If you click on your news app, go to the BBC website or even open a newspaper; there will be something related to utility prices, energy provision or fuel consumption. More than ever, utilities are at the forefront of the political and economic agenda. The Retail Market Review is being implemented from 2014, forcing utility providers to offer only four tariffs. Ed Miliband wants to freeze energy prices for 20 months if Labour is elected in 2015. Fracking is causing controversy across Europe; is it the solution to the energy worries of the Western world or will it cause irreparable environmental damage? Hamburg has recently voted to bring the power utility under public control. SMART meters are being introduced into homes providing insight into energy usage on a house by house level that will either be groundbreaking innovation or a huge drain on finances in an age of austerity.
Clearly, this attention on the utilities sector is well deserved.
In parallel to this, the digital revolution is taking place in businesses and organisations across every sector. According to the joint research between Capgemini Consulting and MIT Sloan Management, 78% of executives say that digital transformation will become critical to their organisation over the next two years and 81% say that digital will give their organisation a competitive advantage.
Every sector is currently going through its own digital transformation. The UK government has the Government Digital Services at the centre of Cabinet Office driving change throughout the big spending departments. The retail sector is embracing the digital agenda, with the shift to online and mobile channels at the heart of customer engagement. The question for utilities companies is what does digital mean for them?
Analytics is cited as the trend with the most impact over the next five years
In this context of the future of utilities and digital transformation, a recent IDC Energy report on “the Digital Utility”, sponsored by Capgemini, is particularly relevant. As expected, its findings present a challenging state of affairs for utilities across the world; energy consumption is down, customer satisfaction levels are low, new competition is arising in the form of customer-owned distributed energy resources and extreme weather is putting pressure on fuel trading and markets.
In the face of all this, what sort of utility company could possibly succeed in these conditions? Well, here at Figure It Out headquarters we agree with the IDC report: a digital utility company.
There are three recommendations arising from the IDC report to address the above challenges over the coming years:
- Optimise the distribution grid
- Develop your channel strategy to engage with customers
- Embrace advanced analytics
You can probably guess which one of those got the Figure It Out team most excited.
Currently most analytics is project based, but with the emergence of big data there is an opportunity for utilities to draw insight on a much larger scale and utilise different types of data. In fact, the IDC report cites analytics as the trend with the most impact over the next five years. New data sources specific to utilities, such as SMART meters, automated distribution and asset condition monitoring equipment will help drive further value if they can be properly exploited with analytics.
To ensure analytical insight is driving their decision making, utilities need to develop an effective strategy to address their people, processes, technology and data. Utilities need to recognise where analytics can provide the most business value and implement the right tools to take advantage of it. Potential use cases include transformer loading, targeted marketing and demand/response programmes. Critical to this is the speed of delivery of information; a real-time feed for demand/response verification, outage management and optimisation of power flows.
Although the scale and rapid flow of utility data can require big data systems and techniques to manage, many benefits can be derived with using advanced analytics on top of current data systems and technology (e.g. optimisation of asset investment plans or marketing campaigns).
Utility respondents do not have a well-developed analytics strategy
So it’s no surprise that we think analytics will help drive growth for the utility sector, but how do utility companies view their current analytics capabilities and its future potential? With a current client, Capgemini Consulting are defining the operating model for the deployment of an analytical asset decision support tool. The business change activities include training and developing end users to embed analytical capabilities among over 800 end users. A small number of Super Users are receiving additional analytical scripting training to take advantage of the full predictive insight capabilities of the tool.
Despite all this, and a common agreement that analytics will create value for operations and customers, the utility respondents did not currently have a well developed analytics strategy.
Going back to the Capgemini Consulting and MIT Sloan Management joint research, it is interesting to note that across all sectors 64% of executives think that the pace of technology change in their organisations is too slow. If the industry and global economic challenges are to be addressed by utilities, this must change over the next few years as the sector embraces big data and analytics.
A challenging future made easier with analytics
The utilities sector as a whole is facing a challenging future, but the power of analytics will help unlock the vast quantities of data that is becoming available through new technologies. This insight will allow companies to tailor customer services and exploit real-time information to optimise distribution and energy management. Surely, this is what digital transformation means for utilities.