Decoding Sector Coupling

NINA SCHJØNSBY     Access to energy is so fundamental in our society. With the energy transition, the energy landscape is also changing rapidly. I guess it has to change, but with that change comes complexity. Now, with sector coupling, the traditional way of looking at the energy industry is also changing. 

KENNETH VAREIDE     Yes, they are transforming from a single focus to more multiple sources. With new energy entering the mix, we're no longer talking only about companies focused on oil and gas, electric, or renewables. It is all becoming more integrated, and that's just what we need to be able to deliver on the energy transition.

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I'm Kenneth Vareide, the CEO of DNV - Digital Solutions. To leave behind a better planet for the next generation, we must get people, society, organizations and technology to come together. 

NINA SCHJØNSBY     I'm Nina Schjønsby, leading the Marketing and Communications unit in DNV's business area, Digital Solutions. The energy transition is important to me because I feel we're at a crossroads. It's about our future; It's about my children's future. We all must unite to accelerate the journey to more sustainable energy sources. 

KENNETH VAREIDE     There will be challenges. It is difficult to see and understand how the whole energy landscape will evolve on both the supply and demand side as we work through the energy transition. 

NINA SCHJØNSBY     Yes, we saw those fluctuations recently in Europe. Sector coupling will help to mitigate these variables. But we also hear from customers that policies and regulations can be a hurdle in this process. 

KENNETH VAREIDE    Absolutely. DNV's Energy Transition Outlook has said that while policies may not be fully there, technologies are becoming more and more ready to deliver on this promise. 

Let's look at both of these, starting with the policies. There have been some very positive developments recently. One positive example of this is the Inflation Reduction Act in the USA. We also see development in Europe and Asia-Pacific. On the technology side, we have seen in the past decade the cost curve both on wind and solar is already lower than what traditional energy sources are, so they are ready to deliver. When it comes to storage and other newer types of energy sources, the cost curve will head in the same direction.

So, we see a lot of collaboration across energy sectors, and we are seeing more investments coming in and more long-term strategies forming. We have been collaborating across industries for some decades now to build up the momentum and deliver on the energy transition. 

NINA SCHJØNSBY     You're saying it's time to jump into gear. So, when policies and regulations are ready, the industry is also prepared to progress on these issues. 

KENNETH VAREIDE     There are some critical foundations you need to have in place. You need to have a common standard and language that everybody can understand. A concrete example is when we electrify the offshore sector in the North Sea, you have different standards for offshore from what you have for onshore. These two standards may not necessarily work together. 

NINA SCHJØNSBY     You're saying that different industries have different technologies and languages. It reminds me of my drawer at home, where I have all the cables for all my electrical devices. 

KENNETH VAREIDE     I sympathize with you because I keep the same box at home. I have cables over 20 years old and don't dare to throw them away. But building on that example, take this simple device or an iPhone. It could also be called a phone or a mobile phone. One thing is the connection to it, but the other way is how we name this device, right? For a computer, it may not recognize it as the same thing. If you extend that to the industries and amplify this into a more complex system, you need something that can very efficiently talk to each other and understand each other. If not, you will not be able to do this very efficiently. So we need this standard and a common language to have this interoperability across the sectors. 

NINA SCHJØNSBY     It sounds like a big investment.

KENNETH VAREIDE     Yes, it is a big investment, but you must get the foundation in place first. And the foundation is data. And you need to get the right quality of data. Remember a few years back, Nina, when we talked about digital twins? 

NINA SCHJØNSBY     Right.

KENNETH VAREIDE     I think it's fair to say now, a few years later, that it has under-delivered. And the reason is because we haven't had the right quality of data. 

NINA SCHJØNSBY     That reminds me of another technology that is still in its infancy but coming at us at high speed, and that is AI. Given your experience with the digital twins and the missing data quality, what do you think about that technology? 

KENNETH VAREIDE     I think there are many aspects to it, Nina. It will happen fast, but we have to be able to adopt it safely and securely. While there's a lot of potential for artificial intelligence, we must ensure that when we embed it into critical infrastructure and safety-critical systems, it must be done safely and securely. 

NINA SCHJØNSBY     Surely, AI is not only about technology. It's also about people and processes. I see technology as an enabler, but we need people and processes to leverage and deploy that technology. The foundation here is also the way we work, the way we collaborate, the way we communicate, and the way we change the way we work going forward. 

KENNETH VAREIDE     Yes, it is about the people. And people are part of a larger organization. We, as an industry and we as companies, need to come together. And we are coming together to make this happen. We are engaged in many joint industry projects addressing this energy transition. But this change mindset is needed for better flexibility in this energy transition.

This is just one example of this needed flexibility; as we moved away from more traditional gas to hydrogen, we're not talking about delivering energy in cubic feet. It’s actually about how much energy is being delivered. So, it's a concrete example of where these changes have happened. 

NINA SCHJØNSBY     So this is like the twin transitions. It's about needing to digitalize to decarbonize. 

KENNETH VAREIDE     You're absolutely right. We must digitalize to decarbonize, but we also must standardize.