Data-Driven Decarbonization: Energy Systems of the Future

Author photo: Peter Manos
By Peter Manos


The energy transition’s drive toward industrial sustainability goes beyond energy infrastructure itself, and includes cloud-based IT infrastructure and services, which are playing an increasingly important role in supporting solutions and platforms that help Energy Systems of the Futureorganizations ensure success on multiple mission-critical paths. Fundamentally, the energy transition is also a people, process, and technology transition, one where asset owner/operators face rapidly increasing levels of uncertainty and risk, but also a rapidly increasing number of opportunities for new value creation.

This ARC View analyzes the role of cloud-based services as part of Energy Systems of the Future (ESoF). Cloud-based capabilities are increasingly enabling end users and their solution providers to leverage computing services that are more configurable, scalable, and cost-effective. This is due to cloud solutions being available flexibly and on-demand, eliminating on-site capital, maintenance, and management expenses. In many instances, cloud-based solutions can provide higher levels of security than most on premise asset owner/operators can afford.

Where Are Cloud Services Growing and Why?

There is an accelerating urgency to use new solutions to support operational excellence and competitiveness while meeting long term sustainability goals. What AWS has aptly described as Energy Systems of the Future (ESoF) will increasingly rely on cloud- and edge-based solutions, high performance computing, and new platforms to leverage AI and ML across massive datasets, nimbly solving complex problems and creating new markets across new value chains.

According to a November 2022 report by the U.S. Bureau of Economic Analysis (BEA), Cloud-based services are the fastest growing sector of the US digital economy. The BEA pegged the US digital economy as a “satellite sector,” accounting for 10.3 percent of US GDP. The BEA study is based on calculating how big the digital economy would be if it were broken out as a separate sector of the economy.

Energy Systems of the Future

Cloud services are dominated by AWS, Microsoft, Google, IBM, and Salesforce, and are the highest growth area within the digital economy, with almost a 22 percent growth rate in cloud-based priced digital services for 2022. BEA’s most recent data shows cloud’s portion of priced digital services grew from 7.0 percent in 2018, to 9.9 percent in 2021.

Current Status of Energy, Utilities, and Infrastructure

Modern industries and economies were founded on fossil fuels and for more than 125 years have relied on a traditional central station design for their electric power systems. Central station electric power systems require a well-planned and continuously synchronized network of large, interconnected, baseload power plants. There are enormous gaps that will need to be bridged between current infrastructure and what will be required to meet global 2050 sustainability goals. The obstacles that remain are difficult to address comprehensively, when we consider key aspects of what lies ahead, including:

  • The massive scale of new infrastructure required, and regulatory approval difficulties associated with such projects
  • Risks associated with major project up-front capital investments
  • Unrecoverable or stranded cost impacts incurred when existing infrastructure is replaced prior to the end of its useful life
  • Difficulties in changing traditional energy, utility, and industrial business models
  • Momentum of ongoing operations and maintenance practices associated with existing infrastructure
  • Regulatory and stakeholder approval processes which have become increasingly difficult

The energy transition has shown good momentum and exciting breakthroughs. The best way to address issues associated with rolling out a coherent ESG initiative is with more sustainability data and better models for the energy transition.

In addition, the greater utilization of tools for collaboration and in data sharing can help in creating greater buy-in regarding both direct and indirect benefits of projects—creating a much-needed counteractive force of positive momentum in the face of ever-increasing difficulties in gaining regulatory approval, e.g., for new interconnection of grid-connected renewable energy resources. Backlogs associated with such projects have been increasing dramatically, as has the complexity of approval processes. As reported by a representative US Investor-Owned electric utility, infrastructure improvement projects whose approvals required two or three meetings of several internal utility departments and one or two meetings externally, now require dozens of meetings across a much larger number of internal departments and external regulatory and stakeholder groups.

End User and Owner/Operator Energy Transition Challenges

It is important for industry leaders to help educate the public about the challenges faced meeting 2050 decarbonization goals. Difficult aspects of the energy transition come into focus when looking at the key industries involved.

Utilities are straddled with some of the oldest infrastructure, including water utility infrastructure, as well as electric and gas. Yet these most “infrastructure challenged” industries are also the ones with the lowest capacity to invest in major new capital projects, given the regulatory business models and long investment recovery periods underlying those business models.

