By using AI to accurately forecast supply and demand, we can make significant gains in efficiency.
As the world transitions towards renewable energy sources, the need for efficient power generation and distribution has never been greater. One solution that is gaining traction is the use of artificial intelligence (AI), but how will this benefit the energy sector and what challenges will it face whilst it is implemented?
AI will boost the efficiency of the energy industry
AI algorithms work by analyzing large amounts of data to identify patterns and make predictions. In the energy sector, AI algorithms can be used to forecast demand and manage the distribution of resources. For example, AI can analyze historical data on energy usage to predict future demand and adjust the supply accordingly. In addition, AI algorithms can also be used to optimize the operation of power plants and other energy infrastructure. For example, it can analyze data from sensors on equipment to identify when maintenance is needed or when a component is likely to fail, helping to prevent downtime and improve efficiency.
Other benefits of AI include ensuring that power is available at the time and place it’s needed with minimum waste. This is particularly important in the renewable energy industry, where power often can’t be stored for long periods of time and must be used close to the time and location where it is generated.
By using AI to accurately forecast supply and demand, we can make significant gains in efficiency. Additionally, as we move away from centralized models of power generation towards decentralized models, where more power is generated by smaller, localized power grids (for example, solar farms), coordinating the integration of these networks requires complex AI algorithms.
With new technology comes new challenges
The potential for AI to revolutionize the energy sector is immense. By embracing this technology, we can make great strides towards a cleaner, more sustainable future. However, as with most technological advances, there are several challenges to adopting AI in the energy sector. The industry is adopting it slowly because of a lack of knowledge about this new technology among decision-makers. Additionally, AI is still a relatively new technology, and professionals who have mastered it are few.
Leading the charge for change in the industry
Other challenges are outdated infrastructure and financial pressure. Leading energy and technology experts say that there are several key barriers preventing AI from being adopted rapidly or on a global scale. That said, there are several companies actively working on incorporating AI to facilitate their energy supply chain. For example, GE Power, which generates 30% of the world’s electricity, is working on incorporating AI and machine learning (ML) to improve their business operations.
Another front runner in successfully adopting AI in their operations is Anodot, a start-up that provides real-time alerts and forecasts that can help energy companies detect issues and solve them as soon as possible.
What does AI in the energy sector mean for insurers?
We’ve demonstrated how the use of AI can improve efficiency and reduce costs, but it also introduces new risks and challenges. Where should the insurance industry look to ensure that AI operated energy assets are properly insured? Insurers will need to understand the inherent risks, which will be difficult to mitigate. One risk is lack of transparency, which will make it difficult to understand how AI algorithms are making decisions on managing the operational assets. The decline in human autonomy may cause the reduction of control over decision-making tasks.
Cybersecurity is also a big concern because AI systems are vulnerable to hacking and other forms of cyber attacks. Additionally, there is a risk of market dominance by companies, which own the proprietary technology, which could lead to price manipulation on the electricity market.
All in all, this is an exciting development for the energy sector, the slow implementation will allow for solutions to the challenges to be found and provide time for the insurance industry to get a grip on how best to insure against the new risks presented by this latest technology.
Sources:
(1) Artificial Intelligence (AI) in the Energy Sector: Opportunities and …. https://intellias.com/opportunities-and-challenges-of-artificial-intelligence-in-the-energy-sector/.
(2) Artificial Intelligence is Critical Enabler of the Energy Transition …. https://www.weforum.org/press/2021/09/artificial-intelligence-energy-transition.
(3) Here’s how AI will accelerate the energy transition. https://www.weforum.org/agenda/2021/09/this-is-how-ai-will-accelerate-the-energy-transition/.
(4) Artificial Intelligence in the Power Sector. https://www.ifc.org/wps/wcm/connect/bd3a196d-a88f-45af-bbc6-e0b00790fba8/EMCompass_Note_81-05-web.pdf?MOD=AJPERES&CVID=n72pj5g.
Zviadi Vardosanidze
General Manager GrECo Specialty
T +43 664 962 39 04
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