January 5, 2021

Utility businesses are becoming more attractive and expansive, thanks to the dissemination of digital technologies and opportunities at the intersection of cross industries. This has created different new digital roles for utilities like lifestyle and affinity services around the empowered prosumer, infrastructure management in the energy sharing economy, grid management in the transactive era, and information simulation and modelling leveraging data science, to mention a few. While the pandemic has put the limelight on the resilience of utility firms, it has created a new role, and in turn new responsibilities, for the industry, which is of a partner in crisis. Despite these changes, the core purpose of serving the nation and putting the lights on continues to remain strong for utilities.

Transforming the digital landscape of utilities with new roles and responsibilities

The increasing convergence of industry boundaries is paving the way for energy democratization. For instance, Tesla is planning to enter the electricity market in the UK and Apple is planning to invest in the construction of two of the world’s largest onshore wind turbines in Denmark. With energy giants acquiring telcos, microgrids empowering local communities, and homes transforming into power stations, digital technologies play a significant role in utilities, in turning threat into opportunity. At the same time, regulators across the globe are ushering in opportunities for utilities to help them reimagine their business. For instance, the Reforming the Energy Vision (REV) in the US, Electricity Market Reforms (EMR) in the UK, and the 5-Minute Settlement regime in Australia are some regulations redefining the utilities business with emphasis on green energy, focus on new investments, and efficient price signal for investment in generation capacity. In addition, market factors such as low natural gas prices, COP21, or extreme events such as COVID-19 or wildfires also significantly impact digital adoption by utilities. In fact, utilities are increasingly leveraging augmented and virtual reality (AR/VR) and digital twin to enable remote operations to ensure improved health and safety during the pandemic.

Today’s utility value chain requires increased focus on flexibility, resiliency, and optimization. This requires transforming from delivery to discovery mode with a focus on unlocking network capability, reducing constraints, and opening up new revenue streams for market participants. To optimize and enhance their networks, utilities are fusing energy technologies like distributed generation, demand side management, storage, and electric vehicles capabilities with exponential technologies such as the internet of things (IoT), blockchain, and 5G. In fact, Brooklyn Microgrid, a US-based energy marketplace for locally generated solar energy, has already received approval to pilot a blockchain-based energy trading platform

Digital utilities – A new world order

Experience – Digital utilities today are focusing on many initiatives such as empowering customers to complete all their account transactions online with fewer, easier steps on any device, anytime, and anywhere. While some utility firms have become the ‘Netflix of electric vehicles’, providing subscription services for electric cars with home charging capabilities, others are creating online-only brand experiences for digitally savvy, cost conscious consumers with 100% renewable products. The focus of these initiatives is to complement energy with non-energy services, including e-commerce, insurance, mobility, and healthcare. These services will in turn create moments of truth and new revenue streams such as incentivizing customers who participate in utility virtual power plant (VPP) plans or paying customers through dynamic tariffs like plunge pricing for using excess electricity in the grid. 

Efficiency – According to McKinsey, digital technologies can improve cost efficiency by one to four cents per kilowatt-hour in power, if successfully implemented. Digital has the potential to improve efficiency across the utility value chain starting from heat rate during generation, to bidding in the market, to inspection in transmission, and to field worker productivity in distribution. A digital utility can also enhance the effectiveness of customer service agents in retail and orchestrate a distributed energy ecosystem (DEE) for behind-the-meter services. 

Ecosystem - Digital technologies provide utilities with the opportunity to build an ecosystem with partners, customers, and competitors to generate exponential value, thereby moving from a product-centric to a purpose-driven approach. This is compelling utilities to enter into partnerships with builders and developers for new connections, and with customers for renewable journeys and demand-side management. Utilities are also partnering with other utilities for mutual co-operation and support during disasters, and with other organizations across industries to provide a one-stop solution for end consumers. 

The success of a digital utility depends on its understanding of customer personas such as that of a tech savvy, cost conscious, ecofriendly, or comfort-seeking consumer. Such an understanding will help it provide personalized experiences, whereby it can showcase its capabilities as a flexibility provider, affinity service provider, or value creator. These capabilities serve as efficiency levers and help a utility make accurate market predictions for the right ecosystem.

Anindya Pradhan is a Utility Value Discovery Advisor in the Utilities Innovation and Transformation Group (ITG) at TCS. He has over 18 years of global business consulting experience in the utilities industry, spanning markets in the US, Canada, UK, Europe, Australia, Japan, and India. An alumnus of the Indian Institute of Management (IIM), Kozhikode, Anindya started his professional career as a part of the operations team of a thermal power plant. In 2004, he joined TCS' utilities practice. In his current role, he helps TCS' global utilities clients discover, define, and generate value at the intersection of energy and digital technologies.