The digital power plant of the future
This article was originally published by McKinsey & Company on 11th March 2021.The power industry must overcome significant challenges in its journey to digitize, but successful transformations could result in the next S-curve of performance.
Like many other industries, power generation is becoming increasingly digitized. Yet many players are only now taking steps to create value from tech-enabled initiatives and establish new ways of working. In fact, there are no global end-to-end cases of digitization in power generation; even the most technologically advanced players have implemented only a small number of isolated digitization use cases, which are often not directly tied to business value.
Simply put, power companies are not nearly as advanced as they could be, so operations and maintenance costs are higher than they could be. Further complicating matters, cost pressure for thermal assets—namely, coal and gas—continues to rise because of ongoing power-market liberalization and large-scale deployment of various renewable energy sources, such as solar and wind in Europe and the United States. Similar developments are expected in Asian markets, such as in Japan. These conditions have led to consistent, major pitfalls across markets.
Tech-enabled transformation combines new technologies with traditional improvement and can provide large value across four key areas: operations; maintenance; energy efficiency; and health, safety, security, and environment (HSSE). In this article, we explain what a successful digital transformation across the four areas looks like as well as the most important themes to create value.
Power-plant digital transformations face common pitfalls
Thermal generation still dominates the global fuel mix, with coal and gas making up 62 percent and representing 16 petawatt-hours (PWh) today. Our research shows coal and gas contribution to the fuel mix will stay constant until 2030, after which it will decrease toward 2050 (Exhibit 1).
