Electrification continues to ramp up globally as part of the larger push to move away from fossil fuels to alternative energy, including wind and solar. While electrification and other modernization efforts, like digitalization, are admirable and necessary endeavors, electrical utility companies and most other utilities, for that matter, face several major challenges that impede progress.

Unsurprisingly, these challenges often boil down to finances. Case in point: several years ago, California bit off more than it could chew in renewable energy projects, resulting, in part, in rolling blackouts. The takeaway is this: For modernization and environmentally-conscious initiatives to become a reality, utilities must find cost-effective solutions funded through rate cases and regulatory approvals.

Legacy infrastructure

At the center of these environmentally-driven electrification initiatives is the need for grid modernization. Today, many utilities operate on outdated infrastructure that cannot sufficiently support modern technologies or digital solutions. Most of the U.S. electric grid was built in the 1960s and 1970s, and although it has undergone enhancements, this aging infrastructure is struggling to handle modern electricity needs. For example, renewable energy resources and electrification – namely, electric vehicles (EV) – put considerable strain on the capacity and function of existing grids.

In the U.S., many states are undertaking initiatives with specific electrification goals, such as mass adoption of EVs among consumers and electrification of other consumer appliances like stoves and mowers. Nevertheless, the aging grid can’t support these assets from both a usage and supply perspective. On the usage side, problems will abound if multiple EVs in the same neighborhood charge at a specific time (say, right after work), because the grid cannot handle so many EVs charging simultaneously in the same area. From a supply perspective, just as the grid is not fit for the load going out to support EVs, it cannot handle the incoming load from EV batteries, solar from residential, neighborhood, community, etc. and other power-generating systems.

Updating this legacy infrastructure can be costly and time-consuming, which is why many electrical utility companies are moving slowly when fully embracing Industry 4.0. Those utilities still have a lot of legacy equipment like meters and capacitor banks that they aren’t in a hurry to replace due to the huge investments they’ve already made. Plus, many of these assets have long lifespans, up to 20 years, and the utilities want to maximize these assets rather than disable them prematurely.

Managing assets and data

Utilities must manage more assets than ever, sometimes upwards of tens of thousands of assets, including sensors, cameras, meters and other connected devices. Maintaining always-on visibility and control over equipment and devices at a reasonable cost will require utilities to connect them remotely to a central system. While utilities could easily pull fiber to equipment like substations, wireless is the only practical solution to connect tens of thousands of distribution assets. As such, a crucial choice utility companies must make is which type of wireless network they will deploy – public cellular, private cellular or a combination of technologies – to connect to their assets in the field remotely.

With a public network, a utility must pay a monthly fee to the cellular carrier to connect to these devices. Payments to mobile operators are OPEX expenses that are difficult for utilities to cover in their CAPEX-oriented business, which is dependent on ratepayers and public utilities commission approvals. If the utility decides to use a private LTE network, it will need to erect its own towers, buy radios and buy and manage its core and network infrastructure, making it the network owner and eliminating monthly fees. Although private LTE may save money from recurring payments, the utility will often require help from contractors to manage these systems, thereby falling outside the typical capital expenditure (CapEx)-related use cases.

Utilities will also generate vast amounts of data from their assets. Managing and analyzing this data effectively is essential for optimizing operations and decision-making. However, collecting huge amounts of data from different places – especially at the edge – will always be difficult. Harder still than collecting the data is determining which data is the most important, e.g., differentiating between current and outdated data, classifying data (revenue vs. safety data), establishing where data needs to go within the organization, etc. Unfortunately, many utilities struggle with data integration, quality and analysis. However, by leveraging technologies like artificial intelligence and edge computing, they can become more efficient from a data management perspective, saving costs simultaneously.

Regulatory compliance and cybersecurity

The utility industry is heavily regulated, and modernization efforts must comply with various regulatory requirements. Navigating these regulations while implementing new technologies can be complex and require significant resources. Utilities must also navigate challenges concerning public safety. Currently, different utilities in Texas, California and the West Coast are being held accountable for wildfires. PG&E had to pay approximately $5.36 billion in settlement awards to compensate survivors of the 2015 Butte, 2017 North Bay and 2018 Camp Fires. Berkshire Hathaway Energy's (BHE) PacifiCorp unit faces billions of dollars in potential liabilities from wildfires that have burned hundreds of thousands of acres in California and Oregon. As of April 30, 2024, BHE projected $2.4 billion in wildfire losses but said that number could increase to $8 billion. Should a wildfire occur suddenly, utilities need the ability to shut down infrastructure instantly to prevent the spread and protect themselves from financial penalties, which can be particularly difficult when many of these wildfires are the result of natural phenomena or acts of nature.

