High energy costs, global conflict, increasing demand, and the push towards sustainability goals have created a perfect storm that's hit energy suppliers from all sides and put digital transformation at the top of agendas.

Technology is improving energy management and accelerating the adoption of renewable sources.

  • Integrating digital utilities creates a more interconnected and efficient energy system.
  • The Internet of Things (IoT) and artificial intelligence (AI) allow for more sophisticated data analysis, asset management, and automation.
  • Digital tools are making compliance easier, thanks to better emissions tracking and smarter power distribution.

This article discusses what’s driving the energy industry to digitize and embrace renewable sources. We’ll also explain the technologies you can adopt and how to avoid common integration challenges. Finally, we’ll discuss successful business integrations and future trends.

The Catalysts of Digital Transformation in the Energy Sector

Statistics showing the size of the North American digital power utility market 2017-2028

Industry forecasts suggest that the global digital power utility market will grow to $239.38 billion in 2028 from $55.02 billion in 2021. The key drivers are:

  • Increasing demand for resources. Population growth and increased urbanization have led to a higher global energy demand. To meet this demand, companies are turning to digital solutions to optimize asset monitoring, energy production, and delivery.
  • High pollution levels. Traditional energy production methods create higher pollution. IoT-enabled networks and smart grids work together to monitor and adjust production processes to reduce emissions.
  • Environmental regulation. Governments have enforced tighter environmental, social, and governance (EGS) laws regarding emissions. Digital solutions help meet these standards by enabling the adoption of more eco-friendly energy sources.
  • Government initiatives. The WEF’s 2023 Fostering Effective Energy Transition report reveals that investments in renewable energy sources have surpassed investments in fossil fuels. Governments are providing incentives for a transition to low-carbon energy to meet the net-zero emissions target by 2050. With digital transformation, energy organizations can capitalize on this financial aid.
  • The quest for energy efficiency in operations. The IT sector is a major source of pollution: software alone may account for around 14% of the global CO₂ footprint by 2040. Digital transformation can lead to significant reductions in the energy used during manufacturing, operations, and software development. A 2021 survey from Accenture reported that 48% of companies saw increased revenue and returns on investments after adopting sustainability technologies.
  • A large influx of actionable data. Modern energy systems generate massive amounts of data from sensors, cameras, and transaction records. Companies are implementing big data solutions and analytics to turn all this raw data into actionable insights.
  • Branding opportunities. Commitment to renewable energy and being environmentally friendly brings financial benefits. A 2022 IBM study suggests that 49% of customers are willing to pay more for sustainable and socially responsible products.
  • Operational risks. Organizations face a constant risk of accidents, equipment failure, and environmental disasters. Equipping sites with sensors that monitor a wide range of parameters (pressure, temperature, etc.) and cameras with AI-driven image recognition enables better threat mitigation.

To show how digitalization helps achieve better energy management, we should look at the technologies you can adopt.

Practical Examples of Digital Transformation in Energy and Utilities

Digital transformation in the energy industry works to enhance power generation, distribution, and transition. It also helps you source and deliver greener energy solutions to meet regulatory requirements.

How digitalization improves energy management

Graph showing the reported impact of different digital transformation technologies in energy organizations

Modern tools enable the digital transformation of energy management and automation of complex tasks. These help create an interconnected, agile, and more efficient energy system.

  • Smart meters. By combining IoT with AI, industrial plants can monitor energy generation and emissions with real-time precision. This allows companies to identify energy consumption and carbon output trends, which they can use to fine-tune their operations.
  • AI-optimized load balancing. Load balancing systems allow your physical assets to adapt to sudden changes, such as an increase in solar power or a drop in wind energy. For example, if the software detects a sudden spike in demand, it can adjust its output or reroute energy to surplus areas.
    Predictive maintenance data analytics. Comprehensive insights from data analytics let you optimize maintenance schedules. AI software with ML algorithms can predict potential breakdowns based on patterns in, say, a turbine's vibration data. Maintenance teams can then take preemptive action, preventing complete breakdowns or unplanned outages.
  • User-friendly energy management. Digital platforms empower you to manage your energy more efficiently. Modern tools provide easily understandable graphs with insights into energy usage patterns and recommendations for improving consumption. You can also give customers a smart meter or app that allows them to monitor their power usage
  • Secure trading via blockchain. Blockchain is an immutable ledger that ensures all energy trading transactions are transparent and unmodifiable. This technology allows trading energy directly without traditional intermediaries, such as banks or clearinghouses.
  • Advanced modeling scenarios. Advanced tools let you create digital twins—virtual models that mirror a real asset’s physical state, operational data, and environmental conditions. You can use twins to simulate different operating scenarios and weather conditions to determine the most effective strategies for energy production.

