Electric Utilities Start Joining the Club of Digital Businesses
The electric power grid is the largest machine mankind has conceived and built to date. Worldwide, it delivers $400 billion of electricity every year to homes and businesses via 7 million miles of power lines. This fact may come as a surprise to those among us who have gotten used to the explosive growth and reach of the internet, thus relegating electricity to a mature core infrastructure, rooted in early 20th century technologies.
As a regulated sector, utilities do not jump to mind as the first example when we envision the digital transformation of our industries. Yet monumental transformations are taking place at utilities exactly because of the need to answer the demands created by an internet society that is increasingly networked. The most recent visible movement was the SmartGrid, which started about a decade ago. It aimed at bringing computational power and increased communications to the distribution grid— the poles, wires and transformers in your neighborhoods.
Other external factors that are driving change in the utilities’ business model are renewables and distributed generation, such as photovoltaic cells on rooftops. This puts small, intermittent power plants and energy storage in the hands of consumers, thereby turning them into “prosumers.” This trend is further reinforced by the steady growth of electric vehicles in the marketplace. To a utility, it’s as if a second house suddenly appeared in the driveway with each electric vehicle. This creates challenges in serving the new demand, keeping the distribution grid reliable and allowing for bi-directional flow of electricity in the grid.
With the plethora of data available—more granular and immediate than ever before— the question of a new “RoI” becomes tantamount. This is where the activities in analytics come to full fruition
For decades, utilities have delivered reliable services to consumers. With the emergence of residential photovoltaics, electric vehicles and energy storage, we see the emergence of a utility business model that will leverage simple electric connectivity as well as an abundance of information to enable prosumers to participate in real-time energy markets. The combination of these developments brings us to the emergence of the “digital utility.”
This will put a premium on the ability to operate an information exchange platform and bring market participants together. As nimble actors at the edge of the grid disrupt existing business models and ecosystems, flexibility along with innovative, test-learn, fail fast and refine mindsets can make traditional utilities powerfully relevant.
Some utilities will leverage virtually unlimited information, ready connectivity and enormous computing capabilities to introduce new business models to their customers. When fully implemented, these will enable utilities to pursue new delivery models and remain central players as orchestrators of newly formed energy markets. As they engage with the prosumer, who will become an empowered actor in utility markets, utilities will need to produce, consume and analyze unprecedented volumes of data to glean actionable insights and to detect and respond to the transformational forces taking shape.
While utilities have been able to take ideas and systems pioneered by other industries and incorporate them into their own operation structure, a utility that leads the way in technical innovation will have an advantage in this evolving sector.
Combining SmartGrid on the distribution side and digitization covering the devices, systems, and processes in the electrical utility, a starting place for the digital utility is created. With its physical assets, utilities expand the Internet of Things (IoT) to include substations, SCADAs, smart meters and more. These additional devices manage the electrical generators, the emission controls and many other elements of power plants. On the transmission side, high voltage substations, line sensors and towers are added to IoT, which now becomes a close informational mirror of the electrical grid, making the Internet of Things effectively the central nervous system of the digital utility.
With the previously islanded physical assets now connected, the digital utility layers existing information systems and processes around this IoT core; systems that include customer service, finance, business development and more.
At this point, it must be noted that IoT in the digital utility creates many challenges for cybersecurity. Conventionally, cybersecurity is mainly associated with the internet and database transactions. Highly publicized incidents revolve around Social Security numbers or credit card numbers being compromised. With IoT fostering a digital utility with complex machines connected to it, the stakes change. Since the electrical grid is critical infrastructure and a base for our economy and society, its breach would have catastrophic consequences. Life and limb—not numbers and dollars—are on the line. All IoT projects in the digital utility must be safe and secure to deliver the reliability and safety that customers have come to expect from the utility.
With the plethora of data available—more granular and immediate than ever before—the question of a new “RoI” (Return on Information) becomes tantamount. This is where the activities in analytics come to full fruition. The first step in applying analytics is discovering use cases for turning data into situational awareness and situational awareness into better commercial decisions. In some instances, this may accelerate or improve existing processes by providing better and faster data. In other cases, new processes will be needed to leverage data that was previously not available. An example might be the use of advanced metering infrastructure to provide demand response services that empower consumers to reduce or shift their electricity usage during peak periods.
The combination of the Internet of Things as the central nervous system and analytics effectively acting as the brain will help bring to full fruition the promise of the digital utility—a modern utility that provides a foundational service to our society in a reliable, clean and safe fashion.