Regulatory compliance is also closely intertwined with cybersecurity compliance. With the adoption of digital technologies increasing the risk of cyber threats, the writing is on the wall that utilities must soon comply with stringent cybersecurity standards. Famously, in the oil and gas sector, Colonial Pipeline suffered a ransomware cyberattack, resulting in fuel shortages, panic buying and even American Airlines changing flight schedules temporarily. More than anything else, the attack revealed how poor existing security was for critical infrastructure services. While the TSA issued security directives for pipeline owners and operators, regulators will likely impose similar rules on other utilities.

Electrical utility companies must ensure their systems are secure from potential cyberattacks, requiring significant investment in cybersecurity measures and constant monitoring. For example, utilities must harden and secure different elements, including the data delivered on platforms and systems, the hardware and networks (cellular and fiber), switches and routers and physical elements like facilities and data centers. Also, many utilities have built their own security plan and then audit themselves against that plan. However, these plans tend to be elaborate with multi-layer contingencies, which can severely tap existing capabilities and limited human resources.

Workforce challenges: Upskilling and retirement

Workforce challenges will be another roadblock that electrical utility companies will encounter amid electrification and other modernization efforts. Implementing digital transformation requires a workforce with the necessary skills and a culture to embrace change. Nevertheless, utilities may face challenges in upskilling their employees and fostering a culture of innovation and collaboration.

Today’s workforces often lack some of those technical skills required to realize the shift to Industry 4.0 and electrification. Almost every solution, whether a backup power system or uninterruptable power supply, has a management component, meaning employees have to be experts, capable of logging into these platforms, understanding how to set things up, troubleshooting, etc. Managing these different solutions becomes even more difficult as digitalization increases.

Additionally, electrical utility companies note their most veteran and skilled leaders and workers continue to retire in droves. In fact, over the next five to ten years, many utilities will lose 50% of their current workforce to retirement. Unfortunately, there aren’t enough skilled workers entering the industry to balance the number of those leaving. For example, over the last 15 years, colleges and universities witnessed a 50% drop-off in graduating engineers. In light of these labor realities, it is paramount that utilities invest in tools that can automate as many routine and monotonous processes as possible.

Automating device management, improving security

As electrical utility companies pursue electrification and digital transformation, they must implement cost-efficient solutions. One of the most effective ways utilities can prioritize CapEx is by leveraging automation to minimize human labor costs while improving productivity, specifically via device management. Utilities should make upfront capital investments in these technologies to cover the cost over 8 to 10-year spans. A best-in-class device management platform with comprehensive tools will streamline the deployment and monitoring of remote assets. The ability to manage devices en masse in an automated way using a management platform not only enhances efficiency but also saves resources during labor shortages, allowing personnel to focus their attention on more value-added projects.

Without the ability to fully automate, utilities would have to monitor thousands of devices manually. For example, it would be unrealistic for human personnel to investigate every alert from each device every time an issue gets reported. However, with a management platform, human workers would only need to review the top 2% or 1% of critical issues depending on the devices and importance of the data, e.g., revenue-grade data. Leading management platforms can also auto-resolve issues like rebooting routers and reconstructing communications without human intervention.

Likewise, automated device management and monitoring platforms help secure the edge of the OT network, which is particularly crucial as utilities bring more assets online, consequently expanding the attack surface. Some leading device management providers will further bolster security at the edge by leveraging complementary software from their partners. Because cybersecurity is an ever-evolving landscape, these providers and their partners are an invaluable resource for utilities as they strive to comply with regulations and avoid fines.

Top-class providers usually have value-added services that can run alongside their management platforms, bringing other enhancements to electrical utility companies as they modernize. For instance, containerized services allow utilities to run any sort of software at the edge, eliminating the otherwise expensive alternative of buying additional industrial PCs. Containerized services also accelerate communications, meaning that computation occurs at the edge. By processing at the edge, utilities can avoid shuffling everything up to a cellular network at a central location, processing and then sending it back.

Pursuing change cost-effectively

To recap, electrical utility companies must engage in electrification and modernization efforts like digitalization to meet modern energy requirements and the demands of shareholders and government regulators who want to move toward more environmentally friendly methods. Nevertheless, there are several glaring challenges in the way, which amount to monetary and labor cost issues. Electrical utility companies must stretch the money they have to address these challenges.

Thankfully, leading providers of device management platforms with productivity tools can boost operational efficiency while enabling utilities to minimize people and operational costs – especially as it pertains to operating the network and the ever-growing number of connected assets. Moreover, some providers offer added services and partners that can further enhance security at the edge, including other operational processes. Of course, not all device management platform providers are equal, and electrical utility companies must exercise scrutiny when selecting the right solution provider.