21st Century Utility Winners Will Seize the AI Opportunity – But the Old Chestnut, Data, is Holding Many Others BackAugust 21, 2018
21st Century utility winners will seize the AI opportunity – but the old chestnut, data, is holding many others back
The internet of things is coming to street near you – where your home will do the dishes and wash clothes for you at night to take advantage of lower market prices; where at power plants, self-regulating, repairing, and optimising turbines will utilise artificial intelligence (AI) to enhance performance, reduce wear and tear and lower emissions; and where smart grids will be able to control supply and demand by monitoring power consumed in real time. The utility sector has a lot to look forward to in this new AI world.
So it’s all the more surprising that according to a recent Roland Berger report, only 23% of utilities executives answered that they had a defined strategy for incorporating AI in their companies. And as many as 40% replied that they had no strategic targets or strategy defined. There’s a strong disconnect between high executive appreciation of AI’s importance and pro-active planning for its implementation. So why is AI so special for utilities? And what’s holding so many back from AI?
AI solutions have enormous potential to revolutionise both the supply chain and the customer experience
AI will impact both the energy supply chain in terms of efficiencies and productivity as well as the whole utility customer experience. Here are five ways we’ll see this over the coming years:
- Better energy management – With grids now gathering energy from different sources, including wind, solar, and electricity, operating these systems has become massively more complex. Artificial intelligence’s ability to analyse massive datasets can bring stability and efficiency to energy management. ‘Autonomous grids’ are now envisaged. In the US for example, Stanford University is exploring programming the grid with past data on power fluctuations and weak spots. This new “autonomous AI grid” will be able to respond more seamlessly to major market and climatic events on its own.
- More efficient energy storage – The American energy storage market officially hit a milestone in the fourth quarter of 2017, deploying over 1000 cumulative megawatt-hours of storage between 2013 and 2017. This number is likely to double in 2018. As storage capacity increases and new technologies emerge, artificial intelligence is helping make usage more efficient.
- Better failure management – In November 2017, 32 people died at a coal-fired power plant in northern India after a boiler exploded due to blockages in a gas pipe. This is a common occurrence in the energy industry — without constant checks on equipment and with less than stringent regulations in many parts of the world, equipment failures are common. Using artificial intelligence to observe equipment and detect failures before they happen can save money, time, and lives.
- Upstream exploration – BP Ventures, for example, has invested in artificial intelligence companyBeyond Limits. Beyond Limits was previously working in deep space exploration. At the time of its investment, BP stated that it planned to use Beyond Limits’ technology for upstream exploration, which involves searching for oil reserves.
- Customer energy consumption – By monitoring the energy consumption behaviour of individuals and businesses, artificial intelligence companies can offer solutions to optimize usage. AI is clearly a major opportunity for suppliers to help customers save both time and money with their utility supplies, boosting customer satisfaction and reducing customer churn.
Cautious and risk averse attitudes are holding many players back
Many in the industry seem to be taking a wait-and-see approach, adopting a follower mentality despite acknowledging the potential effects of AI. ‘Utilities firms are waking up to this potential, but their approach is still very cautious and risk averse,’ said the 2018 Roland Berger report. In the same survey, more than 70% of respondents said that they would adopt mature products from elsewhere rather than develop them in-house. Only 18% said that they intended to develop customised AI solutions with their own specialists.
While improvements can be made to firms’ operations with off-the-shelf and non-customised AI technology, the sector should look to the first mover success of AI implementation in FinTech and other sectors. The report also argues that ‘establishing a competitive edge in more specialist areas of utilities’ business will require internal solutions, however, meaning longer development times.’ Roland Berger suggests that firms move quickly on implementing more innovative AI strategies in order gain an advantage over their industry rivals.
A strategic AI approach starts with data strategy
The survey also reveals that the potential of harvestable data is not being taken advantage of by industry players. 73% responded that data was either not collected or unknown and only 17% rated their firm’s data quality and availability as ‘good.’ The industry seems to have a lack of concern over harvestable data – a key driver of AI. To fully utilise the technology, firms need to collect, understand, and use the vast amounts of data they generate. And UK utility companies need to act soon as the AI future becomes clearer and because data harvesting requirements need to be identified early in the strategic process.
It’s clearly time to stop being a utilities laggard and become a leader!
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