of €20 million and reduce operational costs by up to €46 million for a company operating a fleet generating 1,600 MW.
As the renewables market continues to become more competitive, with tighter margins and higher costs, acquiring digital capabilities is not simply desirable, it’s an imperative. And the digital hub offers a clear and rapid route to a new digitally-powered future.