Utilities Can Use Digitalization And IoT To Power Smart Cities

Pamela Dunn

Futurists suggest we will one day live in smart cities where governments and businesses use data-driven insights to improve the lives of local citizens. Many of these benefits will be brought about by leveraging artificial intelligence (AI) through the Internet of Things (IoT).

IoT will provide the massive amounts of data required for consolidating everything from street lighting to traffic management and public safety into a single, cohesive digital ecosystem. Hatem Zeine, a physicist and inventor, says this process of digitalization will change how people relate to the places where they live and work. Moreover, the infrastructure they rely on will begin to evolve from an inanimate assemblage of structures and facilities into something that seems to be almost alive.

“We’re on the path to treating cities like living entities with biosignatures waiting to be decoded and leveraged,” Zeine says.

What role will utilities play?

Creating smart cities will require integrating multiple aspects of urban life. Because incumbent utility owners and operators have decades of experience in urban environments, they are well positioned to influence the planning and regulatory decisions that will precede many smart-city initiatives. But to secure this role, utilities need to improve their capabilities for gathering, aggregating, and normalizing IoT data.

“Utilities must grow in information maturity,” says Jay Millar, director, outcomes business at Itron, a technology company focused on creating a more resourceful world through effective energy and water resource management. “They have a lot of information, but need higher-quantity and higher-quality information to create better algorithms.”

Domain experience gives utilities a built-in advantage, but a business-as-usual approach to technology investments puts them at risk of losing out to more nimble competitors. To maintain their current position as essential providers, they must invest in infrastructure capabilities and workforce competencies. Both processing power and advanced analytical skills are required to generate the insights and predictions that will support smart-city growth.

How will digitalization challenge utilities?

While improving infrastructure and workforce talent are important, utilities also must transform their organizational cultures. Utilities remain highly bureaucratic organizations where decisions are made slowly and carefully and new assets often take decades to deploy.

Smart cities will be hyper-connected environments where IoT and other forms of connectivity generate massive amounts of real-time data. This data will flow into analytics software and artificial intelligence systems and allow decisions to be made with incredible speed. Smart city inhabitants will have little patience for incumbent businesses that cling to outdated service models and governance processes.

“Historically, people don’t look to the utilities as being a fast mover or the one that is going to be innovating,” says Michael O’Donnell, national vice president, utilities, at SAP North America. “But it is becoming imperative for utilities to take a different stance and try new things and do them very rapidly.”

And O’Donnell says utilities need to be willing to fail. Like most living systems, smart cities will evolve and change. Businesses supporting these communities will have to innovate rapidly to remain relevant and valued. Utilities will have to become comfortable with operating at a faster pace and with more uncertainty than might have been present when markets were more regulated and monopolistic.

Utilities in smart cities will be different

Preparing for smart cities will require utilities to reinvent themselves while continuing to meet their current obligations. It is a massive undertaking, says David Harkness, chief information officer and senior vice president of Xcel Energy, a utility holding company serving over 5 million customers.

“It is hard to introduce competitive juices into a company that was not born with those competitive juices,” Harkness says. “It requires us as a utility to know our customers.”

Knowing customers is more than tracking electricity or water consumption. It really involves understanding the broader picture of how utilities help or hinder the customer’s ability to live his or her life. Comprehensive data and powerful analytics can help utilities gain these insights and begin making decisions to better serve customers as individuals and not just account numbers.

Want to learn more? Listen to the “Digitalization: Powering Utilities and Smart Cities” and check out @SAPradio on Twitter.