• Perspectives
  • 19 August 2020

How data is transforming the energy sector

A new energy industry is busy being born. Steadily, the sector is pivoting from a centralised and monopolistic system dependent on fossil fuels to a renewable, sustainable energy grid. (Whether this shift will be quick and decisive enough to have a meaningful impact on climate change is another matter one of existential importance.)

One can hardly overestimate the level of disruption this prospect presents to the major industry players. It would end a long-standing business model with clear-cut producers and consumers of energy. Instead, those two categories would often overlap. For example, the global stock of electric vehicles is expected to reach 250 million by 2030. They will spend most of their life cycle not on the road, but in parking lots or garages. During their downtime, they could serve as a vast energy bank for the grid to draw upon during times of peak demand. A new type of energy players may emerge: that of “prosumers”, both consuming and distributing energy.

At the same time, regulating an electrical grid increasingly composed of renewables has its share of difficulties, a chief one being the erratic availability of solar and wind power. Keeping the lights on will require careful distribution of resources across space and time. That is where data and AI come in: They can optimise production and distribution across a complex emerging network of prosumers in real time – a type of “energy internet” according to the latest and most reliable data. As Karsten Wildberger, Chief Operating Officer and board member of E.ON, a major provider of energy solutions and critical infrastructure, pointed out: “The future energy world will be decarbonised. The question is how fast can it happen and how can this be orchestrated with digitalisation?”

For the energy industry, therefore, it is almost literally true that “data is the new oil”. In the future, competitive advantage will belong to companies with the best deployment of data and algorithms to operate effectively and efficiently in the global energy ecosystem, rather than to those who are able to dominate large markets through sheer size and strength. Getting there will require a major data- and technology-driven transformation for today’s energy companies – if they are to respond to this data revolution better than incumbents in other sectors that have been “Amazoned” by new technology players.

Our new case study, “E.ON: Building a New AI-Powered Energy World” (PDF), explores one company whose transition to a data-centric future is already well underway. The case provides lessons on how to successfully lead and manage the AI and data journey of an organisation both for energy sector companies and beyond.

E.ON: Past and present

Based in Essen, Germany, E.ON came into being as the result of a merger in the year 2000 between two companies controlled by the German state, VEBA and VIAG. As of 2019, E.ON has more than 70,000 employees and €41.48 billion in annual revenue.

In 2016, E.ON began its transition in earnest by spinning off the fossil fuel arm of the business into a separate company (Uniper) that was later purchased by Fortum, an energy supplier owned by the Finnish state. Through a 2018 swap deal with RWE, another German utility, E.ON completed its metamorphosis into an energy company focused on energy infrastructure for customers.

During this period, E.ON also made changes to its top team, onboarding a Chief Digital Officer and installing a digitalisation task force at the very heart of the global business. Juan Bernabé Moreno, formerly of Spanish telecom company Telefonica, joined in April 2016 as E.ON’s first Chief Data Officer.

In our interviews for the case study, he told us, “I knew this was going to be a tough journey…but at the same time, the opportunity to drive impact was very appealing…When I joined E.ON, AI was a very abstract concept. My obsession was to make it tangible for everyone in the company, highlighting the benefits and the potential.”

Data at the forefront

The data team began by developing use cases. It identified so-called “big ticket” projects with high visibility and potential for significant value creation, such as automating maintenance for wind turbines. Having thus created internal demand for its services, the team set its sights on scaling up. The board approved a transformational programme called Data.ON that the team devised based on two main pillars: data evangelisation and data readiness. After all, building a data-driven culture is key.

Evangelisation largely took place through events designed to promote data literacy in the organisation. For example, a “Data Visualisation Day” provided opportunities for E.ON staff to learn more about how to handle data. The data team also held hands-on demonstrations with various business units. By the end of 2019, more than 1000 employees had taken part in a data demo. Also, many more data evangelists were hired to spread the message: Between mid-2018 and the end of 2019, the data team went from ten members to 50.

Data readiness revolved around increasing E.ON’s data maturity. Past attempts to leverage the company’s rich data resources had fallen victim to the complex structure of the organisation, GDPR regulatory challenges and inconsistencies among E.ON’s many markets. The data team formulated a centralised data governance platform to organise protocols and ownership in a way that was both sustainable and scalable. Data quality processes were at the core, as avoiding the dreadful “garbage in, garbage out” challenge is key at many levels, including building trust in data and technology.

Making the case for this comprehensive data-driven project was not simple. E.ON’s data team had to develop clear KPIs and a process for assessing which AI projects to pursue. It settled on an approach focused on collaboration and value delivery at every stage. First, it created AI prototypes with offline data to demonstrate viable potential. The pathway from prototype to product was very transparent, with the relevant business units assenting and actively contributing step by step.

As Moreno told us, “[Business] experts know more than what you captured with the algorithm; also they are not used to using them. This is a micro change management issue. We tried to overcome this by building trust with the user and making sure they were always in control and not the algorithm.”

