Energy Trading and Risk Management Goes Mobile
Written by Lauren LaFronz of Triple Point Technology
Competitive advantage in the energy sector is increasingly being secured by the quality of the technology deployed. Lauren LaFronz of Triple Point Technology makes the case that ongoing tightening in the markets combined with technological developments will push the next battle for differentiation into the mobile arena.
THE GLOBAL CHALLENGE
The economic roller-coaster ride in the energy market has been well documented. Rapid and large price swings have become commonplace, particularly in the oil industry where it’s become a non-event for prices to swing between 15 and 30 percent. This volatility is caused by multiple factors, including extreme weather phenomena that are changing consumption habits, political instabilities that are disrupting strategically important geographies, and biofuels and other renewables that are complicating financial models.
This price volatility and uncertainty is making it exceptionally difficult for energy companies to make long-range business decisions, and if price fluctuations are not properly managed, profitability suffers.
Additionally, demand from developing countries, notably China and India, is rising, and this trend is expected to continue. According to several sources, including IHS-Cambridge Energy Research Associates, by 2030 energy demand will jump between 30 and 40 percent from 2010 levels primarily due to requirements from emerging economies. While this growth presents big opportunities, it also presents big challenges related to supply, operations, and logistics.
Furthermore, the cost of doing business has risen due to stringent regulations regarding environmental practices, corporate governance, and financial management. And last but certainly not least, the complexity of the energy market has increased exposure to all four key types of risk as identified by the Committee of Chief Risk Officers (CCRO): price risk, operational risk, counterparty credit risk, and regulatory risk.
ENERGY TRADING AND RISK MANAGEMENT
In this challenging environment, energy companies need every possible competitive advantage, and have increasingly turned to specialized systems for energy trading and risk management (ETRM). These systems have such a critical role that they are the subject of an annual ‘Magic Quadrant’ report from global analyst house Gartner, which examines the offerings of leading ETRM vendors.
Sophisticated ETRM platforms enable energy firms to:
Optimize trading by fully integrating physical and financial positions for multiple commodities.
Minimize risk by delivering complete visibility into the four key areas of exposure identified by the CCRO, and providing tools for analyzing positions and exposure in real-time.
Streamline the supply chain by managing the unique scheduling and logistics requirements of coal, power, natural gas, and liquids.
Increase productivity and reduce manual errors by providing straight-through processing (STP) from the front- through to the back-office.
FROM COMPUTERS TO SMARTPHONES
These systems have typically been provided through a desktop or laptop interface. However, the current overwhelming trend in enterprise technology is the move to mobile. The wholesale use of Blackberries in the early years of the 21st century, and more recently the advent of iPhones, iPads, and other tablet computing devices has taken enterprise computing to a new level, and created new ways of increasing productivity.
As a result, the workforce as a whole is becoming increasingly mobile. In a survey conducted for IBM, 75 percent of executives stated that the deployment of mobile devices is critical to the long-term successes of their companies. The Fortune 500 has already embraced modern mobility: according to Apple, iPhones and iPads are already being deployed or tested by over 90 percent of the world’s biggest companies. And furthermore, research from Forrester shows that 75 percent of companies report increased worker productivity from deploying mobile applications.
The power and prevalence of today’s mobile devices is transforming the shape of the modern enterprise. Mobile applications empower executives to make informed, rapid decisions by giving them the data and analysis they need, when and where they need it.
APPS CONDUCIVE TO BUSINESS
Mobile business applications were originally limited to delivering news and information, or serving as generic productivity tools. Recently, however, there have been big advances in the development of applications for specific business environments. These applications have the power to revolutionize the way companies in the energy sector do business.
Due to its global nature, the energy market lends itself to the adoption of mobile technology. The energy industry operates across multiple time zones, frequently involves co-ordination of efforts, resources, and information within very short timeframes, and is subject to rapid changes and fluctuations in both price and operating conditions. It depends on informed, time-sensitive decision-making on a continual basis to maintain productivity and secure margins.
When looking for suitable mobile applications, there are a number of points to consider. The most valuable tools are not simply lighter versions of full desktop applications - they are developed precisely for the device concerned. The idea of moving an entire desktop solution to a mobile platform is also sub-optimal: the ideal solution will include only those tasks that are suitable to the mobile environment, and will offer seamless performance of just the key functions that are appropriate and/or necessary for the designated users. The most important point to consider is that mobile applications are a complement to desktop solutions, not a replacement for them.
The new reality of the energy industry means that industry participants must adopt the latest sophisticated technology-based tools, and do so now. Market volatility and complexity are here to stay. Early adopters of desktop and now mobile solutions are already gaining competitive advantage; their competitors risk being permanently left behind.
Triple Point Technology provides solutions for commodity trading, energy and oil risk management, and logistics. To find out more visit www.tpt.com
Why Transmission & Distribution Utilities Need Digital Twins
As with any new technology, Digital twins can create as many questions as answers. There can be a natural resistance, especially among senior utility executives who are used to the old ways and need a compelling case to invest in new ones.
So is digital twin just a fancy name for modelling? And why do many senior leaders and engineers at power transmission & distribution (T&D) companies have a gnawing feeling they should have one? Ultimately it comes down to one key question: is this a trend worth our time and money?
