Around the world, 2020 was not an easy year for electricity, gas and water companies. For proof, one need only look at the declining energy consumption deriving from industrial and commercial slowdowns, financial credit deterioration, commodities' price volatility, increasing competition and lockdowns impacting operations and maintenance – not to mention an increase in extreme weather occurrences. Nevertheless, the industry has demonstrated resilience and has not stopped its ongoing transformation journey. For the next five years, utilities will have to accelerate the reinvention of their core businesses while deploying new business models to get new revenue streams. In the next normal, hybrid working models, the shift from face-to-face to digital and new business ecosystems will be the norm. Leading utilities will not just adapt to shifting customer needs and market conditions, but will proactively shape the needs and the market to valorize their strengths, innovation and reinvented business models.

In this context, my fellow IDC Energy Insights analysts and I have developed the top 10 predictions that make up what we consider to be the framework for IT and line-of-business (LOB) decision-makers and influencers' technology-related initiatives in the year ahead. Of the 10, the following four predictions should be at the forefront of all IT professionals working in the utility industry and considered a top tech priority in the next several years.

“While the recovery pace will vary across regions, by 2024 80 percent of electric, gas and water companies will have implemented sustainable business models by accelerating DX and rearchitecting the core business”

Across the world, COVID-19 has helped accelerate the transition to more sustainable societies and economic models. From an electricity perspective, lower demand and favorable weather meant that renewables recorded their strongest contribution to the world's electricity generation mix, offering a glimpse into what could soon be achieved. In the U.S., for example, renewables far outpaced coal-fired generation during lockdown and produced more than 21 percent of all electricity in 1Q20. In India, the share of coal in the mix has consistently remained under 70 percent since the introduction of lockdown measures, with renewables generating a third of all electricity in mid-August. A similar pattern was observed in China, despite the gradual easing of lockdown measures starting in March. In the EU, renewables outstripped fossil fuel generation from February through the first week of July. This corresponded to the longest coal-free power stretch for the U.K. (over two months), and Germany produced 56 percent of its power output from renewables in 1H20.

While the road to recovery will vary across regions — as will the mix of forces shaping individual energy and utility markets — the trend of operating model transformation and strategic portfolio reshaping is likely to accelerate. Utilities will balance resiliency and reinvention, focusing on the speed and agility of their organizations while transforming their companies' culture and values to embrace sustainability on every level. On one hand, they will accelerate their move to full-fledged digital operations. Data-driven risk management, digital customer journeys and prescriptive maintenance are a few of the key initiatives for an industry looking to attain operational excellence and a digital customer base. On the other hand, while rethinking their products and offerings, they will launch new purpose-driven brands around resource conservation and circularity, community energy, emobility and energy as a service for large consumers, among others.

By 2024, IDC Energy Insights estimates that new utility business models could grow to account for 4-to-15 percent of the commodity business' EBITDA, with sustainable ones taking up most of the value.

To be effective and accelerate the transformation, at IDC we suggest the following to CIOs and IT departments:

• Bring new data types into the wider data governance lap, balancing safety and privacy with the benefits of access for personalization and efficiency.
   
• Adopt agile techniques and develop an enterprise road map that is modular (i.e., breaks down effort into chunks delivering immediate business value), scalable (i.e., thinks through how the road map will evolve) and extendable (i.e., accommodates changes as they unfold).
   
• Fully deploy agile DevOps teams to manage the life cycle of new front-end applications and evolve IT assets.
   
• Engage the ecosystem (partners, new players and start-ups) to inform and educate IT teams. Work with the business to map requirements and capabilities and influence what business outcomes can be achieved given available technology.

“By 2023, because of the increasing role of residential consumers in distributed energy, 45 percent of grid operators will have deployed AI to enable resilient and flexible management of the grid”

Delivering power reliability, efficiently and safely to residential customers is becoming increasingly difficult for power grid operators. Penetration of renewable sources, growth in electric vehicles, increasing investment in energy storage capabilities and large-scale distributed energy investments are changing the complexity of the grid environment that needs to be managed. Many distributed resources are being connected to the grid; globally, solar photovoltaic (PV) capacity is forecast to grow 250 percent by 2024, and residential annual capacity additions are expected to triple by 2024 (IEA).

Distributed energy resources mitigate energy costs for residential consumers who can leverage the benefits of selling electricity back to the grid. They can also ensure the security of supply in areas where peak demand challenges centralized power availability and satisfy many customers' preference for sustainability. But for utilities maintaining resiliency, reliability, efficiency and safety particularly at peak demand, integrating many renewable resources into the grid is far more challenging. The intermittent nature of renewables poses a threat to the stability of the entire grid, often resulting in increased costs for the grid operator. This new grid environment requires automation, real-time planning and control systems to anticipate, manage and ensure that demand and supply are balanced. Traditional approaches and systems are not sufficient to manage the complexity of this environment; artificial intelligence enables the computation of far more complex scenarios and predictive capabilities to support the complexity of the challenge that grid management faces. IDC expects that the artificial intelligence market for utilities globally will grow from $1.09 billion to $2.6 billion by 2024 (CAGR of 19.3 percent).

