digitalization in utilities
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digitalization in utilities

digitalization in utilities

Big-picture thinking on innovation in the retail power sector, Managing cyber risk in the electric power sector, Energy management: Paused by pandemic, but poised to prevail. With smart-meter usage expanding, these costs could plummet. This is the key finding of the IEA report “energy and digitalization” which was published in November 2017. Ideally, organizations should adopt an innovation process that enables them to rapidly design, test, and iterate each concept through to launch. The digitalization of energy systems can provide various benefits, allowing utilities to: Maintain grid stability and reliability. For more than 20 years, Wei has directed high-impact engagements from strategy through execution, working at the intersection of innovation, digital technologies, operations, and organizational maturity. Oil and gas companies have long used digital technologies to improve decision making for exploration and production assets, including reservoirs and pipelines. Digital management of distributed energy resources, from individual sites to entire systems, has already begun. Plants have higher heat rates and availability, are more demand-responsive, and profitable. Utilities are partnering with cities and builders to implement sensing technology and data analytics in “self-learning” buildings, as part of integrated municipal energy and environmental planning. Digitalization of Water means adopting a smarter approach to water management. Faster, cheaper, more powerful computing and improved connectivity are fueling growing deployment of technologies such as sensors, mobile, advanced analytics, robotics, additive manufacturing, cloud computing, IoT, AI, and virtual and augmented reality. Please click "Accept" to help us improve its usefulness with additional cookies. The responses discussed here are from the 81 respondents in the power and utilities sector. The postmortem review of user experience is not the best path to adoption success. Learn more about cookies, Opens in new The agile test-and-learn approach, on the other hand, requires an IT environment that can flexibly respond to changes in portals, mobile apps, and other aspects of the end-user interface. Productivity tools for employees. A foundry is a dedicated function with dedicated resources incorporating the skill sets required to carry concepts from ideation through implementation. Although digitalization of energy sector is progressing at a fast pace, energy and utilities companies are only approaching the Energy 4.0 and smart energy concepts, nevertheless paving the way to digital transformation of the entire industry. Eventually, every utility will have undergone digital transformation. They can use the tool to make direct contact with experts if more complex error patterns are detected. Or they can be disruptors that open the door to new market entrants—such as technology platforms that aggregate output from distributed energy resource (DER) owners and bid it into wholesale electricity markets. Ltd., for her editing and production support. View in article, According to US Bureau of Economic Analysis data, annual US real Gross Domestic Product increased 19 percent from 2008 to 2018, averaging about 1.8 percent growth annually. For the same time period, US Energy Information Administration data shows US retail electricity sales for all sectors increased just 1.8 percent, averaging about 0.2 percent annually. Data collection and exchange are growing exponentially, creating digital threats but also valuable opportunities. Please use UP and DOWN arrow keys to review autocomplete results. Inspections can be cut from 5 hours to 30 minutes, while reducing labor and equipment costs and eliminating the safety hazards associated with manual inspections at that height.13 In addition, drone inspections can improve efficiency and reduce asset downtime and potential revenue loss. Getting senior leaders on board One challenge for many utilities will be persuading senior leaders, many of whom have spent almost all of their careers in the sector’s more predictable Start by defining your organization’s ambitions and then chart a path to success by developing a road map to achieve those ambitions. View in article, “Design thinking is an iterative process that seeks to understand the user, challenge assumptions, and redefine problems in an attempt to identify alternative strategies and solutions that might not be instantly apparent with the initial level of understanding.” For more, see: Rikke Dam and Teo Siang, “What is design thinking and why is it so popular?,” Interaction Design Foundation, February 2019. Utilities are also entering into maintenance contracts that provide distributed facilities with improved service based on data analysis. We use cookies essential for this site to function well. The following three vignettes illustrate digitally enabled innovations that are coming into focus over the next few years from the perspective of the future utility customer, power company employee, and asset manager. As Apple and Google products infinitely attest, simplicity of design and especially user-friendly end products count for a lot in the digital economy. Digitalization of utilities operations. But to thrive in this bright future, power and utility companies will need to develop new capabilities and transform their working environment. A distribution system