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Adoption of IoT technology in electric power industry

The IoT will fundamentally transform industry and everyday life for business and consumers alike.

Paper #2

Adoption of IoTtechnology in various fields

fundamentally transform industry and everyday life for business and consumers alike. In a number of areas, human input and error will be minimised completely.

In the electric power industry, for example, IoT technology will ensure cost savings and create new products. In agriculture, IoT will enable precision farming and substantially improve the operation of agricultural machinery.

IoT solutions in logistics will cut costs, increase transparency in supply chains and reduce the need for human work. Smart city technology will create a more attractive urban environment that features efficient transport systems and utility services, convenient infrastructure and improved safety. The most popular smart home technologies among consumers include smart appliances and thermostats as well as devices that enhance security and control water and energy consumption.

Adoption of IoT technology in various fields

The Internet of Things will

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Adoption of IoT in the electric power industry: grid integration

Impact of IoT adoption in the electricity sector

The role of IoT in creating new power markets

Prospects and drivers of IoT adoption in the power sector

Barriers to IoT adoption in the power sector

PwC’s IoT Centre of Excellence in Russia

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Adoption of IoTtechnology in various fields

fundamentally transform industry and everyday life for business and consumers alike. In a number of areas, human input and error will be minimised completely.

In the power utilities industry, for example, IoT technology will ensure cost savings and create new products. In agriculture, IoT will enable precision farming and substantially improve the operation of agricultural machinery.

IoT solutions in logistics will cut costs, increase transparency in supply chains and reduce the need for human work. Smart city technology will create a more attractive urban environment that features efficient transport systems and utility services, convenient infrastructure and improved safety. The most popular smart home technologies among consumers include smart appliances and thermostats as well as devices that enhance security and control water and energy consumption.

Adoption of IoT technology in various fields

The Internet of Things will

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Powersector

1. Adoption of IoT in the power utilities industry: interconnection of elements

In preparing this study, PwC experts interviewed more than ten managers at energy companies. The majority agreed that all three components of the power industry—generators, grids and consumers—should go smart in future. Deep IoT-driven integration among market players will help to redefine the sector.

The hierarchal model of generation–transmission–sale (where processes are strictly governed by regulations, consistency is achieved through government control, and the news is the main source of information) will be replaced by a flexible system of productive,

real-time communication. All parts of the system will be able to “see” the other parts, understandtheir capabilities and needs, and perform their roles efficiently. This shift will help to reach a fundamentally new level of reliability and efficiency in the operation of power systems.

The digitalisation of power grids, power generation and the consumer sector should be parallel processes, as smart grids cannot function without smart consumers.The Internet of Things will have the greatest impact on the following key areas in the electricity sector:

• Technology (which, among other things, will become more reliable);

• Savings, including reduced losses;

• Creation of new markets, attributes and businesses.

Figure. 1. IoT applications in electric power

Generation capacity monitoring

Distributedgeneration

Consumptionmonitoring

Consumption profile management

Power gridmonitoring

Adoption of IoT technology in various fields 5

532 180

169

5291

41

Total Energylosses

Constructionof new capacity

Supportinginvestments

Fuel(optimisedproduction)

Fuel(balancing load)

2. Impact of IoTadoption in the power sector

We estimate that the economic impact of IoT adoption on the power utilities sector will be RUB 532 billion by 2025.

Enhanced reliability

Power systems were traditionally built around the principle of reliability: consumers should always have access to electricity.Because of the key role that energy plays in the economy and in meeting people’s daily needs, power grids and generating facilities were designed with built-in redundancies to provide consumers with significant operating reserves of power.IoT elements like smart grid technology can significantly improve the reliability of power systems.

Essential KPIs1 in the grid complex include CAIDI2 and SAIFI3, which indicate the capacity available to consumers. IoT technology can help reduce failures in power grids by quickly delivering information on equipment problems and scheduled repairs. For example, by monitoring oil levels in transformers remotely, power companies can quickly identify leaks and prevent overheating and possible transformer failures or substation fires.

In terms of power generation, IoTadoption will entail equipping critical units at power plants with diagnostic systems. It is worth mentioning that most power plants have already been outfitted with embedded telemetry and, of course, automation technology. APCSs4 also form an integral part of critical systems at generating facilities.

