How Is Digital Economy Growth Driving Amazing Utility Demand?

James McClelland

The United Nations projects that the world’s population will reach 9.8 billion by the year 2050 and 11.2 billion by 2100. Though our world is far from a humanitarian utopia, much of the Third World is developing. The digital economy is growing in ways that were never imagined. One area where that impact is being felt is in utility demand.

Countries develop and economies improve. Some experts believe utility demand will double or triple by 2050. Vehicles and mass transit add to this load as electric transportation becomes more popular. How do our utilities keep up with this level of demand? How do we do so in a way that is sustainable for our rapidly rising population?

Digital economy growth drives utility demand

As population and income rise, the digital economy grows. When households have more money to spend, utility demand increases. These two concepts are basic to anyone who has studied developing economies. But the increase in demand doesn’t mean a return to smog and pollution.

Deregulation, carbon sequestration, and decentralized production are changing how power is produced. Clean water is finally being seen as a finite resource to be protected. A stronger global focus on sustainability is changing the utility industry. This is happening even as demand increases.

The impact of disruption

Disruption is changing how people work. One estimate is that telecommuting rose 79% from 2005 to 2012. New business models are contributing to that change. It’s now possible to hire a virtual assistant from Malaysia and a researcher from South Africa from the comfort of a home office. The future office building may be one that doesn’t exist. How will that impact traffic and transit patterns? What will it do to the traditional urban utility grid?

Disruption is making new companies big and traditional companies obsolete. Failing to change to meet the new reality can quickly have a serious impact on industry leaders. The focus on sustainable development is changing whether customers use utilities at all. New wind, solar, water, and power storage technologies are driving much of this change.

How do existing utilities meet these challenges? New business models can help existing companies find new revenue sources. Smart building services, load balancing, and supply innovations can be part of this process. Combining operations and information technology allow businesses to optimize business processes.

Industry and global collaboration is key

Collaboration is another aspect of digitization that is driving new energy trends. A new utility business may be both a competitor as well as a partner. Previously unrelated industries are collaborating to improve energy production, delivery, and efficiency. A great example of this is the collaboration of telecoms with utility-meter manufacturers to develop smart meters.

How have these meters impacted the industry? Water meters can now detect and measure low-flow levels that were unheard of in the past. Home and business owners can monitor electricity usage in real time and adjust utilization accordingly. Sudden changes catch water leaks before they become serious problems. Utility workers can focus on improving other areas of infrastructure instead of reading meters.

Automotive newcomer Tesla made waves with its Powerwall home energy storage system. Paired with solar panels or another charging source, it provides the option of going completely off-grid. It’s gained enough attention for existing manufacturers to get into the game. Mercedes, Nissan, and BMW have now launched their own home battery systems.

Focus on the customer

Another aspect of digitization is the changing focus to a customer-centric approach. As demand increases, customers still want fully functional appliances, tech, and amenities in their homes and places of business. But at the same time, they want environmentally sound development of products, water, and power. How can those demands be met in a sustainable fashion?

Imagine this scenario. A family lives in a high-rise development. Natural lighting through fiber optics and windows with coatings that reflect heat help reduce their daily energy usage. Telecommuting means they don’t need to commute and may not own a car or deal with public transportation very often.

To meet their daily needs, they may have groceries delivered or shop online for clothing. This requires strong communications and delivery structures. They use appliances and electronics that are cutting-edge technology. Smart-energy design approaches help reduce the electrical load on the grid.

Solar window frames and parking shades generate power. Smart-energy networks offer better rates during times of peak production, lowering the impact on the grid when these production assets go offline as the sun sets. New power storage options allow vehicle owners to provide stored vehicle power to the grid overnight while charging quickly in the morning.

Focusing on changing trends in population and demand growth enables existing utilities and manufacturers to compete in the digital market. Although most executives recognize the importance of digitization, most companies don’t yet have a solid strategy to get there.

Learn how to innovate at scale by incorporating individual innovations back to the core business to drive tangible business value by reading Accelerating Digital Transformation in Utilities.

About James McClelland

James McClelland is the senior global director of SAP Utilities & Energy Industry Marketing, James has over 25 years of experience creating business strategy for the utilities industry. He is a graduate of the University of Toronto, Canada, holds a degree in Business & Commerce, and currently resides in Dallas, Texas.