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Digital Transformation for the Utilities - An Overview

Digital transformation is all around us, whether it is depositing a cheque by phone, asking Alexa to turn down lights in a room or smart kitchen devices that sends cooking progress via Bluetooth. Using remote sensors and analytics to capture data and discover valuable insights about customers, assets and suppliers has opened a frontier for new innovative services and approaches to doing business. Broadly placed under the term digitalization this development gives an organization better visibility into their operations and more control over outcomes saving much time and effort while reducing human error and improving the overall customer experience and service quality. Is there a business case for a digital transformation for the utilities that operate vast system of assets and deliver vital services to many customers? As the digital applications are becoming mainstream it is getting vital for the utilities to have a digital strategy to effectively manage the increasingly complex nature of their networks and services.

In the early 1900’s when electricity was being distributed to the houses. Utilities were considered technology companies because they were laying the foundation of modern life and there was a strong demand for electricity service to be able to bring light and connect the latest time saving tools and appliances at home with perhaps the same longing eyes as there is today with release of the latest electronic devices. With proliferation of advanced technologies such as remote sensors, data analytics, automation and unmanned aerial vehicles (UAVs) utilities have an opportunity to evaluate how they plan, build, operate and maintain their assets and how they serve their customers. For instance, automating repeat tasks, routine designs, inspection and maintenance activities and using super-computing to predict when and where the next outage is likely to occur and when it will be restored would not only reduce costs but improve service quality, reliability and customer loyalty.

The idea of transformation can be daunting for most organizations not knowing where to start. This is especially true for the utilities who by nature of their business need to be very cautious and move in baby steps. For utilities the digital transformation needs to start with the customers in mind because that is who they ultimately serve and need to satisfy. Customers want accessible, problem free, reliable, safe and low emissions electricity at an affordable price with quick access to their account information such as billing history, usage, easy to understand rate structure and options to save money. They also want choice to be able to produce, use and sell their own electricity, adapt new technologies such as electric vehicles, get notifications about outages such as why power went out, what utility is doing to restore quickly, when it will be restored and help set up a back-up battery or generator to deal with outages.

There is an implicit expectation that from the customers today that the utilities are looking after their interests and priorities using the best in class approaches and techniques to conduct their business. This means that if there are new proven technologies and methods available that improves asset performance, reduces outages, restoration time, cost of service, and improves electrical safety and customer experience they expect the utilities to critically evaluate and adapt where there is value proposition.

Customers also expect the utilities to meet their ever-changing expectations that are being shaped by the likes of Amazon, Google and Facebook on how customer communication and services needs to be customized and delivered to their tastes and evolving needs. Customer care today also means frequent and meaningful customer specific interaction via a phone app, an online account and even integration through home smart devices such as Alex and Google Home to earns their loyalty and trust. Utilities can do this because they have a tremendous source of information from the customer meter data that needs to be harvested to better learn the individual customer behavior and needs, and additional value-added services of interest to them. For instance, from the meter data utilities know when a household goes to sleep or wakes-up and is watching TV, baking or vacuuming. Utilities can also detect issues with a customer’s home appliances. Each electrical device has a certain load-signature that allows the utility to harvest the smart meter data to detect issues with a home’s appliances, whether it is energy efficient or not or whether there’s an issue developing with the appliance. Utilities can use this data and, perhaps for a service fee, they can provide a residential customer useful information to help them save money on their bills as well early warning of developing issues, perhaps if a home furnace blower is starting to draw extra amperage because bearings are worn out or fridge compressor is overheating because piston is not being lubricated properly.

Another aspect of digitalization that utilities need to pay close attention to is their potential dual role as enablers of the digitalization of cities and industry such as autonomous vehicles, delivery by UAVs and agritech applications. Utilities own some very valuable assets spread throughout our lands that can be used to host multitude of networked devices that will need to be deployed as eyes and ears of the high-tech smart cities. Whether it is providing utility poles or the rights-of-way for mounting the much anticipated 5G network antennas that will have much higher density than 4G, motion sensors and cameras to monitor traffic flows, and security breaches, weather stations for predicting renewable generation capacity, construction and farming activities or using the utility fiber network for additional bandwidth needs utility assets are becoming invaluable resource for helping realize the vision of smart cities. For utilities to fully realize this potential they need to start collaborating with the municipal governments and the telecom carriers on the value of their assets and defining each other’s role and working arrangements while developing design standards for the third-party attachments mounted on their assets. This needs to be an important part of their long-term digital strategy.