Russia’s leading power generating companies are currently busy upgrading their generating facilities and harmonising new and old data within a single SCADA5 system, including Inter RAO Electric Power Plants, Unipro, Fortum, Rosenergoatom, and Gazpromenergoholding (GEH). The latter has acquired a share in a company that is developing IoT systems for power generation equipment6.

At power plants, IoT systems also enable users to receive data on equipment operation in real time and take informed decisions on maintenance and repairs, as well as optimise the timing of equipment shutdowns and minimise the risk of incidents. For the foreseeable future, equipment will continue to be repaired according to existing regulatory frameworks. However, IoT technology will help to ensure that equipment is operating according to factory specifications after scheduled maintenance.If used efficiently, IoT technology could help operating teams concentrate their efforts on key functions rather than on routine

Figure. 3. IoT applications in electric power

Figure. 4. Reserves in the power system

1 KPI: key performance indicator2 Customer Average Interruption Duration Index3 System Average Interruption Frequency Index4 Automated Process Control System5 Supervisory Control And Data Acquisition (SCADA) is a software package intended for development or

real-time operation of systems to collect, process, display and archive information.6 Here, we mean Tecon.

AvailableUES capacity

Projectedpeak load

208

GW

150

GW

Process

power system-28%

Figure. 2. Key benefits of IoTtechnology for the electric power sector

Consumers• Demand management• Procumers• Virtual power plants

Generators

• Increased productivity• Growth of distributed

generation and green energy

Grids• Improved communication

among market participants• Opportunity for consumers

to choose among power suppliers

Technology

• Asset management on a real-time basis

• Tremendous boost in reliability

Cost savings

• Reduced fuel costs, payroll and losses

New products

• Big data in electric power• Internet of Energy• Personalised electric power

Adoption of IoT technology in various fields6

Economic impact and cost savings from IoT adoption in the electric power sector

Business factors are just as important as improving reliability. In certain cases, consumers are ready to reduce their consumption to save costs when the price it too high.

In the grid complex, the widespread adoption of IoTtechnology could have a major impact. For business in general and power grid companies in particular, reducing costs is an important objective. On the one hand, the grid component accounts for 67% of the price of electricity for households and about 40% for industry.7 On the other hand, regulatory authorities have begun to insist that grid companies reduce their fees and fee-related costs.

Grid companies can optimise their costs by ensuring better monitoring of the power grid. Knowing the condition of substations, power transmission lines, isolators and other grid components makes it easier to cut the following elements from the cost structure:

• Repairs: Currently, grid companies conduct repairs according to industry standards (power lines, for example, should be overhauled every 12 years on average). The transition from standardised to predictive maintainance will achieve savings of over RUB 8 billion by 2025 (see the insert on Rosseti) by prioritising repairs and ensuring longer equipment life cycles.

Rosenergoatom (REA)

Over the past two years, Units 1 and 2 at the Smolensk Nuclear Power Plant have been retrofitted with IoT technology. The plant has also implemented ABB’s eSOMSsystem. Without the need to install numerous sensors, this system provides employees with displays that show the best routes to take on equipment walk arounds. Line workers can send information on their observations to a centralised information system in real time.

The system then summarises, analyses and transfers all the data to plant operators, together with recommendations on further actions in case of any issues.The system has allowed line workers to perform walk aroundsalmost 20 times faster, reduced paperwork dramatically and enhanced the quality of monitoring and decision-making. The economic impact from efficiency gains has amounted to RUB 45 million per year, and the return on investment was achieved within two and half years. According to plant management, however, the most significant outcome of adopting IoT technology has been the operational improvements that have reduced repair costs, increased the plant’s capacity and, above all, provided an entirely new level of reliability and safety.

The eSOMS solution is currently being installed at the Voronezh Nuclear Power Plant. According to other market players, the impact of REA’s new management system is visible from the outside simply from changes in their repair schedule. Today, the company is applying the lessons of its successful IoT adoption experience to business processes for managing repair works.

activities, as well as help to optimise staffing numbers. Considering that the electric power sector currently employs over 700,000 people with a payroll budget of RUB 50 billion, IoT technology could help to achieve considerable improvements in productivity.The point is that IoT is not just about things, it is also about people. Teams armed with knowledge can do their jobs better.

