Managing Power Assets In Uncertain Times

Adam Lyons

As the energy industry reinvents itself in a bid to tackle climate change, some of the UK’s biggest companies are pledging hundreds of millions of pounds to support the shift. The HSBC UK Pension Scheme, for example, is investing £250 million in renewable energy infrastructure (mainly wind and solar), while John Lewis has committed to overhauling its diesel truck fleet.

The move towards a low-carbon future is certainly the biggest driver of change in the UK’s energy industry. A landmark UN report recently stated that emissions must be slashed to “net zero” by 2050, and the UK government is already taking steps to meet this target with its five-year carbon budgets. But at the same time, of course, technological advancements in an ever more connected world mean there’s a general need to modernize our energy infrastructure.

Making energy assets fit for the future

This fundamental change in the UK energy market has led SSE, for example, to announce that it’s de-merging the retail arm of its business and combining it with energy company npower to create a new, independent UK energy retailer. With the merger of SSE and npower’s businesses, SSE’s remaining business will “develop, own, and operate energy and related infrastructure/services in a sustainable way.” Meanwhile, the former parent of npower, RWE, will become entirely focused on generation, managing its own shift from hydrocarbons to renewables, driven by Germany’s energy transition to a lower-carbon energy supply, the Energiewende.

Where gas and electricity companies have traditionally integrated generation and retail, a low-carbon future means we’re seeing more of this kind of unbundling in the market, creating generation specialists with portfolios of generation and renewable assets at scales we’ve never seen before. Management attention will become even more focused on improving the efficiency of these asset operations, which is set to be the primary source of value creation and differentiation in the emerging energy market.

It could also be argued that the rise of large companies focused entirely on generation assets is not just the result of changes in the market, but a natural by-product of aging conventional assets competing with generation assets with zero marginal cost. In April 2018, the UK set a record by being powered for three consecutive days without coal. But that’s just the start. Think for a moment about what energy generation will have to look like in the future: electricity flowing in new and different ways; more and more people driving electric vehicles; more and more homes generating their own power; local, efficient storage; and perhaps even a reduced reliance on the many wind farms we’ve invested in.

It’s little wonder energy companies are waking up to fact that the management of power assets needs to be a focus all of its own.

The technology to support efficient asset management

With the industry relying more and more on renewables, asset management efficiency is set to become even more of a competitive differentiator for energy companies. Margins are made in managing your asset portfolio, whatever it looks like, as well, efficiently, and safely as possible.

Enterprise asset management solutions can help energy companies achieve exactly this. Not only by significantly improving asset operations and maintenance, but also by empowering providers to better meet the environmental, health, and safety requirements that come with being an energy company.

Specifically, this kind of solution supports:

  • Asset operations and maintenance: Improving the reliability of energy assets, which in turn helps to lower risks, downtime, and energy consumption and ensure that providers maintain their competitive edge
  • Asset network: Supporting digital innovation strategies with asset network software, keeping providers competitive with enhanced performance and insights, and taking advantage of the IoT and the opportunity for predictive maintenance services
  • Environment, health, and safety: Helping providers identify risks and implement controls more efficiently, as well as reducing their environmental impact and ensuring they meet regulatory compliance standards

The power providers of the future

As SSE de-merges its retail arm, it’s freeing itself up to focus on optimizing its energy generation asset management, helping to provide the kind of energy and infrastructure that is increasingly required in the UK. And, at the same time, positioning itself to become a leading power provider in the low-carbon world of the future.

In the coming years, we can certainly expect other gas and electricity companies to head in a similar direction. It will also be interesting to watch whether water companies will follow suit by de-merging, in due course, their residential retail operations, as they have with non-household retail. Regardless, the companies that do asset management well will be the ones realizing relentless efficiency through transformative technology adoption. In this way, these companies can significantly reduce outlays like the cost of asset maintenance, while becoming safer, more reliable, fit-for-the-future energy providers.

Find out how your energy company can “Unlock New Business Value with Digital Technology.”

Adam Lyons

About Adam Lyons

Adam Lyons is a senior, experienced strategy and consulting advisor operating at Board level. He has extensive experience in Technology Strategy and Digital Transformation. He has wide sector experience from a career spanning the energy, industrial and consumer goods sectors. He has an established track record of advising C-Suite clients from strategy through to operating model design and implementation. During his experience working in the “Big Four” and at SAP, he has published thought leadership on the Energy Sector and supported his customers’ transformations, developing the vision, strategy and value they can achieve from digital transformation.