Published on 16 Jan 2025
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The global energy sector is currently navigating major headwinds. Amidst a growing demand for balancing carbon footprint reduction with agile digital technologies, the industry is undergoing a transition toward leveraging renewable sources. The impact is underscored in the 5,500 gigawatts (GW) of new renewable energy capacity projected between 2024 and 2030 – an almost 300 percent rise as compared to the period between 2017 and 2023.
And this is against the backdrop of unprecedented cost pressures and continuing geopolitical uncertainties.
Enter Digitalization
Digitalization has emerged as a key driver in the global energy sector in the past decade, enabling unprecedented opportunities across the board. Commoditization of IoT devices, rapid advancements in cloud technologies, affordable computing, the rise of open automation, and the adoption of AI, machine learning, and generative AI (GenAI) are some of the key trends that are continuing to redefine the energy segment.
Today, the role of digitalization is evident across every aspect of business operations. From efficient IT services powered by automated help desks to the creation of custom applications with just a few clicks (through Low Code/No Code platforms), remote operations, and predictive maintenance — digital tools are reshaping how global energy enterprises function.
Interestingly, while the core business challenges have not changed significantly, the complexity of these challenges, their interdependencies, and the rewards of successful digitalization have increased. Some of the critical business needs today include:
- Ensuring business continuity through asset availability
- Optimizing CAPEX and OPEX
- Enhancing asset reliability and maintenance team productivity
- Ensuring safe operations
- Enabling remote operations and real-time decision-making
Despite this, studies indicate that the success rate of digital transformation programs in the energy sector remains low, ranging from 25% to 35%. [Source: ISG Manufacturing Industry Survey and ARC Advisory Benchmarking Research]
Defining the Digitalization Journey
Before exploring the reasons for low success rates, it is essential to have a common understanding of digital terms. There are many interconnected and often interchangeable terms, such as Digital Programs, Digital Twins, Digital Threads, IT-OT Integration, and Digitalization.
In essence, digitalization refers to the implementation of one or more digital programs within a business. These programs can range from building foundational systems like IT-OT integration to creating specific solutions, such as Digital Twins. Digital Twins can serve various business functions, such as engineering, real-time asset monitoring, geospatial analysis, simulation, or environment, health, and safety (EHS) management. A Digital Thread allows enterprises to trace data across the lifecycle of assets or processes.
At its core, the most critical aspect of digitalization is its direct correlation with business impact and value creation.
Why Do Digitalization Efforts Still Face Failures?
Research highlights several barriers to successful digitalization, including high costs of implementation, the skills gap, poor data quality, limited interoperability, regulatory challenges, and cybersecurity risks. [Source: ISG Manufacturing Industry Survey and ARC Advisory Benchmarking Research]. However, one of the most frequently overlooked factors is the people aspect.
The human factor includes miscommunication, insufficient user involvement, misunderstanding of complexities, resistance to change, lack of trust, inadequate training, and ineffective change management. Ironically, the same factors that often delayed or derailed traditional projects are responsible for many digitalization failures as well.
Why Is Digitalization a Priority for Enterprises?
As mentioned at the beginning, high on the energy sector’s priorities are a focus on reducing carbon footprints, transitioning to green energy, reducing assets downtime, and safe operations. Digitalization is a critical lever for achieving these strategic objectives.
To cite an instance, LTTS’ recent implementation at scale (70+ petrochemical plants) of an AI-based real-time monitoring solution (converging IT, OT and ET data streams) on the client’s critical assets (compressors, turbines, furnaces, heat exchangers, etc.) reduced unplanned downtime by more than 10%. Again, with the safety of a plant at maximum vulnerability during sudden shutdowns and start-ups, the potential risk profile was reduced significantly through the engagement.
In summation, therefore, the rise in the adoption of open automation, AI, generative AI, and other technologies is already bringing to life use cases that seemed far-fetched just a few years ago.
IT departments, once viewed as cost centers, are now adopting business-oriented mindsets and unlocking monetization opportunities. Enterprises are advancing toward the "Assets of the Future", characterized by:
- Self-healing capabilities
- Self-optimizing performance
- Safe and reliable operations
The journey toward fully integrated digital assets is well underway, with many essential components falling into place. However, factors such as the human element and cybersecurity must be considered carefully at every step of the digitalization journey.