As the adoption of distributed energy resources (DER) from microgrids such as rooftop solar, geothermal, battery storage or small combined heat & gas (CHP) units, micro turbines spreads the need for a distributed energy resources management system (DERMS) increases that will allow the utilities to aggregate the DERs capacity at the distribution level and put the electrical capacity on the grid. The distribution utilities will essentially be operating a distribution electricity exchange allowing the microgrid operators to buy and sell electricity on their distribution system. This will require a comprehensive data management system to record information about the various microgrid operators and their electricity kWh and financial exchange transactions.

As this vision is realized the utilities will become owners of vast amounts of data of not just their own assets but also data the hosted third-party devices will be collecting as envisioned in the concept of DERMS and smart cities discussed above. Utilities will have the option of storing that data with the commercial storage providers or creating their own backend data warehouses and offering that service to other entities such as local governments, universities or health providers who have enhanced date security needs requiring that data be stored locally versus being hosted by a foreign entity outside the local region or the country.

As great as this digital transformation sounds it is not possible without the utility’s executive leadership creating a vision, culture and buy-in first from the utility management then from the whole organization on the need to transform. Middle management can initiate it within their teams by asking them to innovate by looking at better ways of doing the day-to-day routine tasks, making incremental small improvements to proof the concept before implementing it at scale. Utilities have traditionally worked in silos that works well for focusing departments and teams on specific goals and activities, however, it does not work so well if the goal is to collectively innovate as an organization. The silos need to be opened-up to allow groups to collaborate and discuss value proposition of the potential opportunities. Utility leadership will need to bring in new talent such as millennials to mix with the intermediate and senior talent. The new generation is accustomed to digital technology and doing things in newer ways that generation X and baby boomers are not accustomed to.

These are only a handful of digitalization use cases meant to put the utility leadership in the right frame of mind of what is possible and where to start probing as they develop a digital strategy for their utility. Data driven technologies and approaches such as machine learning and analytics are evolving fast and their applications are almost limitless. The utilities are specifically prime to benefit greatly from having a digital strategy as they have larger network of assets scattered across a large geographic area. In future papers specific applications of digitalization with more specific use cases from operations, asset management, planning to project execution and construction will be discussed to help utilities leadership understand the value proposition of developing a digital strategy for their organization.

Ahsan Upal's picture

Thank Ahsan for the Post!

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Discussions

Matt Chester's picture
Matt Chester on Apr 1, 2020 12:49 pm GMT

There is an implicit expectation that from the customers today that the utilities are looking after their interests and priorities using the best in class approaches and techniques to conduct their business. This means that if there are new proven technologies and methods available that improves asset performance, reduces outages, restoration time, cost of service, and improves electrical safety and customer experience they expect the utilities to critically evaluate and adapt where there is value proposition.

This is quite an interesting position for the utility industry, one that's unique across other business types. At least on the surface level, this expectation is shared by the utilities, but the devil may be in the details-- where what a customer feels is in their best interest may not line up with what the utility deems to be in the customer best interest. I wonder if some of the advanced digital technologies, such as the smart devices and their uses, are deemed essential best practice by customers but are considered more superfluous extras by the utilities? Do you find that there's any disconnect like this that might be getting in the way?

Ahsan Upal's picture
Ahsan Upal on Apr 6, 2020 5:28 pm GMT

Great observation Matt, understanding customer expectations and their changing needs is a growing area of attention for utilties and much still needs to be done to close the gaps. To some degree there's bound to be a level of disconnect between the service providers and their customers regardless of the industry whether it is banks, airlines or the utilities because of the nature of the relationship and business structure. For example, while utilities have certain global mandates and regulations to meet such as cost-of-service and reliability/safety/service level across thousands and millions of customers of varying needs and means, the customers tend to mainly focus on their monthly bill, reliability and customer service. Those are the areas where I think the main opportunities lye for the utilities to innovate and show gains.

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