While the utility industry has long been a traditional bricks and mortar business, today disruptive digital technologies are driving utilities to go beyond simply providing energy.
Companies are grappling with questions like: What does the modern consumer expect of their utility? How proactive should providers be to get ahead of regulatory changes? What partnerships need to be made with other companies outside of the utility sector for them to thrive?
Traditional utilities are having to reinvent themselves by mastering technologies that include social, mobility, analytics, and cloud to meet current market trends and demands, while also grappling with the growth of renewables such as solar and wind generation and the introduction of large-scale storage.
To delve further into the topic of utilities and digital transformation, we are speaking with Bart Thielbar, who leads the North American utilities practice at Capgemini.
EET&D : When it comes to the digital transformation of the utility sector, what are the main shifts you’re seeing?
BT : In the old days of the industry, we were all takers of utility services – we received a paper bill in the mail, wrote a check, perhaps dealt with a power outage, and that was the extent of our interaction. Over the past few years, utility consumers are becoming much more active in the relationship with their provider, a shift that will continue in the future.
This is because, on both sides of the North American border, there’s been a regulatory and legal push to facilitate innovative approaches to the provisioning and distribution of energy. The push is rooted in environmental concerns, but another aspect of this change is about enabling better interactions with consumers.
We’ve now seen utilities respond with solutions to give consumers more access. (For example, customer portals, and near real-time multi-channel, multi-device communication between providers and consumers that are promoting a more empowered consumer.)
In some cases, customers are even becoming active participants – “prosumers” in the generation of power, through rooftop solar or storage devices, which they can feed back into the grid.
The industry is facing a complex challenge: managing a downturn in revenue while meeting the demands of its consumers who are much more technologically conscious than what they were five-to-10 years ago. Digital disruption is helping utilities manage and work through that challenge.
EET&D : When you mention digital disruption, are there specific disruptive technologies that are shifting utility headwinds?
BT : On top of solutions like web portals, there’s a significant move to mobility in the utility sector. Beyond smartphone apps between consumers and utilities, mobility can be understood in terms of how utilities operate in the field. For example, pushing near real-time information to consumers, field workers, and back office professionals ensures everyone has the same data at the same time.
Another area where we’re seeing a lot of disruption is around analytics and increasing business insights into the various workstreams within utilities. Companies will recognize that analytics can enhance financial and operational performance, and will attract industry investment.
Finally, due to rising cost pressure on the operational side, utilities are now looking to move things into the cloud. The cloud helps them reduce cost and increase performance. Many companies have used cloud-based solutions for non-critical systems and will seek to replicate the success for operational and consumer-facing solutions.
EET&D : How far along are companies in transforming into digital utility services?
BT : In a recent study conducted with MIT on this topic, it was concluded that only 20 percent of utilities have used digital technology to transform their business. This is problematic, considering the same study found “digital masters” (what we call technology adopters) across industries are on average 26 percent more profitable than their industry peers, and earn nine percent higher revenue from their physical assets.
This research also revealed that 40 percent of utilities are “conservatives,” which face the following challenges: how to turn vision into action, implementing a digital culture and nurturing digital skills, developing advanced digital features, and strong digital governance across silos.
At the same time, many utilities have begun to execute and implement digital transformation strategies, including industry leaders such as London Hydro in London, Ontario.
EET&D : Aside from generally higher consumer consciousness with technology, are there other market forces shaping the future of utilities?
BT : Overall, North American utilities are seeing flat and sometimes declining growth from consumption of power. This is creating an economic squeeze, which puts more pressure to monetize new revenue streams.
The basic premise is this: now that utilities have a digital gateway to their consumers through smart meters and other technologies, how do they monetize that for other revenue streams?
For example, we see utilities interacting with areas like smart city initiatives, such as smart streetlights. Communities recognize that intelligent devices can make cities safer, and since energy infrastructure enables city services, utilities will be a main player in expanding such devices.
London Hydro is a good example of a company finding new revenue streams. While it can’t sell power in the United States, it can leverage the investment it made in its IT platform as part of the Green Button Initiative and merchandize it outside of Canada as a ready-made platform to organizations in need.
