Utilities, chemicals and oil and gas companies still make little use of digital opportunities

Tuesday 29 October 2019 - More than a third of utilities, chemicals and oil and gas companies are still in the early stages of digital transformation. Only 7% are taking full advantage of existing digital opportunities. This is shown by the 2019 Digital Operations for Energy survey of Strategy&, part of the PwC consultancy firm, which examined more than 500 companies from the energy, chemical and oil and gas industries in the EMEA region.

Digitisation and technological developments, such as decentralised power generation and improvements in battery storage capacity, are having a disruptive effect on the energy sector. These developments lead to volatile energy prices, the need for new investments and increasing competition from tech companies and start-ups.

On the other hand, technologies such as artificial intelligence, blockchain, 3D printing and virtual reality (VR) energy (intensive) companies also offer the possibility to optimize their energy production and/or consumption. So far, only a fraction (7%) of the companies surveyed in the energy sector and energy-intensive industry have reached full digital maturity. 37% make limited use of digital applications and 36% see the potential, but do not yet actively apply it.

According to Luc Vercruyssen, Director at PwC Belgium, this digital backlog can be explained. “In some way the goal of utilities companies is to remain unnoticed: delivering power or gas to their customers while guaranteeing full security by avoiding power cuts or incidents. Through their long standing history, utilities have developed a culture that prioritizes performance and risk control above innovation and the potential mistakes inherent to it. As a result, utilities are rarely early adopters in terms of digital transformation. The fact that most of them inherited a complex sets of software and IT tools reinforce their need for caution.”

The opportunity of digital technology to provide important cost efficiencies is still being underestimated in the companies surveyed. The most optimistic are the companies in the chemical industry, which expect an average increase in revenue of almost 13% over the next five years. Power and gas suppliers expect an increase of more than 10%.

According to Jochen Vincke, Partner at PwC Belgium’s Management Consulting practice specialised in everything related to Industry 4.0, it is unclear to companies what they will get in return for the substantial investments in digital applications. “Almost half consider an unclear return on investment to be the biggest obstacle to the expansion and application of new technologies. It is simply not clear as to what it will bring them. Although energy companies do not yet see the clear benefits, according to the recent PwC Belgium Industry 4.0 survey aimed at start-ups and scale-ups, 83%of respondents stated their solution will improve operational performance”

You can download the full report here.