Technology

Data, digitalisation and digital twins

Peter Durante, Head of Technology & Innovation, Macquarie Infrastructure and Real Assets

12 June 2019

As the world becomes increasingly data-centric, owners and operators of infrastructure assets are embracing data to help drive decisions that will improve performance, value and the services they provide to the community. Of all the megatrends in technology that are changing the world – from renewable energy and storage, to electric and autonomous vehicles, to drones, 5G and many others – data and digitalisation is a common thread that touches all infrastructure assets.

The use of data and ability to perform “digital asset management” can vary widely in different sectors and the application depends on the experience, maturity and capability of the organisation. Some assets are only at the beginning of their journey to implement digital solutions, still relying on manual processes, while others will have made large investments with advanced technological capabilities deeply ingrained in the organisation. One example of digitalisation that is being increasingly applied in the infrastructure sector is digital twins, which can help assets to understand, predict and optimise the performance of both their assets and broader business.

What is a digital twin?

Firstly, it’s not a new concept, although the way digital twins are used today has certainly advanced into new realms of capability.

When Apollo 13 was launched in 1970, no one foresaw that one of the oxygen tanks would explode two days into the mission. However, a key to the rescue operation was that NASA kept a mirrored system of Apollo 13 on earth –a physical model of the spacecraft and its components. This allowed engineers on the ground to test possible solutions, simulating the conditions on board Apollo 13. While this was a physical twin rather than a digital one, the concept is the same.

Digital twins are a realistic digital representation of an infrastructure asset. A digital twin consists of a digital model of the physical structure and its behaviour, combined with data from sensors attached to the real-world asset. This model can start with an abstract linkage of systems or progress to a realistic, visual, three-dimensional model of an asset, or whole system that incorporates all of those systems into the visual model, giving the operators a real-time, virtual copy of their business. The ‘fourth dimension’ of time can be added, which allows the capture and use of historic data, or even projections for the future.

Why use them?

Digital twins are increasingly being used in large-scale infrastructure projects at airports, railways, electricity grids, wind farms and ports. They are used to optimise assets, improve maintenance and safety, increase valuation, and create new data-driven business models.

As a digital twin provides the organisation with a virtual copy of its physical asset, it’s able to plug all the operational systems into the model, including the heating, lighting, security, waste, energy, telecoms, and more. Using this virtual world, the asset can test better maintenance practices, carry out scenario modelling, provide training to employees and review security measures. It’s also able to carry out predictive analytics and maintenance.

While in the past higher costs meant using a digital twin only made sense on very high-value, discrete assets, as with many technology examples the capability of hardware and software has been steadily increasing while costs have been coming down. This means we’re seeing cost-effective applications today that would not have made sense five years ago, and we expect this trend to continue.

Leading research company Gartner has predicted that 50% of large industrial companies will use digital twins by 2021 and that those organisations will gain a 10% improvement in the effectiveness of the asset.

 

How are digital twins being applied?

Almost any industrial or physical infrastructure has the capability to be digitalised in one form or another, from the automation of discrete processes, all the way through a 4D digital twin. Governments in Europe, Asia and Australia are investing in digital twins for urban planning and real-time integrated monitoring of infrastructure. The UK has an ambitious initiative to create a national digital twin that will simulate the interaction of infrastructure.

Endeavour Energy, which a MIRA fund has invested in as part of a consortium under a 99-year lease, has built a three-dimensional model of its entire power grid and the physical items surrounding it, including trees and other objects that may cause obstructions.

Endeavour uses that model, combined with input data from aerial surveys to understand the health and status of the vegetation around the power grid, enabling it to better identify, for example, areas of potential bushfire risk. The information gathered allows Endeavour to carry out pre-emptive vegetation management, understanding the health and growth of the plants and trimming back trees where risk exists.

The Goethals Bridge, linking New York City and New Jersey, whilst not a full digital twin, is well along that spectrum, using multiple sensors along the bridge that track the condition of the road, the traffic status and the condition of the physical asset. This allows for better maintenance of the bridge over time and improved monitoring and dynamic operations of the bridge itself.

 

What’s next?

Data and digitalisation are already proving their ability to drive value in infrastructure assets and improve the services they can provide to the communities using them. Many open up new revenue streams and investment opportunities; some, like digital twins, can transform the way existing assets are managed and used.

This market commentary has been prepared for general informational purposes by Peter Durante, Head of Technology and Innovation, who is part of Macquarie Infrastructure and Real Assets (MIRA), a business division of Macquarie Group (Macquarie), and is not a product of the Macquarie Research Department. This market commentary reflects the views of Peter Durante and statements in it may differ from the views of others in MIRA or of other Macquarie divisions or groups, including Macquarie Research. This market commentary has not been prepared to comply with requirements designed to promote the independence of investment research and is accordingly not subject to any prohibition on dealing ahead of the dissemination of investment research. Nothing in this market commentary shall be construed as a solicitation to buy or sell any security or other product, or to engage in or refrain from engaging in any transaction. Macquarie conducts a global full-service, integrated investment banking, asset management, and brokerage business. Macquarie may do, and seek to do, business with any of the companies covered in this market commentary.  Macquarie has investment banking and other business relationships with a significant number of companies, which may include companies that are discussed in this commentary, and may have positions in financial instruments or other financial interests in the subject matter of this market commentary. As a result, investors should be aware that Macquarie may have a conflict of interest that could affect the objectivity of this market commentary. In preparing this market commentary, we did not take into account the investment objectives, financial situation or needs of any particular client. You should not make an investment decision on the basis of this market commentary. Before making an investment decision you need to consider, with or without the assistance of an adviser, whether the investment is appropriate in light of your particular investment needs, objectives and financial circumstances. Macquarie salespeople, traders and other professionals may provide oral or written market commentary, analysis, trading strategies or research products to Macquarie’s clients that reflect opinions which are different from or contrary to the opinions expressed in this market commentary. Macquarie’s asset management business (including MIRA), principal trading desks and investing businesses may make investment decisions that are inconsistent with the views expressed in this commentary. There are risks involved in investing. The price of securities and other financial products can and does fluctuate, and an individual security or financial product may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international or local financial, market, economic, tax or regulatory conditions, which may adversely affect the value of the investment. This market commentary is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in this market commentary. Opinions, information, and data in this market commentary are as of the date indicated on the cover and subject to change without notice. No member of the Macquarie Group accepts any liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this market commentary and/or further communication in relation to this market commentary. Some of the data in this market commentary may be sourced from information and materials published by government or industry bodies or agencies, however this market commentary is neither endorsed or certified by any such bodies or agencies. This market commentary does not constitute legal, tax accounting or investment advice. Recipients should independently evaluate any specific investment in consultation with their legal, tax, accounting, and investment advisors. Past performance is not indicative of future results.

This market commentary may include forward-looking statements, forecasts, estimates, projections, opinions and investment theses, which may be identified by the use of terminology such as “anticipate”, “believe”, “estimate”, “expect”, “intend”, “may”, “can”, “plan”, “will”, “would”, “should”, “seek”, “project”, “continue”, “target” and similar expressions. No representation is made or will be made that any forward-looking statements will be achieved or will prove to be correct or that any assumptions on which such statements may be based are reasonable. A number of factors could cause actual future results and operations to vary materially and adversely from the forward-looking statements. Qualitative statements regarding political, regulatory, market and economic environments and opportunities are based on Peter Durante’s opinion, belief and judgment.

Other than Macquarie Bank Limited ABN 46 008 583 542 (MBL), none of the entities noted in this document is an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia) or banking legislation in other jurisdictions. The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities.