The Digital Road to Energy Transition

David Sun

Vice President of Huawei, CEO of Electric Power Digitalization Business Unit, Huawei

This article was originally published in The Register and has been edited.

Huawei Paves a Clear Path for the Energy Industry's Digital Transformation

We are witnessing the emergence of a new world energy order as the world’s energy structure changes. The international community and the energy industry are agreed that a shift to renewables is the only means to move forward to meet the growing global energy demand and mitigate damaging climate and environmental changes.

This transition to renewable energy is driven by clean, low-carbon energy resources, higher energy efficiency, wide adoption of electrification, innovation, and the integration of energy and digital technologies. Energy transition strategies have already been formed and are being accelerated in many countries and regions. They may have embarked on different transformation paths based on various visions, resources and energy structures but they are all accelerating the transformation process and are heading in the same direction.

A case in point is the US, which is committed to achieving energy independence, and is using natural gas and renewable energy as transitional energy sources to promote a clean energy structure. Germany has also dramatically cut its consumption of fossil fuels, abandoned nuclear power and taken a lead in promoting the large-scale application of renewable energy. Meanwhile, Japan is looking to facilitate its energy transition by leveraging its technical strengths.

Countries in the Middle East are also playing their part in the changing energy scenario and have started using renewable energy. Not to be left behind, China has adopted a new energy security strategy, "Four Revolutions and One Cooperation", that aims to control the peak in CO2 emissions before 2030 and achieve carbon neutrality before 2060.

The Role of Digital Technologies in the Current Energy Transition

The blurred boundaries between digital and real economies are throwing up both challenges and opportunities for the energy industry, and the innovative application of emerging technologies is already beginning to reshape the relationship between productivity and production. The energy industry therefore needs to actively embrace innovation and change so that it can work to help enterprises achieve their transformation visions and objectives.

Digitalisation and business can typically be integrated through three approaches.

1. In the first approach, digitalisation is the top priority - enterprises are very open to transformation, breaking industry and technology boundaries to position themselves as digitally native enterprises.

2. In the second approach, digitalisation and the business are equally important - this is the pragmatic, preferred choice for numerous enterprises.

3. In the third approach, digitalisation supports the business. Here the process of digitalising the business will eventually lead to qualitative changes, so that the value of digital transformation becomes apparent.

Digitalisation can be positioned in a number of ways, and only time will tell which approach is most suitable for each industry.

Energy Pyramid – A Digital Transformation Methodology

Because digital transformation involves reshaping the relationship between productivity and production, a methodology for decoupling complex issues is needed. Based on its extensive digital transformation practices and experience in the energy industry, Huawei has developed the Energy Pyramid, a digital transformation framework applicable to the energy industry that helps enterprises to realize their digital transformation goals. We shared this framework in September last year at HUAWEI CONNECT 2020.

The five key elements of the Energy Pyramid framework are as follows:

1. Have a clear vision. Transformation is a top-down process that needs a clear vision based on enterprise positioning.

2. Create two assurance conditions. Build a digital culture, accumulate digital knowledge, and develop digital skills. Then unleash the power of talent and consolidate capabilities through teams and platforms.

3. Implement three key processes. Create a blueprint that integrates planning, construction and operations to ensure the vision converts to enterprise value.

4. Construct two core driving forces - the service element and the technical element to seize opportunities.

5. Build one digital foundation that covers connectivity, platforms, data and intelligence.

The 5-3-2 Model for Enterprises' Digital Transformation

Digital transformation is essentially a complete change, and it can be helpful to facilitate it by referencing the 5-3-2 model for energy enterprises, as follows:

The personnel and teams of an enterprise determine 50% of transformation success, with the vision driven by management and teams' perception, consensus, and execution. This 50% weighting demonstrates the importance of organisation culture.

Thirty per cent is derived from policies and environments. A number of countries are using ICT to drive government transformation and innovation, for example the US Federal Data Strategy 2020 Action Plan, Australia's Digital Transformation Strategy 2018–2025 and Canada's Policy on Service and Digital. Likewise, China has promoted the concept of integrating the digital and real economies and released a Notice on Accelerating the Digital Transformation of State-owned Enterprises. All these strategies have played a crucial role in guiding the energy industry's digital transformation.

Twenty per cent is the technology foundation, which makes transformation technically possible. This is where strong ICT players like Huawei can provide the industry with the necessary base and tools for their transition journey.

Creating Value for the Energy Industry with Partners

The energy industry is evolving to create a sustainable low-carbon economy that is fuelled by an efficient energy structure, diversified supply and distributed loads. In the future, a smart energy ecosystem will be built to encompass multi-energy synergy, with integrated electricity, gas, heat, cooling and water, as well as coordinated power sources, grids, loads, storage and consumption. We will also see the deep integration of 5G, IoT, AI, blockchain, cloud, big data, edge computing and other emerging technologies within the energy industry, paving a digital path for the energy transition and carbon neutrality goal.

Focus on technological innovation as the key enabler of the energy transition to promote the construction of a clean, low-carbon, safe, efficient and modern energy system is essential. This will enable us all to seize the opportunities created by far-reaching changes in the global energy landscape.

Huawei will implement the 'Platform + Ecosystem' strategy and help both customers and partners succeed. We believe that digital transformation is unachievable based on a single technology. Our platform that is the result of several decades' worth of experience in cloud-pipe-device collaboration is the most powerful capability we can offer energy enterprises. Similarly, digital transformation of an industry is impossible without an ecosystem.

At Huawei, we have developed a rigorous ecosystem comprising industry alliances, business alliances, developer platforms and the open source community. In this way, we are completely committed to helping global energy enterprises create new value in the digital era.