EET&D : You’ve mentioned ambitious projects that utility companies would like to take on. What else do you think is required to transform utilities into full-fledged services companies?
BT : Many utilities have systems for accounting, customer service, work management, etc. that are still siloed and are not fully integrated. Each may have a different level of maturity and sophistication, and they do not always effectively communicate with each other. Some utilities are developing a more modern flow of information between the different systems that support utility operation and creating intelligence and analytics that can drive efficiency and optimization.
We also need to see a reinvention of IT platforms to keep utilities more aligned with what consumers are asking of them, through the channel they want their data to be consumed. Not everyone wants to be all mobile or physical paper, so utilities must be nimble and adaptable. While doing so, they must reduce their cost footprint.
Finally, a utility’s ability to play “behind-the-meter” within the home can be constrained by regulatory rules in their operating jurisdictions. In those jurisdictions, changes to the rules will be required to enable utilities to provide different types of services to their consumers.
EET&D : What type of regulatory framework do you think would be beneficial?
BT : It varies by geography and regulatory environment, but generally speaking, utilities are often rewarded based on their investments. For example, investments in centralized generation, whether that be in large coal or gas fire plants. In the future, investment in newer technologies needs to be able to compete on an even playing field with other market participants. In some cases, the regulatory construct prevents them from fully participating in behind-the-meter opportunities, or in emerging areas like large-scale storage, so we need to see rules evolve to create a fair playing field for utilities
EET&D : What’s trending in terms of the organizations that can cannibalize the utilities business?
BT : A good example would be storage. Right now, we’re seeing investments in the newer mass storage technologies. One of the issues with renewable energies is it’s not as predictable as a coal fire plant, which is why storage is important for times when the wind isn’t blowing or the sun isn’t shining.
Much of the investment in storage is coming from outside the market, and utilities are not moving as aggressively on this front. Some of it is the risk-averse nature of utilities, and some of it is constrained by regulations where they don’t have an adequate, risk-adjusted avenue to make that investment. Storage is an area where clarity on the regulatory front and the risk portfolio associated with it could be useful to help utilities.
EET&D : Earlier you mentioned the possibility of utilities moving into the smart city initiatives. Can you give examples of a partnership that you’re looking forward to seeing developed in the next era of digital utilities?
BT : There are opportunities developing that utilities haven’t even dreamed about and that are just starting to find their way into the conversation. A simple example is home security and home monitoring. For illustration, consider an elderly person who lives on his/her own and follows routine energy consumption patterns (starting every morning with getting up at the same time, turning on the lights, making a pot of coffee, and going about their day). With a smart meter and the right analytics, utilities could easily message loved ones indicating to them everything is normal. But if the elderly person fell in the night, her energy consumption pattern would be unusual, which could trigger an alert that something is wrong. These types of scenarios create meaningful opportunities for utilities to develop closer relationships with their consumers and provide value-added service. Several years ago, utilities couldn’t have even considered being in the “elder care” business, but it is a real possibility today.
Alternatively, these analytics can be relevant in a commercial setting. With intelligence and diagnostics, utilities and their commercial customers can understand if a compressor is running abnormally or not running at all. By dissecting the energy usage, we can uncover information that can be relevant to a variety of consumers and providers to optimize the whole experience.
Overall, there are profound safety benefits that utilities can offer. I’m looking forward to the next era of digital utilities when these are available to everyday consumers.
About the Author
Bart Thielbar is a vice president and the North American utilities practice lead at Capgemini, one of the world’s foremost providers of consulting, technology and outsourcing services. A utilities industry veteran and former COO of utilities IT advisory firm TMG Consulting, Thielbar leads go-to-market activities and client delivery at Capgemini. Thielbar has more than 25 years of operational and delivery experience. He has led advisory and technology engagements with many of the largest utilities in North America and has worked with many software and technology providers. Thielbar’s prior experience includes serving as a senior vice president at Five Point Partners and as president of Itility Solutions, both utility strategy, research and technology advisory firms. He has extensive industry experience, having served previously as CIO for a combination gas and electric utility serving the Midwest and Northwest. He also served as co-chair of the Edison Electric Institute’s and American Gas Association’s Technology Advisory Council.