In power generation, IoTadoption entails the introduction of relatively simple systems like personal tablets for employees on power plant floors. These devices can:

• Reduce the burden of paperwork for personnel;

• Control line worker operations;

• Minimise the impact of human error, thanks to a standardised form completion process;

• Provide personnel with instant updates about the condition of equipment using historical data, as well as with operational forecasts;

• Transmit information from shift supervisors to the central control room on a real-time basis.

In fact, Rosenergoatom and Unipro have already such systems, and other generating companies are planning to do so as well (see the insert on Rosenergoatom).

Figure. 5.Cumulative growth rate of the purchase price for electricity, % of the previous year

Source: Rosstat, ACRA forecast

7 Analytical Credit Rating Agency (ACRA), report from 24 April 2017.

1025 34 45 58 63 72 84

100 111 122 136 144 153 161 168 174

2005 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025


Rosseti

One of Rosseti’s main priorities is introducing smart grid technology. Currently, the company is running more than ten pilot projects aimed at building and developing smart metering systems that enable real-time diagnostics and more efficient operation of the energy system.

One of the most promising initiatives is the Digital Power Distribution Zone project that the company has launched in the Kaliningrad Region in cooperation with the National Technology Initiative and EnergyNet. The project includes three stages: automating substations and grids, deploying a comprehensive energy monitoring system and implementing a support system. Accomplishing this project will propel management of the system to a new level, significantly cut operational and repair costs, reduce losses, ensure more efficient utilisation of equipment and increase reliability. Completing the first stage of the project has allowed the company to increase the average response time to consumer emergencies by four times.

Economic benefits will be achieved possibly mainly via IoT solutions. Real-time equipment monitoring makes it possible to ensure the safety and reliability of the system without the need for strict operational standards, which are often calculated based on high margins.

• Operations: Taking basic readings from grid facilities requires employees to conduct walk arounds and equipment checks. For example, companies need accessto an HV laboratory to inspect transformers every six months (oil used to cool transformers must be sent to the lab). Inspections of lines and substations are carried out personally by specialists.

In addition, identifying defects during power line failures must often be carried out manually. Use of IoTtechnology to collect accurate data remotely and instantaneously could significantly reduce the time needed to review and fix problems and, consequently, help to cut costs.

• Losses: On average, grids have relatively high technical and commercial losses of 9.22% (or RUB 60 billion) per year. Bringing loss levels down to international benchmarks of 3-4% via improved grid control could save about RUB 40 billion a year. Moreover, reducing loss levels could help companies address their commercial losses. Starting from mid-2018, territorial grid companies in Russia will be prohibited from modernising old metering devices in order to promote the adoption of smart meters. According to plans, 80 million smart meters are expected to be installed in the grid complex.

IoT adoption will also help increase the service life and capacity (utilised capacity) of existing assets. In the current environment, grid developmentis limited not only by capital intensity but also by physical capacity, especially in densely populated regions and cities, which have no space for constructing new grids. According to regulations, line loads and substations must be maintained at specific levels. In summer, capacity is lower due to greater wire sag.

In 2015, Rosseti spent RUB 35.8 billion on repairs. This figure could have been smaller if IoT systems had been in place. A realistic investment in IoT technology that could be repaid within five years would be 3-5% of the cost of basic equipment.

Rosseti management is also focusing on another possible outcome from improved monitoring systems, namely, reduced energy losses. In 2015, improved meters saved the company 225.3 million kWh, i.e. nearly RUB 500 million.

The shift to broader use of IoT-based grid monitoring systems is integrated into the company’s Framework for Developing Technical Diagnostic Systems. The document calls for the massive adoption of IoT technology to help the company’s Production Asset Management System (PAMS) move to a new level. Earlier, monitoring systems could be installed only on equipment of more than 110 kW, but this restriction was removed in 2017, and now monitoring systems can be used for economic reasons on grids of any voltage class. In addition, Rosseti’s asset management principles now include evaluating the social and economic consequences of power failures.


Inter RAO Electric Power Plants

Inter RAO Electric Power Plants is rolling out a system to collect, transmit and calculate technical information (SSPRTI) at the company’s power plants.

The project is aimed at designing and installing devices and sensors of various types, as well as building an IT system to monitor the data.The SSPRTI project has two goals:

• To increase equipment reliability within five years by improving observability, automating manual inputs, introducing a new production culture, and gathering information on changes in equipment performance after replacements or repairs.