Supporting all this requires hiring AI and data talent – for which all companies nowadays compete. Would people choose to join the energy sector instead of the usual suspects, i.e. the internet behemoths? The answer relied largely on “purpose”: what people work for. As Wildberger emphasised, “We are on the cusp of the next energy transition and we wrote the E.ON story to give people a purpose.”

Renewable trading

An early area of AI application was the daily renewables trading markets through which energy companies resolve disparities between forecasted and actual production and demand. A series of algorithmic projects aimed at reducing the associated commercialisation risks, through improving predictions around intraday pricing trends, surplus or shortfalls in nationwide energy supply, etc.

Future growth

E.ON is striving towards what it calls “embedded, scaled and disruptive” AI. And the financial scheme that supports AI use cases reflects this broad-scale ambition. Initially, the data team was financed out of a centrally allocated budget. Now, the team has been integrated into the larger digital business unit. With this move, AI was obligated to become self-sustaining, relying on its partners (i.e. other E.ON business units) for revenue in a relationship much like that of vendor and client. It needs to prove its business value in order to develop.

This innovative structure illustrates E.ON’s commitment to doing things differently. Of course, whether it will fulfil its future-focused objectives remains to be seen. Johan Mörnstam, Senior VP at E.ON, told us, “The energy business is today clearly much more interesting than compared to ten years ago. I think that from an industry that was seen as old and very conservative, we are now doing things that are relevant for many people across industries.”

Pál Boza is an INSEAD GEMBA ’14.

Theodoros Evgeniou is Professor of Decision Sciences and Technology Management at INSEAD. He has been working on machine learning and AI for almost 25 years.

This article is republished courtesy of INSEAD Knowledge. Copyright INSEAD 2020. The opinions expressed in this publication are those of the authors. They do not purport to reflect the opinions or views of Bank of Singapore or its affiliates.


The contents of this article have not been prepared or reviewed by Bank of Singapore Limited (the “Bank”). The Bank is not responsible for the accuracy or completeness of the information contained in this article which may change without prior notice. This article may contain views which are not representative of the views of the Bank, and such views may have been derived without discussion, consultation or agreement with the Bank. You will need to decide as to whether or not the contents are suitable for you. When you are in doubt, please seek your own independent financial, legal, tax or other advice as you deem fit. Neither the Bank nor any of its officers accept any liability for any loss whatsoever arising out of or in connection with your use of the information in the article.

