Abstract

The new energy economy is driven by decarbonization, decentralization and democratization, compelling the utilities industry to accelerate digital transformation.

The global digital utility market size is expected to reach $USD 299.1 billion by 2025, expanding at a compound annual growth rate (CAGR) of 11.6%. Digital technologies are expected to streamline core processes, support data integration, improve asset utilization and visibility, and enhance regulatory compliance. According to McKinsey, digital transformation can help cut operating costs by up to 25%. However, disruptive technologies and competitive threats will continue to place pressure on utility companies to innovate quickly and deliver seamless customer experience, while ensuring safety and reliability.

Next-gen transformation in the utilities industry requires a purpose-driven, resilient and adaptable approach. This whitepaper looks at how utility companies can build new capabilities, business models and revenue streams by leveraging a platform centric approach. A modular approach will enable enterprises to reimagine value creation, become more agile and enhance decision making.

Aligning with the changing energy ecosystem

The utility industry has been undergoing unprecedented transformation in recent years.

This is pushing companies to rethink their sustainability and growth model by shifting focus to customer and employee centricity. There is also a growing demand for renewable and distributed energy resources, non-energy product bundles, self-generation, and e-mobility services. Here’s a closer look at some of the key shifts that are driving transformation in the utilities industry:

Global shift towards renewable energy sources: Countries have pledged net-zero emissions and carbon neutrality to tackle climate change, and utilities are adopting carbon-capture technology and super grids to support this goal. However, shifting to alternate sources of energy requires a significant transformation across infrastructure, asset, people, and technology. By 2024, over 40% of traditional oil and gas companies will operate low or no carbon subsidiaries and rebrand themselves as diversified energy companies. 

Climate change and regulatory compliance: Extreme weather conditions, such as wildfires in in USA, bushfires in Australia, flash floods and cyclones in Europe and Asia, have been linked to global warming. The current infrastructure may not be robust enough to handle such drastic weather changes. Governing bodies are therefore enforcing stricter regulatory norms, which will require utilities to reimagine their operations, including vegetation management, grid resilience and power restoration.

Competition in a de-regulated market: New players are entering the market with innovative business models and disrupting the traditional value chain. For example, Tesla is now offering energy supply alternatives, such as solar roof panels and battery farms. Utilities must provide better customer experience at lower cost in order to compete effectively. 

The COVID-19 pandemic has further catalyzed the need for automation, digital interfacing and smarter operations. By 2024, 80% of electric, gas and water companies will have implemented sustainable business models by rearchitecting their core business to accelerate transformation. Over the next five years, the focus for generation as well as transmission and distribution businesses will be on enhancing flexibility, efficiency, safety, and reliability. Management of distributed energy resources, digital grids and real-time situational awareness through integration of information and operational technology, and artificial intelligence (AI), will be the key areas of transformation. On the other hand, utility retailers are likely to prioritize customer experience and operational efficiency and build new revenue streams. This will be driven by mass personalization and innovative product management along with intelligent, data-driven operations.

Internal roadblocks to digital transformation

Compared to other industries, utility companies have been slow to implement digital technologies across the organization.

According to J.D. Power’s 2021 Utility Digital Experience Study, while utilities have been largely successful in digitizing areas such as payments, they are still lagging in more complex areas such as viewing consumption history and researching energy-saving information. This may be due to internal roadblocks such as:

Inability to scale: The utility industry is infrastructure-heavy, with assets (both above and below the ground) spread across geographies. Maintaining and upgrading these assets to improve outage management is challenging. Moreover, legacy IT system that are on average 10-15 years old, make it difficult for utilities to respond to change and scale quickly to meet digital requirements.

External dependencies: Utility companies rely on several commercial off-the-shelf solutions, which create dependencies on product vendors for transformation decisions.

Diverse and decentralized data: There has been a sudden surge of data from multiple endpoints, including smart meters, connected devices and social media, with varying volumes, frequencies and even structure. In addition, this data can come from various sources and is stored in disparate systems, making it difficult to generate actionable insights quickly.