IDC offers the following guidance to effectively manage increased data from AI-powered tools and solutions:

• Implement an enterprise data governance model and consider investing in master data management. This will be a critical requirement given the amount of data that is being generated and the requirement to scale capabilities.
   
• Consider having a road map in place that will help evaluate infrastructure requirements and develop the strategies around governance frameworks and operating models to drive real-time value.
   
• Build capabilities within the organization that brings in consistent knowledge and become educated on how AI can be leveraged to solve business problems and identify near-term use cases that are important for organizational goals

“In deploying the hybrid working model, in 2021 40 percent of electricity, gas and water companies will prioritize wellbeing monitoring and enhanced personal safety thus improving employee experience by 30 percent”

The shock of COVID-19 and the immediate need to protect employees left its mark on utilities and their day-to-day operations. Working from home was not unheard of prior to the pandemic, but it was far from the norm. In Europe for instance, less than 15 percent of utility employees used to work from home before the pandemic — by August 2020, the percentage had tripled. Making a virtue out of necessity, utilities can now rightfully claim to have made a huge step toward deploying a hybrid working model, supporting a large share of their mission-critical operations remotely using digital tools.

Utilities have now realized that there is room for a permanent change in the way of working and running operations, balancing their onsite-remote workforce. Also reflecting an increased focus on employee experience, utility companies will put the wellbeing monitoring and personal safety of their employees at the center of this shift.

Concrete examples of how enhancing personal safety will take shape include providing flexible working hours during the day, rotational working from home and ensuring time and space separation between staff and field teams. Spanish utility Iberdrola, for example, has championed these measures, with a staggered return to the office for most of its employees. Going beyond anti-COVID-19 measures, utilities will further embed the monitoring of their employees' wellbeing in the standard set of HR processes. U.S. utility Puget Sound Energy (PSE) is actively promoting workplace mental health by setting up an employee assistance program (EAP). Besides training and raising awareness concerning mental illness, employees are offered counseling for themselves and their family members. Despite this being a pre-COVID-19 example, it shows the way for other utilities that still have to take on the challenge of improving employee experience in light of recent events.

In relation to this information, we recommend that utilities:

• Ensure the new generation of applications used to manage human capital, skills, and employer relations are designed around the user and enable an employee experience feedback loop.
   
• Put public cloud and advanced security as the cornerstones of the future utility enterprise infrastructure, enabling IT to provide maximum availability to its users and resilience for the enterprise.

“By 2025, 35 percent of energy utilities will drive at least 30 percent of their business via digital platforms based on cloud native technologies, fulfilling the evolving needs of customers and infrastructures”

Leading international utilities are leveraging digital infrastructure to develop common information, intelligence and process platforms to create efficiency and extensibility in their operations. Specifically, these global data and business platforms respond to one fundamental tenet — the centrality of the consumer and asset data in the system — and two key requirements of the transforming utility: the need to drive efficiency and customer experience in the core business through consistent and scalable processes and resources as well as a more flexible and accessible IT infrastructure, and the need to quickly deploy new services and business models (around sustainability, conservation, decarbonization and electrification), supporting the resulting expansion of the customer base outside the commodity business

With its Enel X brand, for example, Enel is creating open platforms to enable consumers, prosumers and cities (even assets) to actively participate in energy markets through technologies such as demand response, storage and vehicle-to-grid technology, among others. Another pillar of its platform-based model is the distribution network's digital twin, and so is the company's cloud-only strategy (which is providing savings and economies of scale) and is maximizing the impact of innovation. In a similar vein, U.K.-based utility Centrica has developed a vision of the industry transformation that builds on three platforms:

• New market platforms enabled by IoT and AI such as real-time flexibility, which sits at the core of the company's energy-as-a-service offering for C&I with Centrica Business Services
   
• Local, peer-to-peer energy markets unlocked by distributed transactional technologies such as blockchain, which Centrica has tested in Cornwall and competitors EDF Energy and OVO are demonstrating in Scotland
   
• Home energy management, orchestrating smart home devices, micro-renewables, energy storage and electric vehicles to make it easier for consumers to understand and control their energy use, and possibly participate in markets where such control can be monetized.

From a technology perspective, our guidance to utilities is to:

• Use DevOps and agile as the standard organizational architecture and way of working to be able to integrate innovation and deliver projects with a three-to-four-month cycle.
   
• Consider whether to adapt what is already available and deployed for the traditional business or adopt new solutions. Cloud-native solutions and as-a-service procurement can quickly provide capabilities and facilitate scale.
   
• Use cloud to energize legacy infrastructure. Adopt a cloud-first approach for new applications and technologies. Promote the adoption of a platform-led modular architecture and prepare pathways for microservices and application programming interfaces (APIs).

As we continue along the road to the next normal, utilities' executives will have to continue balancing resiliency and reinvention, keeping their hands in the present and eyes on the future. This also implies a different approach to business and tech ecosystems to deliver one integrated experience to customers. Those that can successfully do so will emerge as leaders.