About the event
Digital transformation of the electric power industry took a new direction
What digital transformation means for electric power companies was the point at issue of the 4th Federal IT Forum of Russia’s Electric Power Industry “Smart Electro: Digital Transformation of Electric Power Sector”, which was held on June 20 in the Hilton Garden Inn Moscow Krasnoselskaya Hotel and gathered digital transformation officers of the Russian energy companies, senior executives of domestic developers of IT solutions, software, telecommunication equipment and industrial control systems, and industry experts and analysists.
The forum was endorsed by the Russian Ministry of Energy, RusHydro Group, System Operator of the Unified Energy System, the National Technological Initiative, the Association of Last Resort Suppliers and Power Distribution Companies, International Academy of Communications, the CIO Club in the Central Federal District, and the Optic Fiber Association.
PJSC Rosseti was General Partner of “Smart Electro”, AUVIX was Golden Sponsor, and ECI and Poly were Session Sponsors.
A while ago, the predominant idea was that everything should go digital (from small businesses to big corporations), but lately there has been a change of direction towards a more cautious approach. The reason of changes in the power industry’s sentiments to a large extent is the case of General Electric (GE).
To recap, GE was one of the first corporations, to embark on the path of digital transformation. The company made the corresponding announcement back in the beginning of 2012, when they set up a special business unit GE Digital to develop the required software, and launched Predix industrial platform. The company invested USD 4 billion into these projects, as its ambitious plan was to make it to the list of Top-20 leading international software developers within the next 5 years.
Five years later (at the end of 2017), none of these plans were accomplished. Jeff Immelt, who launched digital transformation, stepped down as GE’s CEO. Moreover, the price for General Electric’s shares was down by three times – from USD 20 in 2012 to USD 6.71 in 2018. GE’s capitalization of USD 58.3 billion in 2018 collapsed from its peak USD 594 billion in 2000.
John Flannery, the newly appointed CEO, announced that GE Digital would be cut back, but he didn’t give up on the digital transformation as such. He said the company would follow a more cautious approach, with an eye to the industry. However, 14 months later the situation still wasn’t fixed. In 2018 alone, GE’s stock lost 35% in market value.
Larry Culp, who was appointed CEO of General Electric on October 1, 2018, admitted that the whole digital transformation was a mistake. After that, all GE Digital and Predix assets were put up for sale. Thus, GE’s CEO made it clear that the company was going to refocus on its core business – turbines, locomotives, and etc.
Since then, analysts have toned down their enthusiasm about the need for digital transformation. “In 2019, companies will no longer pursue drastic change, instead they will prefer a more iterative approach to innovations and focus their efforts on enhancing operational efficiency and product management. The digital transformation, designed as a “big broom”, is becoming somewhat tiresome. There is a need for technological leaders and e-business professionals, who prefer less-scale transformation,” said Forrester Research analyst Allen Bond.
Participants of the panel discussion at Smart Electro shared their opinion on what can be viewed as digital transformation in the electric power industry.
CEO of the Federal Testing Center Vladimir Kharitonov believes that GE’s case should also be relevant for the Russian companies, they need to take it into account. “Business diversification should be build around products in addition to the core business,” says Kharitonov. “Certainly, the company can take different growth directions, but the core business – power supply – should remain in the center.” He urged his colleagues to put consumer in the center and think about which additional services could be of interest for them. However, any business idea need testing, he emphasized. “We cannot just come with an idea and scale it immediately. First, we need to confirm its expediency and economic viability.”
Digital Transformation Director of the Moscow United Electric Grid Company Alexey Kashtanov says that the company’s digital transformation is a function of its business as such. “The concept of digital transformation describes a change in business processes. They should become cheaper, simpler, and have a financial effect. We realized the way it was, automation wasn’t going to work. We need a new model not for a single business process, but for the company as a whole.”
Advisor to CEO of Lenenergo Maxim Mamaev believes that one of the main issues that need to be addressed throughout digital transformation is regulation of business processes. Information systems are not always automatically connected with each other, and in some cases, he points out, it is difficult to get the bigger picture due to the fragmentation of information systems. Maxim Mamaev believes that the economic effect is mainly about saving time and material and other resources. He provided an example: “If when building a big substation digitalization can help us cut construction period by 1-3 months, that would mean a very serious financial benefit for us.”
Rostelecom’s Vice President Roman Shulginov said that for his company, digital transformation is a pursuit of economic effects in middle- and long term. “We are trying to identify this “value” that could become a driver of digital transformation, because we are the ones carrying it out. We believe in digital transformation and synergy from joining forces with other major players, such as Rosseti”, he says. “We are convinced that digital transformation should be led by the industry itself.”
Auvix’s Head of Integration Products Department Sergey Razuvaev-Kapitonov agrees that the initiative should come from within the business. “Each company may set up an R&D center, where programmers and engineers will develop custom solutions to address the company’s current tasks,” he says. “Each company needs to answer the question, whether it is willing to participle in the digital transformation.” The difficulty, according to him, is to transform business without throwing money away, and choose the right areas for investment.
Deputy CEO of RE Technologies (Ruselectronics Holding, Rostec) Vadim Fedorov believes that digitalization should be focused on maintaining the company’s capital capacity. “Today, the main criteria in terms of digital technologies is safe-keeping and maintaining good operational conditions of the equipment at hand,” he says. “Digitalization should be aimed at reducing down-time and damage in case of failures in the power grid.”
Head of the Department of Operational-Technological Management of MRSK Urals Alexander Dudakov specified that safe-keeping equipment, repair activities and ensuring reliability of power supply for consumers are not exactly new tasks for energy companies, but they used to address them with other tools. “Certainly, these tasks are still relevant, but now we will implement a more state-of-the-art approach – modify technology management processes and enhance their reliability and cost-effectiveness,” he concludes.
Traditionally for a COMNEWS event, many members of the audience gathered at Smart Electro were able to capture new potential customers and partners through networking. Next year, at the 5th Smart Electro forum, scheduled for June 2020, event organizers aim to explore new topics, which were voiced by speakers this year, and continue building a professional communication platform, where government regulators, responsible for the digital transformation of the industry can talk to CDOs of the Russian energy companies and vendors of innovative digital solutions.