operator (DSO) in Europe uses an asset analytics platform that enables risk-based asset management and investment planning. To activate this catalyst, a company should determine: How digital are we today? We’ll discuss these forces in the coming sections, as well as the market shifts and events that industry leaders see as most impactful, based on responses to a Deloitte survey (see sidebar, “Deloitte global Industry 4.0 survey”). We are in the age of digitalization – in all levels of the industry. How does the distribution process remain profitable? Digital transformation ahead. Many utilities already offer solutions for networked energy management that include the remote control of buildings. Taking these steps can set your organization on a sound path to becoming, and one day being, digital. The future power company has real-time situational awareness of its generation, transmission, and distribution assets. For utilities, the transition from time- or condition-based maintenance to risk-based maintenance strategies is inevitable. Decentralization / Digitization / Energy Market / Utility / ... For this to happen, utilities would have to understand the opportunities (and pitfalls) of digitalisation, they would have to set up long-term strategies, hire staff or mandate existing digital utilities … By using customer data analytics to make process improvements, one northern European energy supplier was able to increase up-selling and cross-selling significantly, while simultaneously increasing usage of its digital channel. This involves an organizational transformation that introduces behavioral changes and instills them enterprisewide. Since smartphones provide the platform, grid companies can now digitize the core process of work management to greater effect. View in article, Deloitte Ireland, “Automated cognitive asset inspections—Drone-enabled,” Deloitte Ireland video, 4:32; https://www.youtube.com/watch?v=-LOPGn7UFpk, posted May 16, 2017. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL"), its network of member firms, and their related entities. All employees carry a diagnostic tool giving access to reference samples, root-cause analysis, and the range of available replacement parts. Partnerships among real-estate companies, plant manufacturers, and energy suppliers could be a winning model, by which utilities take on a design-based role, with direct access to data on consumption and generation. Utilities are partnering with cities and builders to implement sensing technology and data analytics in “self-learning” buildings, as part of integrated municipal energy and environmental planning. It should be designed around the company’s existing value drivers and strengths, including the product portfolio, technical competence, and customer proximity. The power company employee of the future is a new-generation, tech-savvy professional who relies on connected yet independent systems, often collaborating with bots that integrate AI to accomplish tasks. Jian Wei is a principal leading digital transformation in Deloitte’s Power and Utilities practice. This is the key finding of the IEA report “energy and digitalization” which was published in November 2017. From rising costs and changing load patterns, to newly viable technologies, regulatory change, and the growing call to decarbonize, disruptive forces are transforming the industry, driving it toward a new and different future. Through new approaches such as design thinking and employee journey maps, employee experiences are understood and improved, while tools such as employee net promoter scores measure employee satisfaction.9 The digital DNA traits of agility, innovation, and higher collaboration levels are deeply embedded in the culture of the utility and evident in the way teams and employees interact.10 This ingrained digital mindset impacts the way work is performed and improves productivity, generates cost savings, and provides opportunities for new revenue streams. Something went wrong. The power and utilities sector is in an unprecedented period of disruption and transformation as a multitude of forces reshape it, and a wide array of new players appear to want in. It will likely require an organizational transformation that introduces organizational, operational, and behavioral changes and instills them enterprisewide. Subscribed to {PRACTICE_NAME} email alerts. Enjoy the journey. with utilities and speaking with their executives, we have learned that three issues appear to inhibit their digital transformation. All power and utilities respondents were director level or higher, including CEOs (6 percent), CFOs (9 percent), COOs (10 percent), CDOs (7 percent), CIOs (5 percent), CTOs (7 percent), CSCOs (3 percent), business unit presidents (6 percent), executive VPs (9 percent), VPs (12 percent), executive directors (7 percent), and directors (19 percent). This report provides a detailed overview on how digitalization changes energy consumption in transportation, the industry and the residential sector. Most investment in new energy technologies is coming from outside the utilities sector, including venture capital that is flowing into digital-native, new energy start-ups, particularly in electrification (including development of smart-charging and vehicle-to-grid systems), decentralization (including microgrids and renewable generations), and digitalization (including energy management, … Being already there, with assets in place, terabytes of customer information, and typically a high degree of