Software Is Working To Grow Power Production, Racing Against AI Demand
Energy is always the constraint. It's constrained quality of life, longevity, and countries' economic output for centuries. Every new technological innovation demands more energy, and AI is the latest. The Electric Power Research Institute recently increased its data center power consumption estimates, saying data centers could consume over 9% of US power. Third-party estimates such as this are steadily climbing as many aren't used to a demand source that's growing at this rate. Technology growth rates, in general, have had the luxury of being largely untethered from physical constraints for the past decade. Now, this growth puts actual demands on critical inputs such as power. This comes when significant and growing power demands from electrification and reshoring also exist.
The above dynamics put pressure on energy systems to become more efficient. Vertical software solutions are increasing in the energy space to drive these efficiencies in different energy verticals. Wind power is a prime example. New technology companies such as Shoreline Wind have appeared in just the last few years to support the industry; serving as the industry's simulation modeling tool on more than 20GW of wind power globally.
"The company was founded because the wind industry was having such a hard time doing this type of analysis and I was asked if the research I was doing as part of my PhD could become a product," said Ole-Erik Endrerud, founder at Shoreline Wind. "The need for visibility and de-risking was huge. The industry needed a better way to predict, forecast and look into the future than an Excel spreadsheet."
Wind power's opportunities for efficiencies or downside risks are incredibly apparent. With larger and larger turbines, there is less opportunity to iterate compared to other power sources. At this level of investment, you must get projects right, but this requires simulations in what is arguably still the industry's early days, with an immense opportunity for growth but potentially limited legacy data points vs other verticals. Turbine size has increased from 2MW and is on a trajectory to see turbines larger than 20MW in the 2030s. These giant turbines are naturally more efficient, but the risk is that they spike operations and maintenance costs for some names, as a small failure can result in the downtime of the entire turbine.
Vertical energy software is a good fit for the rapid changes in the energy space because the leading software providers have insights across the space versus industry members making isolated mistakes. "Standardization and avoiding a lot of timeline risk upfront by being able to tackle things prescriptively rather than when they arrive. That's the biggest way to unlock more productivity. Visibility of operations and the ability to forecast are essential to this. Also being less reliant on specific experts in the industry. At Shoreline, we're building expert systems to mitigate this risk," said Ole.
Having all the learnings isolated in a company worked when the world relied on most of its energy innovation from a few dozen names. In almost every country globally, energy startups have doubled in the last few years, pursuing everything from more efficient oil and gas production to fusion to biomass. With rapid investment across hundreds of entities, the best way to benefit broadly from growing insights is with industry-specific software tools. This is critical when the costs associated with mistakes are so significant, and the growth rates are rapid.
"Offshore keeps growing but we're seeing more onshore coming in and we expect the same type of trajectory, with Shoreline working with increasing numbers of onshore projects over the next few years," said Ole. "Offshore wind in the US is growing rapidly, with help from the IRA, and we're seeing onshore restrictions being lifted, like in the UK."
Big tech is increasingly purchasing power directly, increasing demands on power companies. "There's been a lot more big tech power purchase agreements. AWS has just announced, Google and Facebook have. All of them. And I think we'll continue to see this, which gives wind developers confidence in terms of securing energy offtakers," said Ole.
Operations and maintenance costs are the main risk to wind, which plays an increasingly large part in the growing power mix. Reducing these costs has been a primary focus of Shoreline and industry members.
"When product development happens at an extreme pace, of course that comes with issues and challenges. Some of the major maintenance misses we're seeing is because the industry has been going too fast. We're seeing the pace slowing a little and that will mitigate some of the quality issues. We also see the OEMs charging higher service charges to support revenue, and this will lead to more development in the independent service provider space as well", said Ole.
"There's a reset happening, and the industry is looking for smarter approaches such as software and AI to support better planning, which is why we're here."
Tech and energy are becoming increasingly intermingled. In many ways, they always have, as shale was arguably one of the greatest innovations for global quality of life in the past few decades, even though it's rarely thought of that way. The world is now seeing a new crop of software companies that are explicitly trying to help produce more energy efficiently. Names like Shoreline that focus only on one vertical are different from the legacy companies that serviced the entire space and they are seeing positive results from this approach.