Digital transformation doesn’t stop at these general operational improvements; it’s also accelerating the transition to sustainability.

How digitalization supports renewable energy generation

The impact of digital transformation in the renewable energy sector is also making headlines, with forecasts suggesting that around 50% of all electricity will come from renewable sources by 2050. The main developments are focused on:

  • Renewable energy management tools. Digital tools with ML algorithms analyze electricity demand, supply conditions, and price signals to determine the best times to store or utilize energy. For example, in a region with high solar capacity, an energy management system can automatically charge batteries during peak sunlight hours for use in the evening.
  • Decentralized energy management. A virtual power plant (VPP) connects several renewable energy installations across a geographic area to work as a single power plant. Companies can use distributed energy resources management systems (DERMS) to balance energy consumption in plants or communities based on real-time demand without relying on centralized generation.
  • EV charging infrastructure. Companies are investing in electric vehicle charging infrastructure due to rising demand. According to the IEA’s 2024 Global EV Outlook, nearly one in five cars sold in 2023 was electric (up from 14% in 2022). Smart grids can also help maintain a stable supply of eco-friendly energy to the charging stations during peak hours so that customers can charge their vehicles anytime.
  • Weather monitoring software. AI tools can examine satellite imagery for clouds, solar irradiance, and wind patterns over large areas to maximize energy capture. For example, a system can adjust turbine settings or the angle of solar panels to optimize power output based on real-time and upcoming weather.

In short, digital transformation provides attractive solutions for both energy management and renewable energy usage. Yet, correct implementation can be tricky.

Challenges to the Implementation of Digitalization Initiatives

Adopting new technologies is challenging for any company with established workflows. Industry-specific challenges can also prevent you from reaping its rewards.

Rising cybersecurity threats

Energy systems become more vulnerable to cyberattacks as they become more digitized and interconnected. The cost of an average security incident in the energy sector reached $4.78 million in 2023, according to IBM research.

The same source reports that around half of organizations plan to increase their investment in threat detection, incident response teams, and regular testing. Sophisticated security tools are thus a vital part of the digital transformation in energy and utilities.

The report also shows that, on average, organizations save $1.76 million per breach by incorporating security AI and automation tools (compared to companies that don’t). Cybersecurity tools with ML can also learn to adapt faster to evolving threats. Of course, you should also implement other multi-layered measures such as anti-malware software, intrusion detection systems, and role-based access control.

Operational scalability

IoT devices and software generate large amounts of data that can lead to bottlenecks. However, a reliable system can scale the resources for your software automatically to avoid overpaying.

A cloud or hybrid cloud solution prevents performance issues and spiraling costs by allowing you to scale resource usage automatically. Your teams should also periodically assess your application portfolio and retire unnecessary or duplicate apps to ensure system reliability.

Data incompatibility

Combining data from diverse sources for analytics is challenging. Legacy systems with outdated storage and processing techniques often don’t integrate with newer technologies, and IoT devices also use different data formats and structures.

You can address this challenge by:

  • Migrating to a modern data integration platform that supports real-time processing;
  • Developing middleware solutions and custom APIs that facilitate data transfer between modern and legacy systems;
  • Investing in data cleansing and management tools to optimize datasets before they’re integrated into a central platform.

Environmental and social governance laws, data protection regulations, and operational safety rules are in constant flux, making compliance challenging.

Digital utility tools can help you track regulatory changes, manage documentation, and ensure your operations meet legal requirements. But, aside from the software, you should employ legal experts and participate in industry forums to follow regulatory changes.

Network infrastructure costs

There’s no way around it—digital transformation in the energy industry is expensive. You will have to purchase smart sensors and software licenses, potentially modify your infrastructure, and invest in employee training programs. These costs can be prohibitive for smaller operators in markets with tight margins.

So, how can you ensure success on a budget? Here are three main strategies:

  • Identify priority areas for the transformation. This means finding aspects of energy management that will get the most from your transformation with minimal risk.
  • Deploy new technologies gradually, spreading the effort and expenses over time. For larger software development projects, it’s better to validate your ideas first with a minimum viable product (MVP) or proof of concept (PoC). A reliable software development company can help you adopt the latest technology with minimal financial risks.
  • Leverage government incentives. Many institutions provide financial incentives to promote the adoption of renewable technologies.