The short answer is yes, if approached intelligently and accounting for utilities’ specific needs. This is no case of runaway hype or an overwrought name for an underwhelming development – digital twin technology can be genuinely transformational if done right. So here are six reasons why in five years no T&D utility will want to be without a digital twin.
1. Smarter Asset Planning
A digital twin is a real-time digital counterpart of a utility’s real-world grid. A proper digital twin – and not just a static 3D model of some adjacent assets – represents the grid in as much detail as possible, is updated in real-time and can be used to model ‘what if’ scenarios to gauge the effects in real life. It is the repository in which to collect and index all network data, from images, to 3D pointclouds, to past reports and analyses.
With that in mind, an obvious use-case for a digital twin is planning upgrades and expansions. For example, if a developer wants to connect a major solar generation asset, what effect might that have on the grid assets, and will they need upgrading or reinforcement? A seasoned engineer can offer an educated prediction if they are familiar with the local assets, their age and their condition – but with a digital twin they can simply model the scenario on the digital twin and find out.
The decision is more likely to be the right one, the utility is less likely to be blindsided by unforeseen complications, and less time and money need be spent visiting the site and validating information.
As the energy transition accelerates, both transmission and distribution (T&D) utilities will receive more connection requests for anything from solar parks to electric vehicle charging infrastructure, to heat pumps and batteries – and all this on top of normal grid upgrade programs. A well-constructed digital twin may come to be an essential tool to keep up with the pace of change.
2. Improved Inspection and Maintenance
Utilities spend enormous amounts of time and money on asset inspection and maintenance – they have to in order to meet their operational and safety responsibilities. In order to make the task more manageable, most utilities try to prioritise the most critical or fragile parts of the network for inspection, based on past inspection data and engineers’ experience. Many are investigating how to better collect, store and analyze data in order to hone this process, with the ultimate goal of predicting where inspections and maintenance are going to be needed before problems arise.
The digital twin is the platform that contextualises this information. Data is tagged to assets in the model, analytics and AI algorithms are applied and suggested interventions are automatically flagged to the human user, who can understand what and where the problem is thanks to the twin. As new data is collected over time, the process only becomes more effective.
3. More Efficient Vegetation Management
Utilities – especially transmission utilities in areas of high wildfire-risk – are in a constant struggle with nature to keep vegetation in-check that surrounds power lines and other assets. Failure risks outages, damage to assets and even a fire threat. A comprehensive digital twin won’t just incorporate the grid assets – a network of powerlines and pylons isolated on an otherwise blank screen – but the immediate surroundings too. This means local houses, roads, waterways and trees.
If the twin is enriched with vegetation data on factors such as the species, growth rate and health of a tree, then the utility can use it to assess the risk from any given twig or branch neighbouring one of its assets, and prioritise and dispatch vegetation management crews accordingly.
And with expansion planning, inspection and maintenance, the value here is less labor-intensive and more cost-effective decision making and planning – essential in an industry of tight margins and constrained resources. What’s more, the value only rises over time as feedback allows the utility to finesse the program.
4. Automated powerline inspection
Remember though, that to be maximally useful, a digital twin must be kept up to date. A larger utility might blanche at the resources required to not just to map and inspect the network once in order to build the twin, but update that twin at regular intervals.
However, digital twins are also an enabling technology for another technological step-change – automated powerline inspection.
Imagine a fleet of sensor-equipped drones empowered to fly the lines almost constantly, returning (automatically) only to recharge their batteries. Not only would such a set-up be far cheaper to operate than a comparable fleet of human inspectors, it could provide far more detail at far more regular intervals, facilitating all the above benefits of better planning, inspection, maintenance and vegetation management. Human inspectors could be reserved for non-routine interventions that really require their hard-earned expertise.
In this scenario, the digital twin provides he ‘map’ by which the drone can plan a route and navigate itself, in conjunction with its sensors.
5. Improved Emergency Modelling and Faster Response
If the worst happens and emergency strikes, such as a wildfire or natural disaster, digital twins can again prove invaluable. The intricate, detailed understanding of the grid, assets and its surroundings that a digital twin gives is an element of order in a chaotic situation, and can guide the utility and emergency services alike in mounting an informed response.
And once again, the digital twin’s facility for ‘what-if’ scenario testing is especially useful for emergency preparedness. If a hurricane strikes at point X, what will be the effect on assets at point Y? If a downed pylon sparks a fire at point A, what residences are nearby and what does an evacuation plan look like?
6. Easier accommodation of external stakeholders
Finally, a digital twin can make lighter work of engaging with external stakeholders. The world doesn’t stand still, and a once blissfully-isolated powerline may suddenly find itself adjacent to a building site for a new building or road.
As well as planning for connection (see point 1), a digital twin takes the pain out of those processes that require interfacing with external stakeholders, such as maintenance contractors, arborists, trimming crews or local government agencies – the digital twin breaks down the silos between these groups and allows them to work from a single version of the truth – in future it could even be used as part of the bid process for contractors.
These six reasons for why digital twins will be indispensable to power T&D utilities are only the tip of the iceberg; the possibilities are endless given the constant advancement of data collection an analysis technology. No doubt these will invite even more questions – and we relish the challenge of answering them.