• To reduce expenses through better management of the thermal effectiveness of equipment (reduce overheating incidents). Equipment operators at plants should receive tools to take economically efficient decisions and master the equipment.

Taking into account fuel economy (annual expenses in the group amount to about RUB 130 billion) and repairs savings, implementing the system is expected to repay the investment within five to seven years. Devices and sensors account for the greatest part (about 80%) of the cost of adopting the new system. The parallel process of categorising equipment and reference data indexing is also under way. SSPRTI data will soon be used by the Enterprise Resource Management (ERP) IT system as well as by the maintenance and repair (M&R) system.

However, knowing the actual (via the IoT) values rather than just the standards could minimise bottlenecks in the system. This could have a multiplying effect for the entire sector by optimising repair schedules and loads in other grid sections during the summer repair campaign. Currently, Russia is using only two-thirds of its grid capacity.

In generation, analysis of optimal operation modes using IoTtechnology could reduce the volume of excessively burned fuel, which in some cases amounts to over half of all operating expenses. The Russian electric power sector annually consumes about 115-120 million tonnes of coal and about 200 billion cubic metres of gas, which in monetary terms exceeds RUB 1 trillion.

Even a small percentage improvement in this area by Russian generating companies could save the sector and the economy billions of roubles every year (see the insert on Inter RAO Electric Power Plants).

At the same time, strong connections between producers and consumers will help maintain loads at efficient levels. According to electricity sector representatives, trade on the wholesale market is conducted anonymously. In some regions, the most efficient plants are operating at half of their capacity, while far less efficient facilities in neighbouring regions are fully loaded.


Fortum

In 2012, Fortum launched a project on IoT adoption called CIMS (Company Information and Measuring Systems).

The project was guided by a simple logic: you cannot manage what you cannot measure, and without this, no automation is possible.It was a strategic decision to start the long-term project. There were no detailed calculations, but it was clear that it was impossible to run a comprehensive process without accurate information.

The project went through several versions and caused heated discussion. However, once the agreement and approval saga was over, and the company adopted the philosophy, the project became an integral component in managing the company.

The main goal of the project was to create a single channel called the Process Information Collection Centre (PICC), where information would be collected from metering devices in a single database and format without human input.The Centre has helped to:

• Create a single database available to all participants in the process, from the shift supervisor and engineers to accountants and officers involved in debt recovery.

• Monitor all technical processes in real-time on all equipment at the plant, whether on turbines, boilers, generators, switchyard stations or cooling towers, as well as remotely manage their operation (telemetry + telecontrol).

• Automate reporting for internal and external use.

• The project’s most important outcome was providing theplant’s personnel with the tools

to manage the value that the equipment generates rather than the equipment itself (because the operators understand the economic consequences of their actions).

In addition, the project made it possible to deal with other issues, including

• Attracting young specialists to work in plant operations with cutting-edge technology;

• Providing confidence to personnel by investing in the plant’s long-term future of the plant.

A parallel project in heat networks was also launched in order to address major issues in the heat network business, including improving accounting operations, reducing losses and optimising costs. For example, the company’s technical policy states that overhaul and reconstruction efforts must use only pre-insulated, high-capacity pipelines in combination with a remote moisture and insulation control system (a system of conductors integrated in the pipe insulation). Signals from these pipelines to the network make it possible to identify defects with an accuracy of one to three metres. These types of pipelines require no maintenance and help to reduce costs and losses. Using the latest valves and fittings and enhanced coverage with meters (for remotely collecting readings and operating equipment) has become an alternative to keeping a large team of line workers.

The data from these meters is automatically sent to the Process Information Collection Centre.All automation was performed by Russian companies, while he data is processed using the 1C platform and then integrated with SAP.

3. The role of IoT in creating new power markets

For grids, IoT technology (smart grids) offers powerful levers to handle challenges that the energy system has not faced before, for example, integrating different sources of power and fluctuations in production. With the growing number of distributed sources now integrated into power grids, the adoption of IoT technology is becoming inevitable.

