As digital industrial transformation continues to take hold, many seemingly disparate industries are coming together more than ever before to collaborate and solve a range of technological and societal challenges.
A good case in point is the automotive and the energy sectors.
Transportation has always placed a huge demand on the grid, so the two sectors have always been natural bedfellows. However, two disruptive global trends are driving the two closer together:
- Urbanization: More of us are on the move and commuting to work in cities. That means more private vehicles and public transport on the roads.
- Electrification: Under pressure to help meet international energy and climate change targets national and municipal policy is encouraging the adoption of electric and hybrid vehicles and a ban on diesel vehicles.
Conservative estimates predict there will be around 40 million electric vehicles on Europe’s roads by 2040. Great for the environment, but this mainstreaming of electric vehicles throws up a multitude of questions for both sectors.
As energy demand from intelligent transport systems increases, there are a few tough questions to answer: Where will all the extra energy come from, and to what degree will it be from renewable sources? Can the existing grid's copper infrastructure cope with increased demand? and what happens if everyone tries to charge their electric car at the same time?
Data Driven: Analyzing Behaviors and Predicting Peaks
Let's look at GE's experience with power and utility customers across Europe. Network operators pre-empted the growth of ‘vehicle to grid’ requirements and have been developing future infrastructure models for many years. What’s new is the huge impact that digital transformation and data offers in accelerating solutions and creating opportunities for new business models.
Traditionally, innovation in the power sector has occurred in the high voltage network–at the point of generation. This time the disruption is happening in the low voltage network–much closer to the consumer.
Infrastructure investments need to be made to meet the demand on the grid from private users of electric cars and public transport operators opting for electric fleets and wanting to charge.
Rolling out more copper across the grid might seem to be the most obvious choice, but would be impractical and very expensive. Predictive data analytics could help address concerns about drivers simultaneously charging at peak times and causing power outages.
I can easily envisage a scenario in which power network operators and automotive OEMs collaborate to access on-vehicle diagnostic and battery device data, as well as tracking and GPS information, to analyze drivers’ behavior, and then be in a position to accurately predict when and where they are likely to charge.
Overlaying the data and information from today’s connected vehicles on top of the grid providers’ data (for example about the supply of wind power), would enable more nimble demand forecasting and the ability to manage peaks and troughs more efficiently.
New Business Models: Mobility-as-a-Service; Who Owns the Battery?
Seismic shifts in customer behavior are impacting automotive OEMs’ business models–across their value chains.
With vehicle sales generally expected to decline over the coming years, consumers are instead opting for attractive financing options, or making use services like Uber, Lyft, and even Zipcar.
OEMs have already started to transform into mobility service providers.
This means they will have to look for new revenue streams outside their traditional business areas. Another perfect opportunity to collaboration and co-create with the energy sector.
Take batteries as an example. In the future, customers might buy a car, but given its shorter lifespan might sign a separate lease for the battery with the same OEM or with different vendor–such as an energy provider. Either way the battery–a rich source of data itself-would then be managed and maintained separately from the vehicle. In fact some are already starting to innovate their business models here–such as OVO, the energy company who are willing to buy your car battery from you–in return for using it to balance out local power grids.
Then by creating an information infrastructure using and acting on data from the connected vehicle and the battery—the OEM would be able to predict service and maintenance needs and use the data to achieve productivity and efficiency gains across the entire manufacturing value chain. While the energy company will be able to analyze and predict charging behaviors in greater depth.
One day car owners will be able to both buy energy to charge their vehicle, but also have a mechanism to sell back surplus energy to their provider. Using data and innovation to create such innovative models and revenue streams can only empower the consumer further and create a stronger customer experience.
So, will your car brand eventually become your energy supplier, or vice versa?
One thing is for sure. When industries come together to solve problems then the results can often drive deep societal change and behavior.
Those same societal and behavioral changes also work in reverse and are clearly playing a role in shaping technological and digital transformation in the automotive and energy sectors.
And that’s a win for everyone.
2016 Review and 2017 Outlook
The automotive industry has arrived at a major inflection point, signaling a period of intense change and the evolution of the entire industry. What has been traditionally thought of as “automotive” will over the next few years come to be known more broadly as the “mobility industry”—the next generation of products and services enabling the transportation of people and goods. Read how these changes are affecting the automotive industry.
This was originally posted on LinkedIn.