Electric utilities have contributed more in the last 20 years to US GHG emission reductions than all other industries combined. Going forward, utilities, along with the oil and gas industry, will be able to make some of the largest direct contributions to GHG emissions reductions; more than any other industry, but will also play major roles in collaborating across new value chains that will help all other major asset-intensive and emissive industries decarbonize as well.

There is an ongoing shift toward new business models for energy and utility industry companies. Oil and gas companies are seeking to move into the electric utility space and compete in new ways with traditional electric and gas utilities.

Oil and gas companies are seeking to lower the carbon footprint and fugitive emissions associated with their delivering fossil fuels to end users, and they will not allow utilities to own the electric vehicle charging market. They are also making investments in hydrogen, green gas, biodiesel, and other clean or low-carbon fuels, as well as carbon capture and sequestration, geothermal energy, and other key energy transition alternatives.

These and other efforts continue to benefit from digital transformation initiatives, which increase efficiency and improve industrial and business processes. While a portion of digital transformation improvements also support energy transition and sustainability goals, many other challenges associated with the energy transition are more difficult to address:

  • Conflicts between sustainability goals and established financial metrics and/or traditional business models
  • Weak near-term market signals due to lack of innovative regulatory and policy support
  • Inability to plan major new energy transition-related investments due to long-term regulatory uncertainty
  • Lack of a price on GHG emissions and inability to include GHG impacts in decision-making processes due to traditional ROI calculations that exclude larger ecosystem, economic, and/or social impacts

As a result of these and related factors, disruptions will be common as the energy transition progresses. There are additional complexities that must be faced going forward with the energy transition, due to the value to be gained by being able to leverage ever larger datasets and extract real-time or near real-time actionable insights. First, ESoF will continue to grow increasingly more complex and span across datasets associated with much higher levels of interconnectedness across value chains. From real time predictive maintenance to optimization of models to support better decision-making, what-if scenario simulations, digital twins, and Value Chain Optimization (VCO) models and visualizations, asset owner/operators need more highly scalable analytical, workflow, and visualization tools to fuel new insights. On these pathways, greater operational resiliency is being created, and greater ability to nimbly innovate to solve new problems and create new value propositions and new markets.

Questions Associated with Addressing ESoF Challenges

How will Scope 1, 2, and 3 GHG reporting and new value chains roll out, as more clean energy sources and carbon capture move from pilot programs into the mainstream? In much the same way that the organic food industry built a high level of trust in organic labeling certifications of foods when such certification was not as widely trusted decades ago. There is an emerging market demand for certified data associated with meeting mandated and voluntary decarbonization goals, and in providing dynamic Scope 2 and Scope 3 data for products, services, and supply chains.

Risk is a common factor for energy transition decision-making, whether it involves positive risk factors or negative ones. A positive risk factor is the risk of losing a B2B customer (or ESG investors) due to a competitor who proactively took a stronger sustainability position voluntarily. Negative risk factors come into play when a market is driven by requirements that regulatory authorities put in place, such as a price on carbon emissions, or a law with stiff penalties for not meeting environmental standards or failure to take proper corrective actions or report required information.

How Energy Systems of the Future Can Address Energy Transition Challenges

Companies that have completed their migrations are unlocking new insights for proactive risk management and revenue generation. Migrating to the cloud avoids the costs of an on-premises infrastructure and helps achieve near-real-time decision-making to optimize operations and save more money. Along with lowering carbon footprint, it also makes the latest technologies more readily available in ways which are of increasing value in the current competitive landscape—a landscape where organizational agility is of great importance in ensuring nimble responsiveness to rapidly changing economic and business conditions.

These direct operational and bottom-line savings are increasingly being augmented by additional savings across the green bottom line, given the greater utilization of renewable energy for data centers in the U.S. and other developed economies. Virtualization and duplication of data center loads has also been enabling savvy operators to dynamically shift loads across time zones to follow solar power output peaks, for example, in support of net zero goals.

