The race to be the next “Amazon” of the energy sector – understanding opportunity and risk

Digital transformation of the energy sector has been one of the themes of the last decade. The launch of the Department for Business Energy and Industrial Strategy's Energy Digitalisation Taskforce heralded an opportunity for greater focus on future digitalisation needs and the governance needed around that for the next decade and beyond.

Regardless of the outcome of the Taskforce, the race to optimise energy distribution from upstream to downstream to be heralded as the “Amazon” or “Google” of the energy sector is a prize far too great to ignore.

But digitalisation can unlock a greater prize – efficiencies to lead our way to net zero, and it is inevitable digital will be the buzzword of COP26.

Digital means different things to different businesses in the energy supply chain mix.

For example, in Aberdeen, a spectrum of clients are developing innovative data tools to optimize flow right through to the digitalisation of operating platforms – removing the need for engineers to go offshore saving costs and delivering ultimately safer, more sustainable practices. OGTC’s Digital Solutions Centre overall goal is to deliver 10% production efficiency improvements.

Consumer facing technology is also key. Smart meters change consumer practices in their energy usage – surely the ultimate prize – to use energy more smartly. Deploying digital solutions through integration of smartphone technology to bring hyper personalisation in the delivery of energy to consumer has a long way to go.

But joining all of this up into a connected digital integrated system will need much greater collaboration, imagination, and investment across the sector. Partnerships are popular, but bolder and bigger collaborations will be needed to achieve step changes in the sector. Finding shared goals and cultural alignment is key.

Open data presents a good core foundation to build from but will only take us so far. Intellectual property rights ownership and the rewards from licensing is still an important tool to incentivise the movement.

We also need to carefully recognise the work needed to secure any integrated system. Cyber risk is evermore on the radar of the sector. We see a rise in ransomware attacks across the globe – leading to potential issues with data protection regulators and related cyber security regimes like the Network and Information Systems Regulations.

Being one step ahead in this global race is key, not only for future supply, but also for stakeholder engagement and future investment.

Ross McKenzie is a partner in international law firm, Addleshaw Goddard, based in Aberdeen. He specialises in data and technology law advising clients in the energy sector on collaborations and data compliance.