Cross-Border Marketing

Australia: Bank of Singapore Limited (i) is exempt from the requirement to hold an Australian financial services (AFS) licence under the Corporations Act 2001 (Cth) in respect of all financial products or financial services it provides in accordance with ASIC Class Order 03/1102 (as continued in force by ASIC Corporations (Repeal and Transitional) Instrument 2016/396) to any person in Australia who is a wholesale client, and (ii) is regulated by the Monetary Authority of Singapore under Singaporean laws which differ from Australian laws. Brunei: This document has not been delivered to, licensed or permitted by the Autoriti Monetari Brunei Darussalam, the authority as designated under the Brunei Darussalam Securities Markets Order, 2013 and the Banking Order, 2006; nor has it been registered with the Registrar of Companies, Registrar of International Business Companies or the Brunei Darussalam Ministry of Finance. The products mentioned in this document are not registered, licensed or permitted by the Autoriti Monetari Brunei Darussalam or by any other government agency or under any law in Brunei Darussalam. Any offers, acceptances, sales and allotments of the products shall be made outside Brunei Darussalam. Hong Kong SAR: Bank of Singapore Limited is an Authorized Institution as defined in the Banking Ordinance of Hong Kong (Cap 155), regulated by the Hong Kong Monetary Authority in Hong Kong and a Registered Institution as defined in the Securities and Futures Ordinance of Hong Kong (Cap. 571), regulated by the Securities and Futures Commission in Hong Kong. Indonesia: The offering of the investment product in reliance of this document is not registered under the Indonesian Capital Market Law and its implementing regulations, and is not intended to constitute a public offering of securities under the Indonesian Capital Market Law and its implementing regulations. According, this investment product may not be offered or sold, directly or indirectly, within Indonesia or to citizens (wherever they are domiciled or located), entities or residents, in any manner which constitutes a public offering of securities under the Indonesian Capital Market Law and its implementing regulations. Malaysia: Bank of Singapore Limited does not hold any licence, registration or approval to carry on any regulated business in Malaysia (including but not limited to any businesses regulated under the Capital Markets & Services Act 2007 of Malaysia), nor does it hold itself out as carrying on or purport to carry on any such business in Malaysia. Any services provided by Bank of Singapore Limited to residents of Malaysia are provided solely on an offshore basis from outside Malaysia, either as a result of “reverse enquiry” on the part of the Malaysian residents or where Bank of Singapore Limited has been retained outside Malaysia to provide such services. As an integral part of the provision of such services from outside Malaysia, Bank of Singapore Limited may from time to time make available to such residents documents and information making reference to capital markets products (for example, in connection with the provision of fund management or investment advisory services outside of Malaysia). Nothing in such documents or information is intended to be construed as or constitute the making available of, or an offer or invitation to subscribe for or purchase any such capital markets product. Myanmar: The provision of any products and services by Bank of Singapore Limited shall be solely on an offshore basis. You shall ensure that you have and will continue to be fully compliant with all applicable laws in Myanmar when entering into discussion or contracts with Bank of Singapore Limited. Oman: This document does not constitute a public offer of investment, securities or financial services in the Sultanate of Oman, as contemplated by the Commercial Companies Law of Oman (Royal Decree No. 18/2019), Banking Law of Oman (Royal Decree No. 114/2000) or the Capital Market Law of Oman (Royal Decree No. 80/1998) and the Executive Regulations of the Capital Market Law (Ministerial Decision No. 1/2009) or an offer to sell or the solicitation of any offer to buy non-Omani investment products, securities or financial services and products in the Sultanate of Oman. This document is strictly private and confidential. It is being provided to a limited number of sophisticated investors solely to enable them to decide whether or not to make an offer to invest in financial products mentioned in this document, outside of the Sultanate of Oman, upon the terms and subject to the restrictions set out herein and may not be reproduced or used for any other purpose or provided to any person other than the original recipient. Additionally, this document is not intended to lead to the making of any contract within the territory or under the laws of the Sultanate of Oman. The Capital Market Authority of Oman and the Central Bank of Oman take no responsibility for the accuracy of the statements and information contained in this document or for the performance of the financial products mentioned in this document nor shall they have any liability to any person for damage or loss resulting from reliance on any statement or information contained herein Russia: The investment products mentioned in this document have not been registered with or approved by the local regulator of any country and are not publicly distributed in Singapore or elsewhere. This document does not constitute or form part of an offer or invitation to the public in any country to subscribe for the products referred to herein. Saudi Arabia: The Bank has not received authorization or licensing from the Saudi Arabian Monetary Agency or any other governmental authority in the Kingdom of Saudi Arabia to carry on banking business within the Kingdom of Saudi Arabia and the Bank does not hold itself out as carrying on, and does not carry on banking business. South Korea: The document does not constitute an offer, solicitation or investment advertisement to trade in the investment product referred to in the document.  The Philippines: The information contained in this document is not intended to constitute a public offering of securities under the Securities Regulation Code of the Philippines.  Dubai International Financial Center (DIFC): Bank of Singapore Limited has a branch registered in the Dubai International Financial Centre ("DIFC") which is regulated by the Dubai Financial Services Authority (“DFSA”). Bank of Singapore Limited (DIFC Branch) is not a financial institution licensed in the United Arab Emirates outside of the DIFC and does not undertake banking or financial activities in the United Arab Emirates nor is it licensed to do so outside of the DIFC. This material is provided for information purposes only and it is general information not specific in any way to any particular investor, investor type, strategy, investment need or other financial circumstance. As such this information is not financial advice or a financial promotion, nor is it intended to influence an investor's decision to invest. It is not to be construed as an offer to buy or sell or solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy in any jurisdiction. The material is only intended for persons who fulfill the criteria to be classified as “Professional Clients” as defined under the DFSA rules and should not be reviewed, received, provided to or relied upon by any other person. United Arab Emirates (U.A.E): The information contained herein is exclusively addressed to the recipient. The offering of certain products in this document has not been and will not be registered with the Central Bank of United Arab Emirates or Securities & Commodities Authority in the United Arab Emirates. Any products in this document that are being offered or sold do not constitute a public offering or distribution of securities under the applicable laws and regulations of the United Arab Emirates. This document is not intended for circulation or distribution in or into the UAE, other than to persons in the UAE to whom such circulation or distribution is permitted by, or is exempt from the requirements of, the applicable laws and regulations of the United Arab Emirates. The distribution of the information contained herein by the recipient is prohibited. Where applicable, this document relates to securities which are listed outside of the Abu Dhabi Securities Exchange and the Dubai Financial Market.  The Bank of Singapore Limited is not authorized to provide investment research regarding securities listed on the exchanges of the United Arab Emirates which are outside of the DIFC.  United Kingdom: In the United Kingdom, this document is being made available only to the person or the entity to whom it is directed being persons to whom it may lawfully be directed under applicable laws and regulations of the United Kingdom (such persons are hereinafter referred to as ‘relevant persons’). Accordingly, this document is communicated only to relevant persons.  Persons who are not relevant persons must not act on or rely on this document or any of its contents. Any investment or investment activity to which this document relates is available only to relevant persons and will be engaged in only with relevant persons. Relevant persons in receipt of this document must not distribute, publish, reproduce, or disclose this document (in whole or in part) to any person who is not a relevant person.  United States of America: This product may not be sold or offered within the United States or to U.S. persons.

In Hong Kong, Bank of Singapore Limited is a branch of Bank of Singapore Limited incorporated in Singapore with limited liability.

© 2020 Bank of Singapore Limited. All rights reserved.

Version: July 2020