Smart energy: challenges and strategies
15 February 2018
On its first day, the Russian Investment Forum focused on problems and prospects in Russia’s energy sector as one of its major topics. In particular, energy sector development in the digitalization age was considered at the ‘Smart Energy: Challenges and Strategies’ discussion. Experts broached global issues: how to avoid global technological inequality, how to use digitalization of the energy sector to improve Russia’s economic growth dynamics, what the obstacles are to create the infrastructure for digital energy.
Pavel Sorokin, Head of the Analytical Centre of the Energy Sector at the Russian Energy Centre under the Ministry of Energy of the Russian Federation, started by saying that discussion of energy had been an extremely popular in recent few years and he revealed the secret of this popularity: “It is not surprising that we focus on energy, because it accounts for 20% of Russia’s GDP. It is extremely important to increase our global competitiveness.” He bemoaned the fact that, when digitalization is discussed, the energy sector finds itself at the bottom of the list. Traditionally, the financial sector, telecommunications and retail get the greatest benefits from digitalization, so it is spearheaded to those specific areas, which does not have a good effect on energy sector development.
Alexander Novak, Minister of Energy of the Russian Federation, described digital energy. He agreed that digitalization of the economy is most discussed in connection with banking and retail but, recently, energy has been included more often, too. The minister listed the key effects of digitalization in the energy sector: improved efficiency, reduced costs, sweeping process acceleration, creation of new smart ecosystems that become more consumer-friendly. Nonetheless, he added that today we can only make forecasts, while the situation will most likely develop at a far faster pace. “It is difficult to state with certainty what the outcome of the digital economy will be, especially in the energy sector. Foretelling the progress is problematic,” the minister believes. He said that competition on the global market was increasing and the position of Russia’s oil and gas and energy sectors, as well as their development, would largely hinge on the pace at which digital technologies are introduced.
Alexander Dyukov, Chairman of the Board of Directors and President of PJSC Gazprom Neft, noted that his company’s position on digitalization was quite proactive. Gazprom Neft has always paid special attention to innovative technologies. “Our technological development portfolio has a hundred different projects, including digital technologies. We are not merely passive consumers; we take a direct part in creating technological solutions, in shaping the new digital economy,” Alexander Dyukov emphasized. He believes that cost cutting is a major effect of digitalization. “Gazprom Neft’s capital expenditures amount to USD 400–450 billion annually and digital technologies will allow us to cut the costs by 10–20%. This is a large amount, in particular considering our operating expenses of USD 1.4 billion,” said Mr. Dyukov quoting statistical data.
Pavel Livinsky, General Director of Rosseti, said that digitalization was not just a fad but a survival factor in today’s world. He is certain that “a major transformation is in store for the energy sector and we should be prepared. In our sector, a digital network is the eyes, brain and hands of the process; we create a network, monitor, schedule, automate it, and it produces colossal cost savings. Introduction of digital technologies translates primarily into savings.” The moderator expressed concern that customers might pursue effectiveness at a faster pace than digital technologies are introduced, to which Mr. Livinsky responded: “Obviously, if we don’t change, customers will find cheaper solutions. We should be convenient for the customer.”
Speaking of investment in digitalization, Kirill Dmitriev, Chief Executive Officer of the Russian Direct Investment Fund (RDIF), noted: “It is very important to invest in those technologies and they should be cutting-edge and competitive.” He mentioned the increased share of hi-tech companies with which the Fund collaborates, saying: “We have increased our technological portfolio to 25%; we will focus on the technologies that increase efficiency by 25–30%, in the energy sector among others.”
Pavel Kadochnikov, President of the Centre for Strategic Projects Foundation, noted that digitalization should primarily emphasize human capital. But we should not be afraid that it will lead to a drop in the number of jobs since, today, Russia’s economy has a manpower deficit and unemployment is at a record low. The expert refuted the opinion that the energy sector was lagging behind in developing digitalization. Mr. Kadochnikov is confident that “business, particularly in the energy sector, has a hard time achieving monetization, and it is precisely digitalization that promotes it.”
Dietrich Möller, Siemens AG President for Russia and Central Asia, outlined the principal trends in industrial digitalization.
