Digitalization when referring to the energy sector is about the collection and analysis of data on energy use. It can range from being able to track your power consumption online to the ‘internet of things’ where devices from toasters to thermostats communicate and interact.

The primary way in which data is collected and tracked is through smart meters. This data can be used to adjust energy consumption and production levels, increasing energy efficiency.

Digitalization and the Energiewende

Digitalization is considered important in the power sector primarily for two reasons: load shifting and energy sales.

Load shifting refers to managing energy demand – only switching on power when it makes sense to do so. Digitalization is crucial for better efficiency because signals will be sent to various devices indicating when power should be consumed or not.

For instance, someone with an electric vehicle might come home after work in the evening and plug the car in. If everyone does that at once, then power consumption will skyrocket at a time of peak consumption already. Signals will be needed so that electric cars charge overnight when there is sufficient electricity on the grid.

Likewise, large industries can wait to run certain energy-intensive processes until renewable power peaks and power prices go negative. In short, digitalisation will lead to greater efficiency in the energy sector.

Digitalization also means that small-scale energy producers can sell it to others easily. For example, if someone has solar power on their roof that they can’t use while they are at work, they could use blockchain (the technology underlying Bitcoin) to sell power to their neighbors or nearby businesses. As well as peer-to-peer transactions, blockchain could also be used to reform electricity markets by making transactions faster and smoother.

Digitalization in the German Energiewende

In Germany, the rollout of smart meters for commercial consumers is regulated by the 2016 Digitalization Act. Consumers of more than 6,000 kWh (the average household consumes closer to 3,500 kWh) of electricity annually must install smart meters. The price for this level is limited to 100 euros at that level, lest the investment not pay for itself. Most of these system are commercial, not residential. Consumers of more than 100,000 kWh are to install smart meters in 2017. The smallest consumers have until 2020. The EU’s Energy Efficiency Directive requires 80% of each member state’s power consumers to have smart meters by that year.

The first steps towards distributed power sales were taken in 2017, when the German government passed the Tenant Electricity Act. It specifically allows building owners to sell electricity to tenants of that building; the law covers an additional 500 MW of capacity annually. For the moment, the electricity cannot, however, be sold from one building to another. But the purpose of the law is to allow people who do not own their own roofs to nonetheless take part in the Energiewende.