Jul 02, 2024

AI in the Energy Sector: What’s Possible?

The world needs sustainable energy practices. Could AI help? By implementing AI in the energy sector, it may be possible to overcome serious threats while improving engagement with customers. However, there are downsides to consider.

AI Advances Will Impact Every Industry

The explosion of AI tools – particularly generative AI – is impacting every industry, including the energy sector. According to McKinsey & Company, some straightforward use cases in the energy sector involve things like the use of virtual assistants to help with administrative functions and the use of generative AI-powered chatbots to support customer service.

When the power goes out, energy companies are swamped with messages from customers. A sophisticated chatbot could manage this volume. Chatbots could also help customers explore ways to save energy or warn customers when the power grid is at risk of being overwhelmed.

Many energy companies are actively investing in these technologies or at least considering doing so. In a survey from the Capgemini Research Institute, 95% of energy and utility executives said they’d discussed generative AI in the boardroom and 39% said their organizations have a team and budget dedicated to integrating generative AI into future products or services.

Although these applications are promising, they are just the tip of the iceberg for what’s possible.

Leveraging AI to Solve Energy Sector Problems

Meeting the energy demands of a growing global population is no easy task. AI may be able to help.

As S&P Global points out, the energy industry is rooted in data and analytics, making the implementation of new AI technologies a logical next step. AI could boost operating efficiencies by 10% to 25%.

For example, AI may be able to help energy companies reduce grid failures and keep up with demand. IEA explains that AI-powered models can forecast wind power output and assist in the ideal location of turbines, predict faults in the power grid before they occur, and set dynamic pricing and demand response.

McKinsey & Company provides several other examples of how the energy sector could leverage AI – from utility companies using AI and predictive models for monitoring infrastructure to oil and gas companies using specialized models to support seismic interpretation.

For the oil and gas industry, the possibilities are vast. EY says AI can unlock improvements across the entire value chain, impacting exploration, development, production, refining, sales, and transportation. In an EY survey, 50% of oil and gas executives said they are using AI to solve challenges already. Approximately 92% say they are investing in AI or plan to in the next two years.

AI Also Brings Risks

Although AI has enormous potential in the energy sector, new technologies may bring new risks.

Cybersecurity is one area of concern: hackers may use AI to make their cyberattacks more successful. For example, hackers may use generative AI to write malicious code or phishing messages. The UK’s National Cyber Security Centre has warned that global ransomware is expected to increase over the next two years due to AI. The energy sector is a prime target for cybercriminals looking to disrupt critical infrastructure. Resecurity warns that nuclear, oil, and gas companies are major targets in 2024, amid rising ransomware attacks against the energy sector.

The rise of generative AI may also increase demand for energy. According to MIT Technology Review, training massive generative AI models requires energy, and using those models requires even more energy. Research has found that making an image with a generative AI tool uses as much energy as charging a phone. As generative AI becomes integrated into platforms like Google, the amount of energy needed to support internet browsing may surge.

Morningstar warns that this higher demand comes at a time when energy demand is already increasing due to things like electric vehicles and severe weather. Energy companies may need to develop better infrastructure to keep up with the rise in demand.

AI in the energy sector is creating new possibilities, but it’s also leading to new risks and the potential for massive disruption. That makes comprehensive insurance more important than ever. Tangram has an insurance program designed for propane and fuel dealers and distributors. Learn more.