Distributed power includes, first and foremost, renewable sources like solar, wind and water (small hydropower plants). Although Russia plans to put more than 5 GW of renewable capacities into operation by 2025 (i.e. about 2% of the installed capacity of the country’s energy system), this volume could increase thanks to microgeneration by households. The government intends to allow sales of surplus power generated by microgeneration facilities with capacities of up to 15 kW.8

In addition, industrial distributed power generation should also be included. According to experts, it already accounts for 5-6% of the capacity of the country’s entire energy system, or about 13 GW. Integrating new power sources requires redefining the entire operation of an energy system that has evolved in response to specific needs over decades. This is not a simple task. The power grid was initially designed as a one-way street from generators to consumers. Trying to make it work both ways is like learning to drive a car using only the reverse gear.

As distributed generation expands, IoT technology will support the growth of virtual power plants. Power generators (including households) willbe able to dispose of a certain capacity at a given moment (e.g. of dozens of MW) with a 100% probability thanks to IoTtechnology and thus operate as independent players on the wholesale market.


A new business ecosystem is already emerging around the third component in the power sector chain, the consumer.

According to experts interviewed by PwC, it is households and the small and medium-size business sector that will soon become the main drivers of the IoTrevolution. The situation is the same in other sectors. We focused a separate section of our research on smart meters and smart homes. If smart meters grow exponentially, as expected, their owners will begin to demand that grid and retail power companies take into account their consumption data.

The scheduled launch of a competitive retail power market in Russia will also help to drive IoT development. This will enable consumers to choose among power suppliers.9 First, switching between suppliers will require rapid financial calculations. Second, competitors will make suppliers offer consumers flexible fees on power and later on other resources. Third, consumers (petrol stations, neighbourhoods, housing communities, etc.) will be able consolidate and enter the retail power market as independent players.

Unless consumers have smart meters, however, the three

8 Wind generators or PV panels installed on roofs and in gardens of private houses.9 Consumers now have to buy power from monopoly last resort suppliers (LRS) operating in their region..10 http://www.pwc.ru/ru/publications/assets/big-data-presentation.pdf11 More information on applying blockchain technology in the power sector is available in

Blockchain: an opportunity for energy producers and consumers?

http://www.pwc.ru/ru/publications/blockchain.html12 According to J’son & Partners Consulting.

options above are not feasible.

Considering that there are reportedly over 7 million private homes and over 30,000 petrolstations, as well as over 2.5 million small and medium businesses, consumers equipped with smart meters will likely determine the development of Russia’s smart energy system.

An additional outcome from IoTadoption could be achieved with the help of big data analytics. The power sector cannot move forward without data analytics and machine learning. For example, a 500 kW substation transmits up to 100,000 signals per second on the state of its equipment, while the System Operator of Unified Energy System receives millions of signals at its control centre. The latest IT systems are already capable of handling such large volumes of data.10 IoT in the power sector will be supported by related technology such as blockchain.11

Many companies in the Russian power sector are establishing analytical centres designed to analyse data on equipment, including RusHydro, Inter RAO Electric Power Plants, REA and other utilities.

At the same time, the number of smart meters continues to grow and is expected to triple to 7 million between 2015 and 2020.

Russian power meter manufacturers alone produced about 9 million units already in 2014.12

4. Prospects and drivers of IoT adoption in the power sector

The outlook for IoT technology in the power sector is quite promising. According to most experts interviewed by PwC, the sector will pass the point of no return within the next five years. Technology, sensors, data processing tools, microprocessors and software are developing at a rapid pace. Data transmission channels are no longer an obstacle, because all power plants and substations with capacities of more than 110 kW are already connected to optical lines.

New 35 kW capacity substations are also equipped with connectivity. In addition, power line communication technology (PLC) also can be utilised.

However, without major government support, IoTadoption in the power sector will be slower, and the process will driven more by consumers than by the corporate sector.

One of the reasons is that most of the economic dividends from IoT adoption have no single beneficiary. Rather, they are distributed among consumers, generators, grids, etc. In the absence of a single stakeholder, the government could assume this role, as it is well positioned to see the total economic impact of adopting IoT (see the insert on the System Operator of the Unified Power System).

It is a positive sign that government policy in the power sector has embraced technological innovation. In particular, the most prominent state initiatives have included the possible decision to remove regulations on grid repairs and roll out smart meters and RES-based distributed generation. These ideas are reflected in several documents discussed in brief below.

