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How Will Utilities Adapt and Flourish?

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Michael Smith's picture
Principal KLN Group

If you have been active in the North American utility IT/automation markets over the last 30+ years, chances are that you have subscribed to a publication, read a research report, or attended an...

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  • Feb 23, 2022
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This item is part of the Business Side of Running a Utility in 2022 - February 2022 SPECIAL ISSUE, click here for more

The “business side of running a utility?” In today’s utility operating environment we can safely say that “business as usual” is anything but that. Utility leaders can lean on their decades of experience, but need to work towards a vision that is both deep (what does a sustainable future look like with all of its implications?) and broad (what are the disruptions that we need to watch for?).

Having said that, what makes this topic so compelling at this point in time is the change and the pace of change we are all living and working through in this industry that we all call “home.” For example, it’s not just that renewables are happening; it’s that their growth is accelerating, creating many operational, financial, and customer challenges. Or look at the role of state regulators. Long a predictable piece of the utility puzzle, this is also changing; indeed, many state regulators are looking at changing the decades-old compact with utilities, which will significantly change how utilities take on projects, deploy technology, and interact with customers.

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In this environment, it is wise to take a look at how change is impacting utilities as they prepare for the challenges that lie ahead. Referencing some of the results from a recently published study from TMG Research titled, “Organizational Readiness & Change Management: Aligning for the Future,” (downloadable here) one can get a sense of how a utility’s day-to-day business practices as well as planning for future operations is evolving. The following are just a few examples of how the utility business is changing and will look radically different in just a few years.

First is the role of technology. The TMG study found that implementing new technologies is driving a lot of organizational change in utilities in terms of the technology itself, but also in that the organizational design at many utilities is based on legacy technology. As one utility leader quoted in the study noted, “Our organizational design is probably 70% aligned to old legacy systems as compared to newer systems. Roles will change over time, and a lot of ‘back house’ support will be required as we transition.”

Indeed, as these technologies are replaced, new staffing, skill sets, and business processes will be required. A great example of this is going from an on-premise legacy customer information system to a new solution that is cloud-based. This shift is happening today as utility leaders see the cost, flexibility, and even security benefits of moving large applications to the cloud.

A related challenge is managing the organizational silos that have been built over many years. As another utility leader put it in the study, “My biggest concern with change is that sometimes technology becomes the tail that wags the dog. We need to be delivering more value through the organizational ‘pipes.’ We’re trying to do this, but the technology sometimes makes this difficult.”

Again, the important thing here is not just the technology itself, but the need for a utility to be able to get the most value for its investment in new systems that leverage data, systems, and people across traditional organizational boundaries.

Finally, we take a brief look at how the shift towards renewables and electrification is driving change on two fronts: a utility’s customer engagement and its generation businesses. Looking at the customer side of a utility’s business, the moment that a customer puts up a solar panel on his or her rooftop or plugs in an electric vehicle, they became active participants in the grid, not just a ratepayer writing a check once a month. How does this change the utility’s posture? Consider questions like:

  • How do we work with customers to create a win/win that gives the customer flexibility, reliability, and cost management?
  • Is the distribution infrastructure equipped to manage a large influx on EVs?
  • Extending this scenario out to one possible conclusion, how does the utility stay viable and relevant when the customer has rooftop solar and on-site storage? This is a very real scenario across the commercial & industrial and residential customer segments.

On the generation side of a utility’s business, consider how utilities of all sizes are moving away from fossil fuels to more sustainable energy sources. What will the utility do with all of its boiler mechanics and related job classifications when there are no more fossil fuel plants to service? One utility leader quoted in the study noted that, “A big one for us right now is move from fossil fuels to renewables. We have sold off all of the fossil plants. The entire generation organization has had to change their staffing, skills sets, and mission.” This is a BIG change initiative that will impact a traditionally large part of how a utility operates.

These are just a few examples of the challenges in the business of a utility. This barely scrapes the surface on how the grid will operate in a future that is rich in distributed energy resources, how to leverage value from the massive new data sets being generated from a utility’s digital infrastructure, how cybersecurity is becoming an acute need, and countless other areas of the business.

One thing that all of this change reinforces is the need for utility leaders to sharpen their strategic focus on a future that is unlike the environment in which that they grew up. This might be described as disruption, a big pivot, or accelerated change. All of these would be correct.

No matter how this is labeled or branded, it is an interesting time to be working in the utility industry. All of us need to do what the old high school football coach used to tell his players: keep your head on a swivel and be prepared for the unexpected.

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Russ Hissom's picture
Russ Hissom on Mar 3, 2022

Great post and insights! I work in the accounting and finance area and where we see a need on the changes in the office that you mentioned, is that the old skill sets need to be expanded. Finance professionals will need more technology skills so they know what to ask IT professionals so they can use the reams of data that are available from new systems.

Thanks again for the post!

 

Russ

Michael Smith's picture
Michael Smith on Mar 7, 2022

Thanks Russ. Yes, we are all, or will soon be, awash in data! Interesting times in 'our' industry!

Michael Smith's picture
Thank Michael for the Post!
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