AI4Good: Leading the energy transition

Smart Energy - Intellico

Index

What role can AI play in the energy sector?

Digitalisation is among the most important trends that are currently transforming the society we live in. This transformation, which is often referred to as “Industry 4.0,” is fundamentally altering the way businesses operate. At the heart of this revolution lie digital technologies, which have already transformed various aspects of professional activities, redefining traditional norms and processes.

Among digital technologies, Artificial Intelligence (AI), is being recognized as one of the most promising ones. Indeed, over the past few years, AI has experienced unprecedented growth and development: nowadays it is already fully used to extract, analyse and predict vast amount of data in varying industries, emerging as one of the most promising technologies with applications spanning diverse sectors.

One of them is the energy sector, which is undergoing a transformation of its own: indeed, energy, and in particular electricity, has been at the centre of environmental concerns to reduce carbon emissions. To do so, a lot of effort has been put towards reducing energy consumption or by shifting from traditional fossil fuel generation to renewable energy sources. This transformation also requires a change of the electricity grid: the proliferation of distributed generation power plants requires a different approach in the management of the grid, which needs to become “smart”.

How these new potentials should be explored? Are there any emerging commodity applications? How are business model changing? These are some examples of questions that energy providers are asking themselves.

As Intellico we are committed to understand how we can support Smart Energy providers at best. That’s why we partnered with the School of Management of Politecnico di Milano, and in particular with the Management Engineering department, in a research project trying to understand how AI is shaping the new energy market.

What applied research is talking about

Indeed, AI is currently being implemented for activities related with smart grid itself and renewable energies. AI algorithms related with forecast (either for consumption or generation), are replacing traditional ones: these are especially important in systems where non-programmable generation assets are increasingly diffused. Moreover, O&M is also an area where AI is contributing further: more refined algorithms allow to shift from “on-fault” and preventive maintenance to a predictive one.

All these AI applications allow to improve operating conditions, which eventually results in an improved business plan: this is an extremely important factor for technologies close to marketability, such as renewables. Small improvements can make the difference between a profitable investment and a non-profitable one, which is a key factor to fostering the development of “clean” technologies. However, it is to be noticed that the changes the AI is causing on business models are limited: as previously stated, AI is changing the operating conditions, which affect the business model only partially, rather than completely disrupting it.

The analysis conducted on the academic literature, allowed to identify 13 relevant AI applications, which insists upon 7 “domains”, defined as the stage of the electricity value chain affected. These can be classified as:

  • Generation: divided into renewable energy generation (RES), non-renewable energy generation (NRES),
  • Transportation and distribution (T&D);
  • Consumption, divided into residential energy consumption (REC), industrial energy consumption (IEC) and electric vehicles (EVs);
  • General, such as commodity markets (CM).

Companies confirm the outlook

Several preliminary interviews have been conducted with relevant players of the energy industry in Italy, mainly utilities and energy service companies (ESCO). The interviews confirmed the strong interest towards AI applications in the energy sector, but also highlighted that smaller companies often lack a dedicated business unit to develop such applications. On the other, larger companies have developed, either internally or through acquisitions, the capabilities to implement AI applications along the value chain.

Moreover, like many other sector, Generative AI would act as an additional transformative technology:

  • Support innovation: It can facilitate the design of novel energy materials and systems through the generation of innovative solutions that might not be intuitive for human researchers, thus accelerating the transition to renewable energy sources.
  • Knowledge sharing: leveraging on internal knowledge base, it can facilitate cross-pollination and upskilling of professionals and promoting a deeper understanding of operations;
  • Documentation analysis: In regulatory-heavy environments like the energy sector, it can assist in navigating complex legal documents, regulations, and compliance requirements by summarizing documents, highlighting relevant sections, and even drafting compliance reports under human supervision.

As of today, AI can play an important role in the energy sector, with applications in the whole value chain; however, as the technology is evolving fast, we can expect to see it having a deeper impact on incumbents’ business models and even allow new ones in the near future. What’s your point of view?

We are interested to combine our experience on technologies and emerging trends with you company’s challenges. If you want to share your opinion and experiences with us, you can contact us for more information (email: martino.bonalumi@polimi.it)

Contributors:

Martino Bonalumi (PhD in Management Engineering – Energy and Environmental Management with research interests in Renewable energy and Business model innovation)

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