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Policy Brief / Electricity

Policy-Brief

The Digital World Knocks at Electricity’s Door: Six Building Blocks to Understand Why

Author(s): GLACHANT Jean-Michel, ROSSETTO Nicolò

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ABSTRACT

Digitalisation is invading the electricity sector. How will it play out? Six building blocks, grouped into three categories, can provide the analytical framework required to navigate through the emerging digital world and the transformations that are taking place in the electricity sector.

Digitalisation builds on changes in infrastructure. Billions of digital devices interconnected by the internet provide the facilities to access the digital world and the multitude of digital products (building block one). Digitalisation also transforms physical networks in other industries and make them smarter, either to perform existing activities or to offer new and more interactive services (building block two).

Digitalisation involves changes in markets too. A growing number of products are purely digital and the platforms providing them cannot be bypassed by consumers (building block three). Other digital platforms operate in two-sided markets: they do not create the product but act as intermediaries facilitating interactions between the sellers and the buyers of goods and services that are not necessarily digital (building block four).

Digitalisation is a transformative process whose frontier is constantly moving. New technologies like the blockchain can offer disintermediated peer-to-peer transactions to digital communities (building block five). On the contrary, artificial intelligence and the Internet of Things (IoT) can become unavoidable and automated intermediaries, replacing direct human involvement in thousands of decisions concerning the management of vast sets of assets (building block six).