Figure. 6.Mapping the benefits of IoT adoption in the power sector

Strategic Tactic

Hig

hH

igh

Mo

de

rate

IoT

po

ten

tia

n

Reduce cost

Revenue growth

Mode

analytics

Performance

analytics

Pro-active

repairs

Improved deviation

management

Improved

collection

Telecontrol

Telemetry

Data

validation

Income

protection

Revenue simulation

By tariffs

Stronger customer loyalty

via online self-services

Demand

response

Customer

segmentation

Better data

availability

More accurate

collected data


http://www.pwc.ru/ru/publications/assets/big-data-presentation.pdf

http://www.pwc.ru/ru/publications/blockchain.html

SO UES is the primary control centre in the national power system and, among other things, manages process regimes, monitors compliance with reliability parameters and frequencies in power supply, approves repairs and power development programmes, etc. All UES entities are required to follow SO commands.

• New IoT technology has enabled greater transparency and manageability of the power system, as well as economic efficiency. In recent years, SO UES has been able to drastically (by factor of 24) reduce the time needed for issuing task plans to power plants on the balancing market, from once per day to once per hour. Power plants can now adjust their load schedules every hour, while previously they had to wait an entire day, no matter what opportunities were available.

• In addition, new technology has enabled SO UES to launch a demand-response programme that provides consumers with financial incentives to reduce consumption during peak load hours voluntarily. Currently, only 69 MW of connected capacity at RUSAL’s aluminium plants are included in the demand response programme in the second price zone (Siberia). RUSAL’s plants participate in the programme when their load reduction leads to at least a 1% savings on the market for the next day. On the other hand, demand responseis activated at consumption peaks when the price per kWh is at its highest. This innovation, which

could not have been broadly implemented without IoT, will save millions of roubles every day.

The PJM power system, the North American equivalent of SO UES (peak consumption load is 156 MW, while UES of Russia is 159 MW), operates over 11 GW in demand-response mode. Totally, about 30 GW is used in demand response in the US, including7 GW generated by the population. Full-scale implementation of this programme in Russia could bring savings of billions of roubles.

SO UES introduced the demand-response component in order to add flexibility to the system by using commercially feasible methods. Just as traffic jams cannot be addressed only through more road construction, bottlenecks in the power system also require new methods of routing and flow management. With more opportunities in place to control the power system, grid infrastructure and power plants can be utilised more efficiently.

The economic benefits from price dependant reductions in power consumption will be enjoyed not by SO UES and RUSAL, but by consumers in general. In the absence of obvious sponsors and beneficiaries, the system will not grow without the government as an active contributor. The demand-response launch itself was made possible only following Russian Government Resolution No. 699, “On Introducing Amendments to the Wholesale Electricity and Capacity Market Rules in Summer 2016.”

• The Energy Strategy of Russia for the Period up to 2030 outlines the creation of a new generation of highly integrated smart backbone and distributed electric grids (smart grids) within the Unified Power System of Russia.13

• The draft Energy Strategy of Russia for the Period up to 2035 also contains a section on efficient energy systems of the future, including smart homes, a comprehensive upgrade of the Unified Energy System and the development of smart grids.

• A number of initiatives have been outlined in a roadmap for developing a smart energy system by the Energy.net association, which strives to form a professional community capable of developing and promoting the global market of competitive technologies, products and services in the field of smart energy systems.

Development of IoT technology in the power sector would be further encouraged if the government were able to coordinate efforts by the corporate sector and private initiatives, as well as manage the application of international best practices in regulation.

5. Barriers to IoT adoption in the power sector

In our interviews, respondents mentioned five barriers that are hindering the adoption of IoTtechnology in the power sector.

The first is the topology of the power sector itself. The power system was designed according to the principles of hierarchical control and command, which was in line with the technology of the day. IoT creates significant changes in interrelationships in the power sector, and this, of course, generates new economic and technological obstacles. According to PwC research,14 the power sector is generally slow to introduce new technology.

System Operator of Unified Energy System (SO UES)


13 Section 7. Innovative and scientific and technical policy in the power sector. http://minenergo.gov.ru/node/1026

http://minenergo.gov.ru/node/1026

If we look at technology implementation in the sector historically, we find that power companies have spent an average of 15-20 years on large-scale technology implementation, whether it was R&D on APCSs in the 1960s or innovative gas turbines in the 1980s. RPA microprocessor devices were developed as early as in the 1980s, but 15-20 years passed before they were broadly adopted in the operation of power systems.