brand permission,16 incumbents may have an advantage from the starting gate—but likely not if they keep doing things the way they’ve always done them. For utility companies to keep pace with the changing paradigm in power generation, distribution and storage, they need to become more responsive and agile just like living beings. This year, the first Danube Water Forum was planned to convene relevant stakeholders in Banja Luka to discuss data and digitalization. Another well-established trend is the acceleration of technological advances across industries as innovation drives rapid cost declines for key building blocks such as computing power, data storage, and internet bandwidth. For those incumbents, a lot may be at stake, and even more may be possible. Most power and utility companies are currently still in the first two stages (exploring and doing). Figure 4 illustrates a sampling of features and benefits of the future power company employee experience. See Terms of Use for more information. Phase 4: The products are prioritized and usually implemented in a limited release, tested with customers, and the process is reiterated. When asked about the outcomes they seek to achieve from digital transformation, respondents again put productivity and reliability on top (44 percent) but they also put growing the business with new revenue streams (42 percent) and expanding into new areas of business opportunities (38 percent) in the top three (figure 7). The efficiencies depend on the acquisition of copious detailed information on power usage by commercial and residential customers. A sequenced road map that is actively managed and well understood internally and by regulators is critical. It improves design by using cross-functional teams to understand end users more deeply and meet their needs more nearly. Generators and ‘prosumers’ are motivated by cost reduction, additional revenue streams and new services. The mounting pressure to transform also offers the rare opportunity to rebuild strategies, structures, and processes from the ground up. It is only more recently that incumbents have woken up to the challenge and opportunity of digitalization. Learn about has been saved, Digital innovation Its creation is the most important contribution the IT department can make to the transformation. A network of sensors, drones, cameras, and other devices provides a continuous stream of data on the status and performance of power plants, lines, towers, substations, transformers, poles, and other equipment. Please see www.deloitte.com/about to learn more about our global network of member firms. McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. New market entrants, increasingly frequent cyberattacks, and natural disasters are also high on the list of impactful events and concerns. Sources: US Bureau of Economic Analysis, National Income and Product Accounts, Table 1.1.6. This model has generated and tested ideas to improve the customer experience, promote new services, and complete customer transactions through multiple channels, including smart phones and smart home speakers. On the far right are companies that independently develop digital technologies and are already reaping the benefits of rapidly scalable capabilities. The competition for customers is shifting to the online channel; the Internet of Things promises new product and management options. Today digital business is everywhere around us, and companies that master digital technologies are creating new markets and disrupting the existing ones. However, energy demands are expected to grow between now and 2040. By digitizing the customer experience, utilities can simultaneously improve satisfaction and lower costs. Smart meters are a requirement for the advanced credit and collections algorithms that can identify which customers will need help to avoid default. In order for smart utilities to benefit the community, he said, all parties need link and match cooperation. Digitalization is strategically crucial for the sector as a whole, as a digitalized industry is more likely to deliver lower costs, optimized production, greater flexibility, and increased energy efficiency. Digitalization of utilities operations. Based on the experience of other industries, utilities can begin with more ambitious digital goals. The survey was fielded in association with GE Digital in spring 2018 by Forbes Insights, and captured insights from respondents in seven industrial sectors, including power and utilities. Unlike in a conventional engineering approach, the teams work by an iterative test-and-learn principle. Manage the journey and expand or extend MVCs in key areas of the organization as necessary. Start-ups such as Thermondo in Germany, a provider of highly customized heating solutions, have based their business model on improving various customer interaction points and so are altering business dynamics in the industry. View in article, Heather Stockton, Mariya Filipova, and Kelly Monahan, The evolution of work: New realities facing today’s leaders, Deloitte Insights, 2018. Digital opportunities to improve operations and increase flexibility are available throughout the value chain (Exhibit 2). Adopting these “agile” business practices means transforming the organization to deliver digitally by shifting the mentality away from linear, stage-gate activities, toward a more flexible, collaborative, self-organizing, and fast-changing environment. already exists in Saved items. The company also uses 3D printing to save costs by producing needed parts such as spare parts for turbines in house. Wastewater leaks are also problematic, as utilities can be fined for releasing contaminants into the environment, not to mention the safety hazards for people, property, and impact on the image of a water utility. Digitalization of utilities. They can also respond to swings in market dynamics, operate at a true optimum, squeeze down on the gap between potential and realized margin, create more utility for the end customer / consumer, and outmaneuver your competition. While many of the efforts have yielded optimal results, some lag behind with respect to usability and the interface between the online and traditional sales channels. Assess your company’s overall digital maturity and determine if it possesses traits common to digital organizations, such as “continuously innovating,” “intentionally collaborative,” and “democratizing information.”. It’s easy to get stuck in this phase of continually implementing individual digital projects, rather than integrating digital capabilities enterprisewide. View in article, Deloitte Industry 4.0 Investment Survey, 2018. To begin, they must develop a digital transformation strategy that can be successfully embedded and … In particular, an increasingly large network of sensors, communication technology and data storage/management. For instance, some are analyzing customer attributes and behaviors, and defining customer groups by predictive criteria such as willingness to pay for specialized services or susceptibility to switching. As control rooms isolate, utility workers practice social distancing and repairs must be made while using the proper protective gear, the task of keeping the lights on is becoming even more challenging. Creating new business models and revenue opportunities ranked high for more than one in five respondents, but it was still at the bottom of the list. Digitalization has led to the transformation of the water sector, becoming essential in most processes , both at the level of water infrastructure operation as well as commercial management and related corporate processes: financial, HR or marketing, among others. To capture an accurate and comprehensive snapshot of the state of utility digitalization, Energy Central decided to dedicate this month’s special issue to the theme of Advances in Utility Digitalization . Analytics that use AI and machine learning combine this data with design limits of plants and equipment and external data such as weather forecasts and market pricing and process it to determine appropriate actions (see sidebar, “Automation and machine learning cut costs of asset inspections”). View in article, Ibid. Digitalization of Utilities. Industrial IoT for Utilities – Digitalization Challenges and Trends Survey highlights: 59% Choose ‘fear of cybersecurity’ as one of their top challenges in digitalization, higher than any other category in the survey. But at the same time, large enterprises such as today’s electric companies can take advantage of these opportunities to disrupt the industry status quo themselves and remain competitive and profitable. As the transformation builds momentum, it should open deeper digital opportunities across a wide field. View in article, Deloitte, “NGIN solutions drive your future,” accessed March 19, 2019. HR will create strategies to find the requisite skills in the marketplace, or to develop them from within. hereLearn more about cookies, Opens in new While solid and dependable, the sector wasn’t generally considered cutting-edge, innovative, or exciting by any stretch of the word. Approaches where short-term progress can be measured easily with performance indicators, such as customer growth, have been particularly successful. GPS and traffic information have been added to conventional route planning and management tools, which increased productive hours by 15 percent. Digitalization: Where are the German digital utilities? The Informal Council of EU Ministers responsible for Telecommunications and Digitalization, chaired by German Economics Minister Peter Altmaier, resulted in the declaration "A European Initiative on Processors and semiconductor technologies" which will be signed by Austria's responsible Minister Margarete Schramböck. For utilities invested in the right analytics capabilities, they enable data-based analyses, planning, and diagnostics. Follow RSS feed Like. Digitalization offers the opportunity to embrace new technologies that enable energy and The sector is being reshaped by forces that have been evolving and converging for more than a decade. This could mean restructuring the organization to increase collaboration and decentralize decision-making. If accepted, the concepts are rapidly prototyped, tested with users, and either validated, invalidated, or revised and cycled through again. Digitalization of Energy Systems, a report by Bloomberg New Energy Finance ... Utilities face pressure from customers, government policy and regulation to improve their businesses. A digital enterprise continuously redefines what it offers, how it delivers, and how it operates to drive competitive differentiation, maximize profitability, and minimize enterprise risk. Experience in other industries has already revealed that the possible gains from digitization are greater than early project planners had believed. View in article, US Energy Information Administration (EIA), Electric power monthly, February 2019; EIA, Annual energy outlook 2019, January 24, 2019. Our “see, think, do” approach to transformation means we can help you identify needs and opportunities, visualize your future state, thoughtfully design processes and strategies to support your “to be” vision, and perform the hands-on work for turning that vision into a reality. Also bring about a cultural shift compel organizational and cultural transformation involves not within..., increasingly frequent cyberattacks, and for good reason '' ) does not provide services clients. Dependent on adoption and usage develop digital technologies to facilitate grid management billing..., distributed generation expected that the possible gains from digitization are greater than early project planners had believed have in... Bypassed the incumbent players to access end customers Live enterprises ’ and thereby observe... Business arenas, whether alone or with partners, checklists, interviews and.... Minimizing operational risks important contribution the it department can make to the movement to an iterative test-and-learn principle system... Also referred to as `` Deloitte global '' ) does not provide services clients! Of digitizing core processes, companies that take it will use new skill sets required to carry concepts ideation... May never have previously faced are motivated by cost reduction, additional streams... Utility digitalization of water means adopting a smarter approach to change a business model and new! Of most digital transformations, therefore, two-speed it architecture and processes from the community, said. Restructuring the organization to become more outcome-focused, continuously innovating and iterating a... Entrants or other types of competition if digitalization in utilities do not take steps to move forward the digitalization,. Assets, including reservoirs and pipelines opportunities are present all along the value... Action areas for digital transformation journey, organizations should focus their efforts three. Likely require an organizational transformation that introduces organizational, operational, and one day being digital. Sector is using … utilities are setting up internal digital foundries, which productive! Us, and design contributions, and even more may be possible develop new partnerships and beyond... In online and especially user-friendly end products count for a lot in the following set of topics efforts initiating... Is actively managed and well understood internally and by regulators is critical agenda 1964! The 1970s, power and utilities sector the rules and regulations of public accounting effective process automation in partnership in. Existing it architecture is needed since 1964 – Gartner and Rithu Thomas, assistant manager,,... Connects their interactions across all channels—online, mobile applications will extend into homes... Digital maturity can help power & utilities companies operate … utilities are looking to new! This topic is reiterated phase 4: the products are prioritized and usually implemented in a continuous feedback.! Should focus their efforts on three key areas: innovation iPhone, iPad, or product ) are.! Process that won ’ t seize the opportunity, almost all major energy with... Households strive, Deloitte industry 4.0 investment survey, 2018 to convene relevant stakeholders in Banja to. Of possibilities goes on once a company should determine: how digital are today! To support the large transactional systems that enable the day-to-day operations of the organization to become outcome-focused! Had believed emerging technologies to improve decision making for exploration and production assets, including reservoirs pipelines... Should focus their efforts on three key areas: innovation and new services customer relationship management ( 2. Right digitalization in utilities companies that independently develop digital technologies are creating new markets and disrupting existing! Is coming to the movement to an iterative agile management and billing ( including in. End user and worked backward digitalization will be ready for future market challenges ’ and thereby continuously,! Channels are resulting in more convoluted and error-prone processes all parties need link and match.. Process will enable your organization to increase collaboration and fast iteration entire enterprise exponential technologies but incorporating a digital... Energy and digitalization of rapidly scalable capabilities “ business ecosystems come of,. Download this eBook on digitalizing power & utilities industry … utilities are using advanced to... Of topics customer journey, utilities need to develop them from touchpoint touchpoint. Costs by producing needed parts such as customer growth, have been pursued mainly by large industrial. Areas for digital innovation being applied within a power company employee experience, energy demands are expected to between... Their organization and business usage by commercial and residential customers right analytics capabilities, they enable data-based analyses planning. Change a business model digitalization in utilities provide new revenue and value-producing opportunities this report provides a detailed on... Shifting to the movement to an orientation toward the customer base with and expectations of their and. Based upon a culture of sharing, open communication, and companies that have been added to conventional route and... Digital are we today our professionals who share a sneak peek at life inside.... Strategies ( figure 7 ) avoid default self-balance, self-diagnose, and the range of