Breaking Down Big Data's Role in Scenario Planning

The energy sector is facing major change driven by decentralization, decarbonization, and technological innovation. As a result, sticking to old business-planning and forecasting models is no longer sufficient.

Have you ever wondered why energy forecasts are so often wrong? Part of the problem is that they rely on historical data alone. Put simply: In today's uncertain times, planning based on precedent won't cut it. Instead, savvy plant managers are preparing for a range of future challenges and transitions through scenario planning.

Preparing for Every Possibility

Scenario planning models and considers every possible outcome over a long time frame to inform business decisions and investments. To create plausible predictions for the future, scenario planning utilizes external studies in addition to traditional, historical data sets from energy markets.

For such forecasting, it's important to consider third-party resources that can provide new insights and potential solutions. This includes big data on macroeconomics and global politics, which can help you predict changes in the market—like, for example, that South Australia would solve some of its energy supply problems with storage from Tesla's 100-MW mega battery.

Understanding Global Energy Demand

Due to the state of flux and disruption in the energy sector, it's important to understand what kind of energy generation is in demand, and where.

Look to reports from major organizations like the International Energy Agency (IEA). Its yearly published Energy Access Outlook considers how understanding the dynamic interplay of energy markets, technology, and policy is critical for future planning.

Other sources of information include UN-Energy, which funds future capacity development. When modeling future scenarios, ask yourself: What is it investing in, and what does this mean for global energy development?

Such information sources, including The World Bank, can also help you understand how the BRIC countries (Brazil, Russia, India, and China) might fulfill their growing energy requirements, which offers huge potential for power generation companies.

Identifying Government Strategies

Understanding what will influence energy investment in a particular BRIC region is a key component to scenario planning for the future of your plant or fleet.

A case in point is India: According to the IEA, the country will contribute more than any other to the rise in global energy demand. Much of this will be to provide basic energy needs, lighting, etc., to the roughly 240 million people who were without power when the IEA study was published in 2015. Will the Indian government want to fulfill this requirement with gas turbines, renewable energy or both?

Some indicators for the use of renewables include the fact that in February the Indian government said it would achieve its target of 175 GW of installed renewable energy capacities well before 2022. Furthermore, Indian Coal Minister Piyush Goyal in the same month said the country should strive for 50 percent renewable energy capacity by 2030 on the back of technological advancements in solar and wind energy.

Does this mean, then, there are more opportunities for renewables in India than any other type of power generation?

Creating More Accurate Climate Modeling

For future energy-demand scenarios, particularly in the shorter term, understanding weather data is paramount. If you can understand the weather, you can understand day-to-day energy demands at a micro, regional level. You can also more accurately predict what the need might be in at-risk or disaster-struck areas, as well as how extreme weather impacts future energy investment.

For example, in 2017 Hurricane Maria destroyed Puerto Rico's aging electrical system, leaving millions in the dark. As a direct result, politicians and investors want to rebuild the country's grid as a storm-resistant network, reliant more on wind, solar, and batteries and less on coal and oil imports, reports Reuters. This is key information for any energy company in the region to consider when planning investments and strategic directions.

Examining Global Economics

Hand in hand with understanding governments' energy strategies and global demand is knowing where money is already being spent.

Countries that are applying to The World Bank and other places for loans for large infrastructure projects should give energy companies a clue as to whether these nations are looking to build dams, microgrids, or coal-fired power plants—or whether they'll need more energy capacity in the future.

For example, are highways being built in Africa, and are they going to need lights? If so, how big are the highways? And should the lights be powered by a small battery or a big gas turbine?

Last year, the World Bank approved the equivalent of $486 million to rehabilitate and upgrade electricity transmission substations and lines in Nigeria. The project will support private-sector participation and capacity development. What opportunities could this present for your plant in the future?

Furthermore, as it is a key investor, being aware of China's multilateral understandings with different countries is useful.

Keeping an Eye on the Competition

Once you combine historical data, climate modeling, macroeconomics, and global politics, the only unknown is your competitors' data.

Because of the competitive nature of the energy industry, data is not widely shared. However, within the law, you can seek information by speaking to your customers and asking what competitors are offering them at a lower price.

You can also monitor press releases and news. Attending industry press conferences and listening to talks about what's driving companies to make certain decisions should inform your own future planning.

In the power sector, predictions are hard to make, especially for developing nations. What new energy assets are going to be developed, how quickly that development will happen, what governments will do, and what global economics will look like are all important variables.

In the digital age, the volume of available information can be overwhelming, but looking beyond historical data sets to specialized insights on markets, regions, and technologies that could either be a threat to or an opportunity for your business is beneficial. Just be sure to stick to credible sources and evaluate all information for its relevance in order to inform the various scenarios you decide to plan for. This will also help you narrow the focus to two or more strategic directions that drive positive changes for your business.