Vasily Osmakov, Deputy Minister for Trade and Industry of the Russian Federation; Dmitry Konov, Chairman of the Management Board at SIBUR Holding and SIBUR LLC; Andrey Kuzyaev, President, Chairman of the Management Board, Member of the Board of Directors at ER-Telecom Holding; and Kirill Komarov, First Deputy Chief Executive Officer for Corporate Development and International Business at Rosatom took part in the discussion.
Pavel Sorokin, Head of the Analytical Centre of the Energy Sector at the Russian Energy Centre under the Ministry of Energy of the Russian Federation, started by saying that discussion of energy had been an extremely popular in recent few years and he revealed the secret of this popularity: “It is not surprising that we focus on energy, because it accounts for 20% of Russia’s GDP. It is extremely important to increase our global competitiveness.” He bemoaned the fact that, when digitalization is discussed, the energy sector finds itself at the bottom of the list. Traditionally, the financial sector, telecommunications and retail get the greatest benefits from digitalization, so it is spearheaded to those specific areas, which does not have a good effect on energy sector development.
Alexander Novak, Minister of Energy of the Russian Federation, described digital energy. He agreed that digitalization of the economy is most discussed in connection with banking and retail but, recently, energy has been included more often, too. The minister listed the key effects of digitalization in the energy sector: improved efficiency, reduced costs, sweeping process acceleration, creation of new smart ecosystems that become more consumer-friendly. Nonetheless, he added that today we can only make forecasts, while the situation will most likely develop at a far faster pace. “It is difficult to state with certainty what the outcome of the digital economy will be, especially in the energy sector. Foretelling the progress is problematic,” the minister believes. He said that competition on the global market was increasing and the position of Russia’s oil and gas and energy sectors, as well as their development, would largely hinge on the pace at which digital technologies are introduced.
Alexander Dyukov, Chairman of the Board of Directors and President of PJSC Gazprom Neft, noted that his company’s position on digitalization was quite proactive. Gazprom Neft has always paid special attention to innovative technologies. “Our technological development portfolio has a hundred different projects, including digital technologies. We are not merely passive consumers; we take a direct part in creating technological solutions, in shaping the new digital economy,” Alexander Dyukov emphasized. He believes that cost cutting is a major effect of digitalization. “Gazprom Neft’s capital expenditures amount to USD 400–450 billion annually and digital technologies will allow us to cut the costs by 10–20%. This is a large amount, in particular considering our operating expenses of USD 1.4 billion,” said Mr. Dyukov quoting statistical data.
Pavel Livinsky, General Director of Rosseti, said that digitalization was not just a fad but a survival factor in today’s world. He is certain that “a major transformation is in store for the energy sector and we should be prepared. In our sector, a digital network is the eyes, brain and hands of the process; we create a network, monitor, schedule, automate it, and it produces colossal cost savings. Introduction of digital technologies translates primarily into savings.” The moderator expressed concern that customers might pursue effectiveness at a faster pace than digital technologies are introduced, to which Mr. Livinsky responded: “Obviously, if we don’t change, customers will find cheaper solutions. We should be convenient for the customer.”
Speaking of investment in digitalization, Kirill Dmitriev, Chief Executive Officer of the Russian Direct Investment Fund (RDIF), noted: “It is very important to invest in those technologies and they should be cutting-edge and competitive.” He mentioned the increased share of hi-tech companies with which the Fund collaborates, saying: “We have increased our technological portfolio to 25%; we will focus on the technologies that increase efficiency by 25–30%, in the energy sector among others.”
Pavel Kadochnikov, President of the Centre for Strategic Projects Foundation, noted that digitalization should primarily emphasize human capital. But we should not be afraid that it will lead to a drop in the number of jobs since, today, Russia’s economy has a manpower deficit and unemployment is at a record low. The expert refuted the opinion that the energy sector was lagging behind in developing digitalization. Mr. Kadochnikov is confident that “business, particularly in the energy sector, has a hard time achieving monetization, and it is precisely digitalization that promotes it.”
Dietrich Möller, Siemens AG President for Russia and Central Asia, outlined the principal trends in industrial digitalization.
Vasily Osmakov, Deputy Minister for Trade and Industry of the Russian Federation; Dmitry Konov, Chairman of the Management Board at SIBUR Holding and SIBUR LLC; Andrey Kuzyaev, President, Chairman of the Management Board, Member of the Board of Directors at ER-Telecom Holding; and Kirill Komarov, First Deputy Chief Executive Officer for Corporate Development and International Business at Rosatom took part in the discussion.
