Cloud Computing in the Energy Sector: A Slow but Steady Growth

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Analytic firm Precedence Research is projecting $1.2 billion and a 10% increase in spending on cloud computing in the energy sector this year. This is a small share, considering total spending on cloud computing is expected to reach $529 billion by the end of 2023. However, a change in attitudes towards the cloud in the energy sector is gradually becoming noticeable, according to analysts.

The energy transition and the associated rapid increase in data from smart grids, the growing number of IoT devices, the increasingly popular hybrid work and the development of artificial intelligence, useful in forecasting energy demand and the need to optimize costs, are the main factors affecting investment in cloud computing in the energy sector, according to Precedence Research.

According to this global market research and consulting organization, by 2025, spending on cloud computing is expected to reach $1.45 billion, and by 2031, it will double to $2.5 billion, which indicates an average 10% increase year-on-year.

US energy companies are currently the largest investors in the cloud, accounting for 44% of the total market share last year. Europe is in second place, with a 26% share. In the coming years, forecasts anticipate significant growth in investment in Asia and the Pacific, associated with the rapid development of these regions and the growing demand for green energy.

In total, companies are forecasted to allocate $529 billion to the cloud in 2023, $721 billion in 2025 and by 2028, this expenditure will double compared to 2023, reaching $1.156 trillion. Over nine years they will increase nearly fourfold, reaching a value of $2.192 trillion. The energy sector, although increasing year by year, represents a fraction of the overall cloud budgets.

“The energy industry has historically been reluctant to implement cloud computing technology. The current implementations are still hampered by the lack of regulations that govern, for example, the financial sector, as well as concerns about the security and reliability of cloud infrastructure, although experience shows that on-premise solutions in companies are often outdated and provide significantly less security.” – says Łukasz Jęczmiński, Senior Manager for Cloud and Data Center from NTT DATA.

The analytic firm Precedence Research shows that the approach is gradually changing, first due to the transformation in the industry and the need to leverage technology. Secondly, due to the benefits that the cloud guarantees.

In the case of energy sector companies, full migration to the cloud is rare. They usually opt for hybrid cloud solutions, which provide control over critical data and applications while allowing the benefits of the public cloud.

Engie, a group of energy companies from France employing 170,000 people worldwide, implemented a solution for forecasting failures for 10,000 devices using 1,000 machine learning models in cooperation with AWS. It is estimated that the group’s savings are around € 800,000 per year thanks to this. Another example can be GE Renewable Energy, which, thanks to the use of the AWS cloud, increased data processing volume by 500%, while simultaneously increasing data availability from about 89-92% to 99.9%.

The Precedence Research analysts point out that the main limitation for the development of cloud computing from the point of view of energy companies are primarily concerns related to its reliability and potential downtime.

However, integrators stress that you do not have to migrate to the cloud to take advantage of its capabilities. They point to services such as Disaster Recovery and SaaS solutions that enable remote management and monitoring of corporate assets.

The Covid-19 pandemic considerably changed energy companies’ approach to cloud computing. Remote work forced cloud-based solutions. In addition, energy companies increasingly relied on cloud-based analytics in terms of network management, remote monitoring, and predictive maintenance.

According to Precedence Research’s analysis, the cloud provider leader is AWS, with a 34% market share. The greatest sales growth is forecasted in the PaaS area – an 11.7% increase year-on-year. Last year, IaaS services were purchased the most and had a 43% share in the cloud market.