The century-old utilities industry model, built on trillions of dollars worth of plants and grids, is facing an unprecendented pace of change. New market entrants look set to wreak havoc on the value chain, with huge new solar plants going live and others being planned.
Today’s digital customers are comfortable going “off the grid” with new solar, wind, and storage technologies. They will be positioned to sell energy resources back to the traditional providers, fundamentally changing the natural centralization that defines today’s utilities industry.
In this future, how can the utility remain relevant operating as it does today? In a much more competitive market environment where customers are no longer at the mercy of monopolized rate setting, the new challenge for utilities will be in maximizing the social value of their networks.
To do this, they’ll need to adopt decentralized digital technologies that enable them to maintain a strong grasp on the distribution and grid networks. In part, this means the onus is the provider to transform the customer experience they offer today.
More specifically, the successful utilities of the future will be those already set on restructuring their business models to offer smart energy services—smart apps, smart distributed energy resources, smart appliances—in a bid to preserve their usefulness to consumers in a decentralized market.
Making the utilities customer experience smarter
Prior to digital ubiquity and decentralization, managing the customer experience was relatively simple for utilities. Meters were checked, bills were sent monthly, and customers contacted call centers to speak to representatives. They didn’t expect too much, and they didn’t get it.
Now customers want providers to be accessible at all times and digitally innovative. They mercilessly judge these services against those of other service providers, such as retailers. This means entire organizations are being driven to do much more for their customers across crews, billing, IT and customer service.
This demand is driving a trend of tighter integration between meter data management tools and customer information systems. Pushed by increasing solar adoption and more utilities mandating time-of-use pricing, the goal, in part, is to reduce manual billing processes and costs while introducing a more efficient design.
It is also bringing about a new age of customer self-service, with a blend of predictive interactive voice response, web tools, and mobile apps becoming the new normal. One aspect of this self-service is giving customers the tools to live-track data like billing and usage and make adjustments accordingly.
Naturally, self-service has the positive effect of relieving pressure on call centers. One utility we work with has reduced average handling times and eliminated 1 million calls per year by using predictive IVR menus, while also reducing new agent training times and improving customer satisfaction scores.
Intriguingly, for utilities, recent benchmarks elsewhere have shown similarly worthwhile improvements, even as the size of investment needed to get there is plummeting. Frankly, any notion that these projects do not deliver a return on spend is being emphatically proven wrong.
Digital raising the bar for efficient distribution and operation
We can thank the ease of access to cloud and digital as-a-service technologies for the falling costs. The option to pay-as-you-go in the cloud allows utilities to procure systems on an off-premise, more ad-hoc basis, without being slammed with the crippling upfront costs of yesteryear. This leaves partnering software vendors and utilities with little excuse for the sloppy, bloated, customized large-scale transformational programs we’ve seen in the past.
The digital foundation opens a new world of possibilities in using technology to become more efficient. Consider that generators can integrate to process real-time sensor, market, and weather data to operate profitably. Predictive analytics can maximize the use of both centralized and decentralized assets. Dutch power distribution company Alliander analyzes more than 1.5 billion grid sensor measurements to forecast when it needs new machinery and the best time to do maintenance.
Intermittent and decentralized power production requires the ability to predict and handle power in-feed with bi-directional power flow. Evaluation of energy data helps to predict grid loads and anticipate bottlenecks that strain the grid, allowing for optimization of grid investments.
So why are many utilities lagging behind?
Despite all this change and opportunity, utilities generally remain among the worst digital laggards. Some companies, like CenterPoint Energy in the U.S., have already invested in smart grid technology and customer notification systems. In Minnesota, the Wright-Hennepin rural electric co-op is already offering community solar, remote control of appliances, and home security systems.
It’s worth pointing out that these innovations have been made possible by updated regulatory thinking in those regions, which is what we need to see in Canada as our utilities prepare to transform how they distribute energy. Today when a utility makes a large up-front capital investment, they are allowed a rate of return on it. This has not traditionally applied to cloud computing models, which has turned utilities off embracing the technology and its payment scheme.
The regulators have a duty to update their thinking and build a framework that embraces technology innovation. And it’s not just IT they need to get up to date on – self-service, off-the-grid power consumption, and decentralizations are all developments that need to be addressed.
Ultimately, it is the responsibility of the utilities industry as a whole to embrace this change. Fortunately, there is wealth of information, inspiration and thought leadership out there to get started. The Western Energy Institute does an outstanding job of pulling utilities and partners together to tackle industry challenges. Watch BC Hydro EVP Greg Reimer talk about the impact of change on the industry, and Space-Time Insight SVP Steve Ehrlich on locating distributive energy opportunities using analytics.
Also, check out the content coming out of the SAP Utilities community. There is an excellent piece by utilities thought leader Henry Bailey on how IOT can help utilities. If you find that useful, more of his insights can be found here. Make the most of the SAP for Utilities SCN page and download a white paper on digital transformation in utilities here.