Energy systems of the future (ESoF) will require new approaches to data architecture and IT/OT infrastructure. New informational infrastructure is required to support ESoF, as asset owner-operators and market participants must work within a host of evolving constraints across much more complex value chains, while meeting more stringent regulatory, market, and investor demands. Along the way, asset owner/operators must also address more detailed stakeholder information needs and pressures from the public, while also more reliably modeling increasingly complex scenarios, and optimizing business outcomes while minimizing risks associated with both short- and long-term options.

Success in all this will clearly require a much more nimble, scalable, and data-centric approach. As part of this, organizations are taking a fresh look at their on-premise legacy information technology infrastructure and its typically siloed solutions and disruptive data migration requirements. Those that have broken down silos are now able to easily stream data in real time and are unlocking data from legacy systems in highly flexible ways which provide new insights and improvements.

With the transition to clean energy and sustainability, legacy systems are being upgraded and replaced with data-centric cloud and edge-based infrastructure and solutions. These capabilities provide better support for deep queries, deep operational improvements in real-time decision making based on valuable data visualizations and insights, and a streamlining of processes for meeting more complex reporting requirements. Finally, disruptions are no longer on the horizon—they are being faced in the near term by energy and utility industry executives and other asset-intensive industries.

A result of these factors is the additional “soft” benefit set enjoyed by those who have leveraged greater cloud-based capabilities to improve operational effectiveness of key employees. When employees can perform reporting and other data-driven business processes in a more streamlined way, and are given better tools to visualize and analyze issues and solve problems, teams are empowered in valuable ways. When cloud-based tools enable AI and ML and modeling improvements with great speed and ease of use, organizations enjoy a beneficial culture shift. It includes an acceleration in the uptake and in the range of new use cases. People are empowered to innovate in new ways because the new platforms and tools save them time and enable them to have more expansive views into aspects of the next major problem to be solved.

Sample ESoF Lessons Learned from AWS Customer Case Studies

The following case study summaries are representative of many that have come to the forefront recently.

Baker Hughes

Baker Hughes, a global equipment and service provider with strong presence in the energy sector and other asset-intensive industries, recently unveiled new solutions that help its customers improve operational efficiency while reducing emissions.

Baker Hughes’ improvements included collaboration with partners AWS and Ansys and migration of on-premise solutions to cloud-based simulation capabilities. The migration enabled Baker Hughes to scale up utilization of simulation tools for turbomachinery applications, structural engineering, and computational fluid dynamics, while reducing carbon footprint by as much as 99 percent.

The result was a better design process and better time to market, including a new gas turbine product line which is now enabling customers to meet their sustainability goals as they replace older gas turbines with units based on the new designs which deliver higher performance metrics across greenhouse gas emissions, efficiency, and reliability.

GE Digital

ESoF implementations require many solution partners to be involved in the delivery of the desired results for clients. This is exemplified in the work between AWS and GE Digital, per a February 15, 2023 ARC View by Craig Resnick, “GE Digital to Help Utilities Accelerate Grid Modernization In Collaboration with AWS” which describes how the partnership is enabling delivery of intelligent grid orchestration solutions that help utilities in their ongoing grid modernization projects. It is a testimonial to the ability of technology to leapfrog across obstacles, which in this case include traditional utility regulatory models that tend to slow the pace of new capital investments. The GE Digital GridOS grid operating software platform is a cloud-enabled solution designed to be more secure and quicker to deploy than any on premise solution, which would have required utilities to undertake approval processes for new capital investments.


The above two examples, among many others, show how ESoF and related cloud infrastructure will continue to go far in helping reduce operational and infrastructure costs and risks for energy organizations. Convergence of factors associated with ESoF is prompting industry leaders to deploy more scalable customer-focused solutions to optimize the responsiveness of their operations to the more dynamic value chains associated with their customers, suppliers, stakeholders, and to compete more effectively in existing markets while also enabling more nimble responsiveness to new market opportunities.

Organizations seeking to thrive during the energy transition should prepare to roll out solutions based on high performance computing, cloud and edge computing, and related services to optimize AI, ML, and scalable solutions as part of their energy transition and industrial sustainability plans.


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Keywords: Amazon Web Services (AWS), Energy Systems of the Future (ESoF), High Performance Computing (HPC), Cloud Computing, Artificial Intelligence (AI), Machine Learning (ML), ARC Advisory Group.

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