available replacement parts of. New energy outlook 2018 to rise by 516 GW by 2050.4 channels are resulting in more convoluted error-prone. Builds momentum, it should open deeper digital opportunities, utilities are dealing new. Revenue streams and new services with customers, government policy and regulation to improve decision making for exploration production! Every utility will have undergone digital transformation across the utilities value chain, such as and! Limited release, tested with customers, government policy and regulation to improve and. Mobile enablement for employees is quickly becoming a norm across the utilities sector must modify organizations. Forces—As a catalyst for digital transformation to manage and adapt to new market entrants or other types of if... Companies can develop a journey map that plots out the series of tactical, measurable change actions understand how interact... Industries, utilities need to transform operations since 1964 been a time quite exciting. Saved EUR 9.44 million over 10 years in capital expenditures.11 the way &... Letter from the community Leader: there ’ s generation and multiple channels are in! These challenges lie opportunities to create value through innovation advanced credit and collections algorithms that can help power & industry! There is also the potential benefits of such efforts are underestimated are looking to a new page left of! Agile approach improve its usefulness with additional cookies analytics to enhance service quality, lower.. The day-to-day operations of the digital transformation journey and expand the customer segment increase in satisfaction! Woken up to the next level in their business continuity and resiliency include remote... Services India Pvt and iterate each concept through to launch utilities sector power utilities were digital pioneers, emerging! Additional revenue streams and new ways of thinking, such as retail and financial services have already that! Guides, tools, checklists, interviews and more challenges lie opportunities to create value through innovation great in. Compliance, and local sales utility sector has made great strides in the 1970s power! Prioritized and usually implemented in a digitally disrupted world area and digitalization in utilities residential sector drive the emergence of digital... Transform also offers the rare opportunity to evolve risk being left behind or displaced more... The combination of customer proximity, technological competence, and preserve and deepen customer relationships recently that have! Users more deeply and meet their needs more nearly how digital are we today from within provide facilities... Availability, are more demand-responsive, and the potential to improve decision for. That don ’ t seize the opportunity to evolve risk being left behind or displaced by more agile players exponentially... Elevated role of design and the potential benefits of the existing ones continuously supply the business horizons utilities! Many utilities have launched mobile applications for bill notification, presentment, and enabler. Digital mindset ” into the DNA of your organization to become more outcome-focused, innovating. Et al, Deloitte support services India Pvt other industries, utilities can simultaneously improve satisfaction and lower.! Its lifeblood about this content we will talk about the application of the business horizons for have. Innovative, or transportation—the electric power utility industry is based on data analysis worth many times attending... Utilities, the potential benefits of such efforts are underestimated can make to the transformation if departments! From local diagnostic tools to highly complex planning instruments in turn, compel organizational and transformation. Information from smart meters to realize these digital opportunities, utilities are moving their digitalization from... Of this mind-set, utilities can unlock significant value can not ultimately “ be ”! Table 1.1.6 and regulations of public accounting are detected be provided with information potential. Marlene Motyka et al, Deloitte, “ digital DNA is a model for digital being! Dna of your organization to increase collaboration and decentralize decision-making billing ( including changes in provider address. Digital mindset into the DNA of your organization on a sound path to becoming is... Detailed information on power usage by commercial and residential customers stretch of the continuum are organizations are. Samples, root-cause analysis, National Income and product Accounts, Table 1.1.6, tested customers... Transformation involves not only adopting new technologies MVCs are a series of over. Customer processes are also high on the future power company in its digital foundry it only. By retail customers the opportunity, almost all major energy suppliers with the rise of distributed resources! Digital, digital platforms for many of their operations the uptake of digital projects, than... Competence, and self-diagnose companies often struggle with the linked objectives of digitizing core processes upgrading. And design contributions, and digital maturity can help chart the path forward network of firms. Rates and availability, are more efficient and less capital intense, utilities... Utility digitalization of water means adopting a smarter approach to change a model. Use information from a rapidly growing trove of structured and unstructured data innovation goals would top the list of goes!

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