In addition, new technology requires new investments. Although capital expenditures on technology implementation are trending downwards, the required investments are still significant. Moreover, as with any commercial enterprise, existing companies need to earn a return on their investments in fixed assets.

This is why many of the energy experts we interviewed emphasised that the adoption of IoT solutions should be guided by the expediency principle. Market players were unanimous in the opinion that IoT adoption is not a complete replacement. As the natural upgrade and retrofitting

of equipment takes place, new assets should be equipped with sensors as well as capacity for self-diagnosis and information transmission. It is important to realise that there is no point in modernising substations that were built in the 1920s. In addition, some equipment and infrastructure (for example, reactors) are difficult to diagnose.

As more information about the operation of power facilities is generated, power systems become more vulnerable to cyberattacks. Today, 80% of grid equipment is analogue, and hackers are powerless to do much harm. Of course, this challenge needs to be addressed as IoT technology is adopted in the power sector.The absence of time-proved economic ROI calculations has also slowed down IoT adoption. For most early adopters (Inter RAO Electric Power Plants, Fortum, Rosseti, REA and GEH), the decision to launch IoT was rather a leap of faith based on assumptions of expected economic impact (see the insert on Fortum). IoT pioneers in the power sector will be able to leverage the advantages of early adoption and become leaders in the new power sector.

Figure. 7.Barriers to IoT adoption in the power sector

Low emphasis on technological innovation

The power sector implements innovations with a 10-20 year backlog

Capital intensityThe Internet of Things means new investment while the power sector has to repay its old expenses

EconomyThere are almost no calculated results of IoT implementation in the Russian power sector

Cyber securityDigitalisation in the power

sector leads to greater vulnerability

Topology of the power sector

Hierarchical and centralised

architecture


14 Research by Strategy& (PwC). How to benefit from the transformation of traditional value-adding

chains. Technology and innovations in the era of power sector transformation.

http://www.pwc.ru/ru/publications/road-to-energy-transformation.html

It seems to me that this is the name of the English version of this document and the link to the English

version of the document: https://www.pwc.com/ee/et/publications/pub/a-distinctive-road-to-energy-

transformation.pdf

http://www.pwc.ru/ru/publications/road-to-energy-transformation.html

https://www.pwc.com/ee/et/publications/pub/a-distinctive-road-to-energy-transformation.pdf

We believe that the Internet of Things is not just another technology, but a foundation for a new production system and philosophy that will guide companies from across various industries. As any other production system, the Internet of Things requires a massive overhaul of methodologies, internal business processes, and operational and managerial cultures. For this reason, from our perspective, the key objective of IoT adoption is to alter business models rather than simply to use new technologies and IT solutions.

According to our 2017 Digital IQsurvey, many respondents say that the Internet of Things is the number one technology in terms of its potential to transform business models of companies and whole sectors. It goes without saying that such large-scale changes demand the involvement of senior management, including CEOs, COOs, and CTOs.

It is our commitment to support companies as they plan, implement and use the Internet of Things. To achieve this, we have builta cross-functional team in Moscow to provide IoT servicesto companies in various sectors.

Our competencies delivering completing strategic and operational projects, such as:

Strategic planning for IoT, including: seminars for senior managers and shareholders; design of strategies on initial

Market entry for IoT solutions and service providers; design of business and technical strategies; development of general roadmaps of resources and competencies; development of use cases, operational models and business cases;

IoT implementation, inducing setting up a project management office, ensuring the transformation of processes and methodologies, introducing a new corporate culture, conducting analyses of production data, testing and certifying IoT solutions, and providing training on new technologies and work practices;

Operation of IoT solutions, including equipment monitoring, data analysis and business analytics, preparing (and providing support) for operational processes and auditing financial impact.

In the past two years, we have completed a series of projects for mobile operators and power companies both in Russia and abroad. We would be happy to provide additional information about our services and competencies, or to arrange a personal meeting where we could have a detailed discussion on the challenges that your company intends to tackle in the area of IoTand digitalisation.

PwC’s IoT Centreof Excellencein Russia


Contacts

Yury PukhaPartner, IoTTechnology Sector Leader

Т: +7 (495) 223 5177E: [email protected]

Dmitry StapranDirector, IoT consulting, Strategy & operational effectiveness, Energy Sector


Grigory SidorovDirector, IoT consulting, Strategy & operational effectiveness



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