Industry Watch: Artificial Intelligence and Energy Market

The crisis in the energy industry has left operators facing the need to effectively respond to a variety of challenges, including price volatility, demand growth and reducing environmental impact, all of which require innovative solutions . The support that AI can provide necessitates the implementation of internal compliance mechanisms ahead of time by stakeholders in line with the growing regulations associated with this area.

The crisis facing the energy industry requires operators to respond effectively to different challenges: price fluctuations influenced by geopolitical factors, growing demand and the need to reduce environmental impact. In such complex situations, artificial intelligence (“AI”) may be an effective means to help find successful solutions. The wide range of applications of artificial intelligence often intersect with the energy topic, especially in the need to make data-driven decisions and ensure immediate response to changing factors, of which machine learning is the most important. It is in this context that we should consider technological solutions from so-called “algorithmic trading” to “smart homes”, without forgetting smart grids and automated renewable energy optimization processes.

Smart Grid

Artificial intelligence plays a vital role in the network of energy consumers and distributors. The decentralization and digitization of the power grid has brought about an increase in the number of active players, while also increasing the difficulty of keeping the grid balanced. At the same time, the rise of irregular energy sources such as solar and wind energy requires power distribution to quickly adapt to floating consumption and vice versa. Smart grids managed by Distribution System Operators (“DSOs”) fall within the scope of local medium and low voltage distribution and transmit not only power but also data. Smart grid management from source to final branch is accomplished through a remote control system that enables consumption metering, real-time monitoring of infrastructure and power management of individual power supply points.

Artificial Intelligence and Trading

The predictive capabilities of artificial intelligence have greater potential in power trading. Artificial intelligence makes it easier to systematically evaluate large amounts of historical market or weather data. Furthermore, as has been seen, better forecasts ensure grid stability and security of supply. Under these premises, some artificial intelligence algorithms have proven to be intelligent enough to conduct independent trading (algorithmic trading or automated trading) in accordance with what is already happening in the financial market.

Artificial Intelligence Home Consumption

When consumers are connected to the power system through artificial intelligence, they can contribute to a stable and green grid. Solutions such as smart homes and smart meters already exist but are not yet widely adopted. In a smart home, connected devices respond to electricity market prices and adapt to household usage patterns to save power and reduce costs.

What changes will regulation bring?

In this case, companies using artificial intelligence systems in the energy market should start to consider the regulations related to the systems they use from a legal perspective Require. In fact, the debate on the use of artificial intelligence intersects with the legislative progress of the Artificial Intelligence Bill, which is based on an ethics and risk-based approach and has a specific goal: the trustworthiness of artificial intelligence systems. Therefore, the approach to AI systems should be based on an assessment of the risks associated with them and consider different compliance mechanisms depending on whether the system is high or low risk.

In addition to compliance (which is likely to become quite stringent once EU regulations are finalized), operators should also consider EU advice on other aspects of the use of AI. In particular, in October 2020, the issue of civil liability became the subject of a European Parliament resolution drafting a draft regulation for the artificial intelligence industry. The draft proposes to implement a strict accountability mechanism for operators of high-risk systems. The draft has solicited public comments and has not yet been transformed into a binding text.

Given this uncertainty, operators in the energy industry, whether traders, distributors or commercial users, are called upon to pay increasing attention to the issue of artificial intelligence in order to exploit it wherever possible its advantages. Most importantly, implementing internal compliance mechanisms in advance to comply with future regulations and avoid bans or restrictions on AI systems that could disadvantage potential competitors will be key.

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