Digitial transformation. It’s everywhere, but what does it mean, and why does it matter to utilities?

For starters, the digital transformation is the use of digital technology (including sensors, two-way communications, and software) to solve traditional (electro-mechanical, analog, manual) problems. The longer, and perhaps more relevant definition includes the “transformation” part: the profound changes to processes that can drive significant improvement in financial performance, customer satisfaction, operational efficiency, safety and more. One might not even recognize a business after it has been transformed. (For instance, think about how transportation and hospitality markets look today after undergoing massive transformations).

The utility industry has been on the digital transformation road for more than a decade. Here, we will look at the utility industry’s digital journey in three phases: the smart infrastructure build-out, data-driven use cases and industry transformation. In this context, we’ll look at how utilities have had to re?invent themselves from risk-averse, electro-mechanical entities, to leaders at the forefront of the digital revolution, and what many call “Industry 4.0.”

The smart infrastructure build-out

Utilities arguably entered the “smart” business 50 years ago with the introduction of SCADA / EMS in the late 1960s, but the much wider and deeper “smart” movement has really taken off with the realization of the smart grid over the last decade or so. The U.S. Energy Information Agency estimates that today, there are nearly 80 million smart meters deployed in the US alone. In addition to this digitization of the customer connection, utilities have embarked on digitizing much of their generation and T & D infrastructure with the installation of millions of IEDs, PMUs and other types of sensors across their systems.

These smart investments, with price tags that run into the billions for large utilities, are the foundation for the digital transformation of utility operations across the enterprise. While there is a relatively short list of initial use cases that were implemented in quick order once this infrastructure was up and running – more accurate and automated meter reads, remote connect / disconnect and increased visibility into remote operations come to mind – these early use cases were really more about establishing an initial ROI as a means of getting that infrastructure in place for future use cases than for fully leveraging this infrastructure for digital transformation.

Data-driven use cases

One could borrow the 1992 presidential campaign quote, “it’s the economy, stupid” for utilities with “it’s the data, stupid.” While there have been massive investments and a lot of hype around this smart infrastructure, the real value has always been in the data. Arguably, whoever does the best job at leveraging this new data-rich environment will be left standing as the utility industry continues to undergo fundamental changes in its business.

Think about the landscape today as compared to just a few years ago. One-direction central station generation has given way to multi-directional power flows across distributed generation, customers have more choices (and higher expectations) than ever beyond what their utility can offer, and just about every function in a utility has changed dramatically. Figure 1 presentsa snapshot of what this new world looks like.

What is important here is not to get too lost in the hype and hold on to the realization that all of these new use cases are being enabled by the availability of more and better data. Need to improve outage metrics? Predictive analytics leveraging asset, weather and customer data is the ticket. Need to engage customers across a broad spectrum of programs in a newly competitive market? Go deep, leveraging your own customer data and third?party data to profile customers at a granular level only dreamed of in years past. And how will utilities predict load with the proliferation of DERs and EVs? Traditional forecasting practices will give way to new algorithms and methodologies that are able to ingest and analyze massive new data sets from customers, grid devices and partners.
 

Figure 1. The utility operating landscape. The underlying smart infrastructure is enabling an operating
environment that was unthinkable just a few years ago, inviting many new opportunities and challenges.
 

Industry transformation

So, there has been a lot of change, but does change automatically equal transformation? No, but in the case of utilities, we are at the precipice of changes that areindeed transformative. Looking back at Figure 1, imagine an integrated, orchestrated utility that seamlessly manages EVs and their requisite charging station networks, microgrids, new solar and wind farms from third-party developers and prosumers entering and exiting the market every day, or even every minute. Now, that is a transformed utility… and this vision is not a small light in the distance. Parts of it are here today.

What are the ways that a utility’s business will change beyond what we see in Figure 1? Extend the use cases illustrated previously, and it’s not too difficult to envision a very different utility. Gas stations give way to fast?charging stations; the utility as the trusted energy advisory that we’ve all been hearing about for years finally becomes a reality, providing a suite of products and services on the other side of the meter; and how about maintenance services for all of those third-party energy providers? Utilities just happen to be awesome at maintaining field assets.

Some industry commentators are saying things like “Utilities will become data companies that happen to be selling electrons.” While this might be an extremeposition, it is, at least, directionally correct. And yes, it’s all going to be a heckuva lot of work, but what an exciting time to be in our industry!