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Digital Transformation Opportunities for China Energy Companies

2 Digital Transformation Opportunities for China Energy Companies

With the rise of new technologies in the energy market, the traditional power network and energy market are facing increasing challenges. How to integrate these technologies and pursue the journey of digital transformation to grasp valuable opportunities become the key for energy companies to maintain their market competitiveness.

Digital Transformation Opportunities for China Energy Companies 3

Thermal Power 72%Nuclear Power 4%

Hydroelectic Power 13%

Solar Power 2%

Wind Power 9%

Source: IBISWorld, BNEF

2018 Energy Market Performance Overview

Total National Energy Consumption 4.64bn tce

Total Industry Revenue $345.72bn

Total Power Generation 6994bn kWh

Total Installed Capacity 1.899bn kWh

Total Clean Energy Investments $100.1bn

0

100000

200000

300000

400000

500000

2010 2011 2012 2013 2014 2015 2016 2017 2018

Total Energy Coal Petroleum Natural Gas Hydro, Nuclear, Wind

14.3%

59%

Source: National Bureau of Statistics of China

down to 59% of the nation’s total energy consumption at 2.73 billion tce, nearly accomplishing the national target of below 58%. From a five-year perspective, a downward tendency is seen to be aligned with China’s energy consumption policies. The Non-renewables are still the major source of consumption with revenue contribution of 76% in 2018.

Total clean energy consumption, in 2018, moved up to 14.3% of the total energy consumption and generated 28% of the total industry revenue, attracting $100.1million investment even with halved solar investment to $40.4 billion due to the more restricted feed-in tariffs from the government.

Nationwide, the 2018 China energy industry has seen the following performance:

Total national energy consumption reached 4.64 billion tce(tons of coal equivalent) in 2018. Coal consumption was

Annual Energy Consumption (in 10k tons of coal equivalent)

Source: IBISWorld, BNEF

Solar Wind Other

89.6

125.4107.2

146.8

100.1

2014 2015 2016 2017 2018

Clean Energy Investment (in $bn)Total Revenue composition


Limit Thermal Power• Improve non-fossil fuel energy consumption

to above 15% of the total consumption

• Limit coal consumption to below 58% of total consumption by 2020

Under the ‘Clean and Low Carbon, Safe and High Efficiency’ energy industry guideline, clean energy has become the key development area in the dynamics of the overall energy market transition. Here is a quick summary of the targets for the major five power types:

Drive Solar Power• By 2030, wind and solar power will decrease

300m tce fossil fuel energy consumption, installed capacity increase to 450m kWh

• Increase the EFFICIENCY of PV conversion and lower the MAINTENANCE COST.

• Improve utilization rate to above 95% and limit the abandonment rate within 5% by 2020

Monitor Nuclear Power• By 2030, nuclear power electricity

generation increase to 4% of the gross generation

• Facilitate the progress of qualified nuclear projects, ensure the safety and security standards being strictly adhered

Develop Hydro Power• By 2020, installed capacity increase to

380m kWh

• Establish a integrated hydro utilization efficiency system, and promote benefit sharing in the phase of hydro power development

Stabilize Wind Power• By 2030, Installed capacity increase to

490m kWh

• Lower the ABANDONMENT OF WIND POWER due to underutilization of installed capacity and limit the abandonment rate within 5% by 2020

• Facilitate the non-subsidy market transactions


The year of 2018 witnessed the continuous development of clean energy in China. Clean energy power generation increased its percentage of total power generation by 0.71%, taking up 29.61% in total. Among all types of clean energy, solar energy power generation has the highest CAGR, with a rate of 50%. From the total installed capacity perspective, clean energy took up 39.8% of the total installed capacity, improving 2% from 2017. All types of clean energy improved their installed capacity, out of which nuclear power increased 24.7% and solar power increased 33.9%. Clean energy developments boosts China Power Industry’s restructuring and transformation.

All types of power generation had improved their utilization rates since last round of utilization adjustment. Wind power took the lead of the increment, increasing by around 4% from 19.7% in 2015 to 23.9% in 2018.Thermal power utilization rate is slightly raised by 0.6% from 2017, back up to the same level in 2015 at 49.8%. However, further utilization rate improvement towards the national clean energy development targets still require investment in the operation optimization. The ‘Solar power abandonment’ problem in the Northeast Area and the ‘Wind power abandonment’ problem in Northwest Area are still in the phases towards amelioration as guided by the ‘13th Five Year Plan’.

China Gross Generation (in 100 Million KWH) and Clean Energy Ratio

China Installed Capacity (in 10K KWH) and Clean Energy Ratio

56801 57399 60228

645296994024.24%

26.29%28.15% 28.90% 29.61%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

20000

30000

40000

50000

60000

70000

80000

90000

2014 2015 2016 2017 2018

Gross Generation Clean Energy Ratio

137869 152518

165044 178410

189948

32.4%34.1%

35.7%37.8%

39.8%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

40000

80000

120000

160000

200000

240000

280000

2014 2015 2016 2017 2018

Gross Installed Capacity Clean Energy Ratio


Future Trends for the Energy MarketAs China continues to push the ‘Clean and Low Carbon, Safe and High Efficiency’ guideline, energy enterprises are still facing many other challenges apart from the shrinking solar feed-in tariffs and decreasing hydro investment return.

The situation in which demand for electricity grows slowly and resources distribute unevenly has not yet shown signs of significant improvements. The whole energy industry needs to transform from capacity expansion to smart generation. Meanwhile, Chinese electricity industry marketization put pressure on enterprises to cut cost and improve supplying efficiency. How to take advantage of IT strategy and digital transformation opportunities to improve distribution network and asset efficiency is the key factor to succeed in the future energy market.

