March 24, 2021

Utilities, globally, are undergoing rapid transformation. New companies, business lines, strategic partnerships, and joint ventures are transforming the spectrum of the utilities business. In addition, progressive reforms, increased competition, digitally empowered customers, automation and situational awareness through information technology and operational technology (IT-OT), sustainable and green initiatives, stringent regulations, and the infusion of new digital technologies are phasing out traditional commodity models.

Underpinning these changes are four key drivers for the emergence of new business models – new regulations enforced pre- and post- pandemic; changes in the business portfolio – a classic example is consumers becoming prosumers; convergence of industries – new players entering the utilities market, especially in renewable energy; and adoption of technologies, evident in electric vehicles, smart grid, smart metering, and other applications. These drivers are shaping the energy value ecosystem and driving new roles in the utilities value chain.

Today, utilities are discovering value at the intersection of their ecosystem – consumers, competition, and partners. The new business models, in a demand-driven market, are based on two key principles – co-opetition and co-creation. Partnering, rather than competing and collaborating with partners and customers, is the new success factor. Utilities have been partnering with companies in the technology and home electronics space for a while now, to provide solutions for their consumers. A key example is the smart thermostats deployed by utilities and developed by software and hardware companies. As the ecosystem becomes inclusive, utilities are now able to create a connected customer experience revolving around customers and partners. Alabama Power’s web presence is indicative of this new resolution with internet of things (IoT)-enabled customer interface and chatbots.

Enhancing business models after COVID-19 by fusing technologies

The utilities sector has traditionally been slow in embracing digital. COVID-19 brought about several challenges, including average demand reduction, concerns around operational continuity, financially stressed economies, and stalling of capital projects due to lack of funds. However, it has also proven to be a catalyst in accelerating digital adoption by utilities and helping them transform and innovate to face the immediate effects of the pandemic and align themselves to long-term changes.

The spectrum of technologies available today is vast, and these have been traditionally leveraged for energy efficiency, distributed energy, storage, electric vehicles, and so on. Utilities have also used digital technologies such as augmented and virtual reality (AR/VR), digital twin, IoT, and drone technology to ensure business continuity and efficiency. However, the need of the hour is to enable a fusion of these technologies and their applications across the value chain. We are already witnessing several instances of this. For instance, the use of AR/VR to train remote personnel is commonplace. Drone-assisted asset maintenance can facilitate storm damage assessment, outage management, risk response, and sub-station inspection. Utilities are also deploying drones to detect and prevent damage caused due to bad weather conditions or forest fires. With work-from-home being the norm, energy companies witnessed a dramatic shift in demand. Research has indicated that energy demand reduced by almost 6% during the peak months of the pandemic. AI-based predictive analytics of energy consumption enables efficient demand side management (DSM) with real-time insights and forecasting support to make quick decisions. A digital twin incorporates analytics and sensor technology to enhance operational efficiency for utilities. Using IoT sensors in renewable energy production enables energy companies to monitor assets remotely and in real time, thereby reducing operational costs and meeting fossil fuel conservation needs.

The question is – where do all these transformative technologies fit in the new business model for utilities? The answer is simple – across the entire spectrum. Utilities are already deriving significant value across business processes through new technologies that enhance operations, reduce risk, cater to customer demands, thereby enhancing efficiencies. The deployment of these technologies is evident across the business value chain, from generation to the retail distribution of utilities to creating new revenue streams such as energy-as-a-service.

New roles and changing business models for a new decade

New digital technologies have made utilities more efficient and effective. Most importantly, it has re-defined the energy value ecosystem. TCS and IDC Energy Insights’ research across 120 utility executives revealed 36% of utilities in Europe were expecting more than 10% of their revenues from new energy sales and services. It further indicated that 79% of European utilities believed that distributed generation is key to new revenue streams and that low energy carbon (77%) emerged as the leading role for utilities in the near future.

So, what role will utility companies play in the future? The TCS-IDC research reveals that utilities must embrace technology, innovation, and partnerships to emerge as truly digital enterprises.

For more insights on the paradigm shift in utilities, please listen to the recently concluded keynote address at the SAP Global Partner Utility Week 2020.

KV Sarma, better known as KV, heads the Europe Manufacturing & Utilities Industry Solutions Unit (ISU). Manufacturing and Utilities ISU serves global customers from Automotive, Industrial Equipment & Machinery, Aerospace, Process and Utilities Industry.

As a Business unit head, KV is globally responsible for all Manufacturing & Utilities customers headquartered in Europe geography. In this role KV has been working with several Fortune 500 Manufacturing and Utilities customers in formulating their strategy on Run the business, Growth and Transformation. KV has been instrumental in achieving high growth rates for this business unit and establishing TCS as a growth and transformation partner for the customers. KV considers 4’P’s Perseverance, Patience, People and Performance are critical for success in Europe.

KV has over three decades years of professional experience working in IT industry and out of which 29 years in TCS. He started his career as technical expert and later shifted to techno-managerial, Account management and Sales roles. He has managed deliveries for global customers, large programs and customer relationships in Manufacturing, Banking/Financial Services and Transportation Industries.

KV is a postgraduate in Computer Science and he is interested in Long drives and Photography.