Utilities around the world are developing new strategies in response to tectonic shifts in the industry. While many traditional utilities focus on the challenges and difficulties, industry leaders are creating new businesses around market opportunities. One of the key areas of transformation is the digitization of electric utilities’ business.
This is exemplified by the next generation of smart metering, which integrates new capabilities in Internet of Things (IoT), and remote sensoring with advanced analytics and AI. These capabilities enable the accelerating expansion of distributed energy resources. What’s more, they enable the creation of new virtual power plants that are changing the business model of electric utilities.
Digital capabilities enable the creation of new virtual power plants that are changing the business model of electric utilities.
The IBM Institute for Business Value (IBV) report “Digitizing electric utilities: Core Performers power up reliability and resiliency” explores the actions underway to reposition electric utilities to meet current demands and to anticipate evolving future demands. I found insights into the current and future use of exponential technologies particularly revelatory, especially as they accelerate adoption in areas critical to network resilience and safety.
Executives surveyed from 240 utilities identified areas of challenge and opportunity. They discussed their adoption and application of new technologies, data, and insights. They confirmed the well-known challenges arising from the “4 Ds” (decarbonization, decentralization, democratization, and digitization), while sharing insights into their strategies. Importantly, these leaders also described their next steps to reposition their companies and networks for the Energy Transition.
I found responses around the sense of urgency of transmission and distribution (T&D) leaders to be particularly relevant. About half (47%) recognize the need to modify elements of their existing business models. A clear majority (66%) feel moderate or significant pressure to digitally reinvent their operations over the next 5 years.
Strategic digital capabilities for utilities
Industry leaders among those surveyed—identified as “Core Performers” in the report—are pursuing specific strategies and roadmaps to create deep digital capabilities for their operations and workforce. Their roadmaps show 3 areas of strategic focus:
- Digitizing assets. Creating a stable, resilient digital core as a foundation for upgrading IT and OT systems and processes.
- Digitizing workflows. Creating intelligent workflows by integrating advanced digital capabilities (such as IoT, AI, and automation) to improve customer service, efficiency, and workplace safety.
- Digitizing grid operations. Using advanced technologies to maintain resilience and security while distributed generation resources are integrated.
Fundamental to the successful execution of these strategic priorities is the seamless integration of advanced digital technologies across all domains in the enterprise. In other words, it requires breaking down the siloes between IT and OT systems, processes, and data. These game-changing digital capabilities, including AI, IoT, and cybersecurity, must be considered strategic, enterprisewide assets and embedded consistently across all solutions. Transformative value is created by applying advanced analytics and AI, and by identifying opportunities across all corporate data.
AI moves from single points to integrated processes
T&D utility leaders are already leveraging AI-enabled decision making in customer operations, growing from 36% today to 48% in 3 years. While that’s impressive, even greater growth is planned in work and asset optimization. Executives tell us they expect cognitive and prescriptive analytics usage to double from 20% today to 42% of participants in 3 years. AI in asset predictive quality management delivers significant efficiencies, and this use case is expected to increase from 27% today to 41% in 3 years. Injecting intelligence into asset monitoring and maintenance delivers leaner, more efficient, and resilient operations.
Expansion of IoT network
IoT technologies (including next-generation smart meters) will become embedded, integral components of the T&D network. The exponential increase in the quantity of data generated will be more significant than the number of edge devices. T&D leaders will require novel solutions for using active data: collection, communication, storage, sharing, and analysis. Part of the solution will be hybrid cloud architectures that enable seamless and secure management, including data sharing. It’s part of a broader trend: 50% of respondents expect all T&D applications to move to the cloud in 3 years.
Such transformation exerts pressures on the entire organization and its systems: existing IT/OT architectures, the integration of information across business units, and the available skills to formulate recommendations from the data. Coordinating and optimizing for people + technology equals the only winning answer for integrating these domains and accelerating transformation.
Building cyber resilience
Crucially important, the security and control of the new networks and data, and the creation of enterprisewide cyber resilience, is a key area of focus for utilities.
Is enough being done to protect traditional and digitized assets, networks, and data from cybersecurity threats? 2019 alone saw a 2,000% increase in OT-targeting incidents. The 2021 cyberattack on the Colonial Pipeline made headlines, but every utility is battling threats on a daily basis.
About half of surveyed T&D utilities note that they are delaying integration of cloud solutions due to concerns with cybersecurity. Our research shows that only 41% are actually employing cyber resilience tools as well. Thankfully, respondents tell us that number is expected to grow, with the largest area of investment growth outside of distributed energy resources (DERs) and renewables in the next 3 years.
The definition of resilience must expand to include cyber resilience: a utility company’s ability to prevent, detect, contain, and recover from a myriad of serious threats against data, applications, and IT infrastructure.
Intelligent meters drive IT/OT integration
Much of the increased intelligence from across enterprises comes by combining operational data with customer or asset data. This enables actions and operational workflows that can create value and decrease risk.
One crucial value-generating area is next-generation smart metering. Pricing is the first beneficiary of advanced metering programs. These programs include consumption-related and/or network congestion pricing, green energy credits, and flexible tariffs based on whole pricing and bill smoothing.
But advanced metering isn’t the only area that can benefit—others include enabling better decisions in home automation, supporting load management and disaggregation for EV programs and appliances, and analytics driving grid optimization at the edge. As more distributed energy and electric vehicles join the systems, smart meters will continue to play a key role in the infrastructure.
Advanced metering infrastructures will be most effective on a digital backbone including cloud and AI that can quickly harvest data, analyze it, and act on the resulting insights. Through our work with multiple utilities, we’ve observed that a well-defined internal architecture of their data across multiple cloud environments is a critical—but often lagging—step to create value from historical data and real-time situational information. Their experiences validate the mantra “There is no AI without IA.”
Utility industry leaders understand they need a secure, flexible, digital core underpinning their transformation. The results of our research can help executives get focused.
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