From a forward looking perspective, Chinese energy companies should also start preparing for the further long-term challenges such as how to integrate the current system into a cost effective and reliable system, how to strengthen future competitive advantage, how to keep the demand and how to make renewable energy investable without government subsidy.

Globally, the rise of digital innovations in energy market has illustrated these top five trends in the journey of digital transformation:

Blockchain technology used in Spain to track renewable energy delivery in real-time• Guarantees the origin of renewable energy

• Helps the company to cut cost and eliminate intermediaries

• Facilitates transactions such as power purchase agreements (PPAs) and wholesaling

Cloud Services software operate in Germany• Reading of energy and

consumption meters via the Internet

• Intelligent metering devices

• Customers can view private consumption data

Predictive Maintenance Program implement in Tucson power plant, the US• Saving $1 million

maintenance cost

Digital Technology improving efficiency and cost to reach Grid Parity

Growing numbers of AI applications

Asset Performance Management — lower maintenance, lower downtime

Intelligent grid systems and Grid Optimization

Integrated Customer Services with smart devices, service platforms


What are we expecting in China?

The top five trends for Chinese Energy Companies are:

Continue Energy Market Transformation with the focus in Clean Energy• The efficiency of conventional energy will be

improved by adopting effective technological innovations

• Clean energy industry will continue to develop as a result of its environmental friendly benefit and the lesser cost differentiation between clean energy and fossil fuel energy power generation

Achieve Cost Savings and Efficiency Gains• Digital Transformation will assist energy

companies to become more efficient, reliable, developed, secure and advanced

• Asset Performance Management will help lower repair and maintenance costs and reduce asset downtimes

The widely use of Information Management Systems to facilitate the smart photovoltaic industry• Using IT management systems e.g.

ERP/MES/PLC/ACADA/ARM/PLM/CRM to improve resource utilization, environment monitoring, equipment management and process automation etc.

The Journey to Grid Parity• More cost pressures will be put on solar and

wind power manufacturers, developers and power companies

• Real time data analytics and cloud services will help improve distributed generation and equip power companies with better ability to react to market changes in terms of cost and capacity

The use of Big Data and AI to improve the precision of prediction • Digital tools such as Big Data Analysis, Artificial

Intelligence, Internet of Thing and Blockchain will improve the precision of prediction and the automation of power generation process, and hence will provide better insights in how to achieve sustainability


Digital Transformation is on the wayDigital transformation enables Chinese energy enterprises to embrace valuable opportunities along with the big changes happening in this industry. Asset Management System, Big Data and Internet of Things are playing key roles and bringing tangible benefits to this transformation process.

Capabilities Methodologies Benefits

Asset Management System

• Enterprise Asset Management capability assessment and transformation

• Identify key processes and evaluate asset management capability• Benchmarking with companies that has best EAM practices and

conduct gap analysis• Provide asset management transformation recommendations• Develop EAM roadmaps

• Clear identification of improvement opportunities

• Provide solid support for management decision making

• Production operation benchmarking and equipment reliability optimization

• Search benchmark data and build benchmark data base• Rebuild data and identify data source and research procedures• Conduct data analysis e.g. data mining, lean six sigma,

procedure control, gap analysis, reliability, reparability and usability analysis and financial impact analysis

• Provide reporting on procedure KPIs, equipment performance and overall asset management system improvement

• Increase revenue by reducing unplanned downtime

• Reduce maintenance cycle• Manage and control risks• Balance maintenance, repair

and operation (MRO) procurement

• Asset Performance Management (APM) based on PredixPlatform

• Identity and evaluate key assets • Collect critical data and maintenance history• Conduct maintenance strategy planning, maintenance strategy

optimization, priority matrix analysis, equipment analysis, performance monitoring, FMEA analysis and lifecycle analysis

• Develop new analytics and redesign proposals to increase asset reliability and availability

• Improve availability and reliability

• Reduce inventory costs• Reduces unplanned downtime

and unnecessary maintenance costs

• Manage risks

Big Data and Internet of Things

• Preventative Maintenance Management

• Establish an integrated and reliable Preventative Management System including a closed-loop Failure Information Management System (FRACAS), a set of Maintenance Management Framework and a Failure Modes & Effects Analysis System (FMEA)

• Collect reliability and maintainability data and performance data in reliability database

• Perform failure modes, effects and damages analysis, criticality analysis and generate FMECA reports

• Construct clear maintenance work framework to monitor, control, design, analysis, test and evaluate maintenance work, maintenance model and maintainability

• Report, classify and analyze failures

• Plan preventative or correct actions in response to failures

• Systematically eliminate defects and issues

• Improve reliability

• Construct Enterprise Knowledge Base with Experience Feedback

• Build parts of the application layer and presentation layer functions (e.g. experience search, knowledge match) based on the data platform

• Expand the types of experience feedback events in the knowledge base in different phases and according to different enterprise needs

• Develop the enterprise-wide knowledge base (e.g. clean energy enterprise) and enhance the intelligence of application layer

• Utilize IoT, Semantic Analysis, Machine Learning and Mobile Technologies to seamlessly build the ‘brain’ and ‘nerves’ for enterprises and support experience feedback and interactions

• Remote monitoring• Interpret valuable information,

develop simulation and analysis to support management decision making

• Provide robust, flexible and dynamic expansion ability

• Achieve real-time interaction and feedback to optimize power distribution and enhance customer experience


Stanley H FengPartner+86 (21) 2323 [email protected]

Ying QiDirector+86 (10) 6533 [email protected]

SiuFung ChanPartner+86 (21) 2323 [email protected]

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www.pwccn.comThis content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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