AI-Driven Digital Transformation Reshaping the Energy Sector: KPMG Report

AI is playing an increasingly pivotal role in the sector, with 67 percent of energy businesses reporting tangible benefits from AI-driven initiatives. This was revealed by the latest KPMG report titled 'KPMG Global Tech Report: Energy Insights.'

The report highlights the rapid digital transformation in the energy sector, driven by artificial intelligence (AI) and data capabilities. Based on a survey of 2,450 global technology leaders, including 122 energy sector executives across 19 countries, the report underscores how companies are leveraging advanced technologies to enhance operational efficiency, drive innovation, and secure future growth. The energy industry stands out for its ability to embrace risk and adapt to technological changes faster than other sectors, the report said.

According to the report, 25 percent of energy organisations stated that risk aversion rarely slows down leadership decisions, compared to the 17 percent cross-industry average. This willingness to take risks has allowed firms to remain confident in their technology investments, even amid economic uncertainties.

However, many companies remain in the proof-of-concept phase, cautiously exploring AI applications while managing associated risks. The industry is also accelerating ERP modernisation and cloud migration, with public cloud adoption being a major driver of AI deployment.

The adoption of Everything-as-a-Service (XaaS) is yielding significant business value, particularly in data management and integration. The report found that 43 percent of energy executives credited XaaS for improved data handling—six percentage points above the global average.

Despite progress in AI adoption, the energy sector lags behind in data maturity, particularly in interoperability, security, and extracting actionable insights. Many industry leaders acknowledge these gaps and are implementing measures to enhance data governance and security frameworks. The report warns that weak data management practices make it difficult for companies to fully demonstrate AI's business value.

The report highlights cybersecurity as a major area of profitability for the energy sector, with technology-driven security enhancements linked to profit increases of 16 percent or more. Thecompanies are focusing on evidence-based decision-making to responsibly scale AI and digital tools while mitigating potential risks.

Energy firms are taking a disciplined approach to technology adoption, ensuring that digital projects deliver measurable value before scaling up. The industry is more likely than others to terminate initiatives that fail to meet expectations, demonstrating a pragmatic mindset toward innovation. Instead of investing in specific technologies, companies are prioritizing a long-term strategic direction that allows them to adapt to emerging trends.

Anish De, Global Head for Energy, Natural Resources & Chemicals (ENRC) at KPMG International, emphasised that energy firms have a unique opportunity to drive growth through AI and digital investments. “The industry has a greater risk appetite than others, but success will depend on integrating security, enhancing data capabilities, and empowering people through strong governance,” he said.

“Firms that take bold, strategic steps will gain a competitive edge,” he added.

Sushant Rabra, Lead of Global Digital Technology for ENRC at KPMG International, pointed out that the energy sector’s long-term vision and disciplined decision-making enable it to navigate digital transformations more effectively than many other industries. “Energy companies are pragmatic; if a project doesn’t deliver value, they are willing to shut it down and redirect resources. This approach keeps them agile as they adopt AI and sustainability-driven technologies,” he noted.

As AI and digital transformation reshape the industry, energy firms must adopt a holistic approach that integrates technology, data, and strategic direction across all business functions. The KPMG report provides actionable insights to help companies overcome challenges, harness new opportunities, and prepare for the next phase of digital evolution.