Cultural resistance to change

Digitalization disrupts established processes, making resistance inevitable. Stakeholders at all levels, from employees to C-level managers, may not understand the reasons behind the transformation. A shift to new technologies can also create a demand for new skills.

Before adopting new technologies, you need to educate your employees and leadership on its transformative benefits. You also need to foster a culture that values sustainability to encourage workers to seek innovations that enhance energy efficiency.

Companies should build internal training programs to introduce employees to new technologies and green computing practices. Change management is critical for smoother transformation, as we will see in the case studies.

Examples of Successful Digital Transformation in the Energy Sector

Despite the challenges, companies of all sizes are succeeding with digital transformation, as these recent case studies show.

  • Cosmo Energy's digitalization initiative. This Japanese energy company is transforming its entire business model by doubling IT investments. Cosmo plans to develop custom tools and platforms to enhance their energy management and distribution capabilities. The initiative includes training 7000 employees to use new data technologies in everyday work processes.
  • IWB’s solar power analytics with ML. Swiss energy company IWB has enhanced its solar power production forecasting with machine learning. The new system integrates smart meter data with weather forecasts to update information every 15 minutes. Launched in early 2023, the project has already gained international recognition for its novel approach to renewable energy management.
  • INESC uses algorithms for weekly forecasts. Portuguese R&D institute INESC TEC’s Centre for Power and Energy Systems has developed algorithms that leverage geographical and meteorological data to improve solar forecasting accuracy.
  • Google’s decarbonizing solutions. Google has joined leading digital transformation utility companies that are investing in solutions to reduce emissions. The IT giant’s Tapestry initiative offers AI tools for advanced grid mapping and scenario modeling that help to assess, for example, the impact of extreme weather on clean energy sources. It has also updated Google Earth to help urban planners optimize solar installations on buildings.
  • Solar energy data collection and storage. At Techstack, we developed a custom platform for an energy company to process real-time solar data. The system collects and standardizes data from multiple vendors, overcoming the client’s compatibility issues. This future-ready solution supports integrations of smart grid and predictive maintenance tools.

Now that we’ve reviewed existing technologies, let’s discuss what energy companies can expect in the coming years.

Our research into the energy sector and forecasts created the following shortlist of technology trends to watch.

  • Energy system decentralization. Digitalization drives the decentralization of energy systems, allowing smaller, localized energy sources to integrate into the bigger grid. Digital tools will help improve the energy flow produced by these decentralized sources, reducing dependency on central power plants.
  • Blockchain implementation for energy systems. 2022 research suggests that the blockchain ledger and smart contracts have huge potential for the energy sector. Among other things, this technology is essential for informed decision-making in net zero efforts and sets the stage for solar energy trading within communities.
  • Advances in blockchain performance. Recent improvements in blockchain have boosted its technical capabilities. In-house tests show increased transaction speeds, enhanced scalability, and reduced end-to-end delays. These developments support diverse applications, ranging from charging electric vehicles on highways to trading energy from home.
  • AI's expanding role in energy systems. As AI develops, its predictions are becoming faster and more accurate. We expect AI and ML to power digital transformation, particularly in predictive analytics, decentralized grids, smart charging systems, and cybersecurity solutions.
  • Regulatory sandboxes for the blockchain. Public institutions will provide regulatory sandboxes in the digital energy sector where new blockchain-based products, services, and business models can be tested in real-world settings. This approach ensures innovations meet market and regulatory standards before broader implementation.
  • Digitalization in buildings management. Buildings-related digital technology will improve power management in houses and apartment blocks. Thanks to digital sensors and remote controllers, consumers will be able to adjust power consumption for systems that control temperature, air quality, and moisture levels. These technologies will also foster the development of automated power management systems in buildings.

Keep Up With Digital Transformation in the Energy Industry

Companies that integrate IoT devices, AI and ML analytics, and automation are improving the efficiency of energy production and distribution. These tools help meet stringent regulations and support a shift towards more sustainable sources.

Choosing the right technologies for your energy company and integrating them into your existing workflow can be challenging. However, effective planning, gradual integration, and change management can improve your chances of success. This is where partnering with an experienced software company can make the biggest difference.

Techstack’s expertise in IoT engineering, AI technologies, and application development is here to help you overcome any obstacles in renewable energy software development. We can significantly reduce your project risks by developing an MVP or POC that validates your digitalization plans with cost-efficient design models and prototyping.
Reach out to our team to see how we can help you on your digital transformation journey, starting today!