Digital is transforming the energy and utilities sector. Lower costs and improved efficiencies are just the beginning!December 7, 2018
Digital is transforming the energy and utilities sector. Lower costs and improved efficiencies are just the beginning!
Some energy CEOs will see digital as a risk to their business model, but the more visionary ones in the sector will see digital as a route to not just greater efficiencies but new and greater business opportunities. New business models and regulatory frameworks are emerging globally with the progression of digital or ‘Energy 4’ as it’s sometimes being coined. Many established players are seeing the chance to improve the productivity and efficiency of existing operations, at least in the short- to medium- term, before making wholesale changes to their business models. Smart grids, renewables, the Internet of Things and new energy market disruptors are all headliners in the sector and require new ways of working for the energy players – but what’s happening in the less sexy, less headline-grabbing areas of cost and efficiency transformation?
Energy sector productivity and efficiency improvements
Digital opportunities to improve operations and increase flexibility fall across the entire energy value chain. It’s estimated by McKinsey that digital optimization can boost profitability by an astonishing 20 to 30 percent in such utilities. There are three key areas where significant change can impact these sorts of levels of profit improvement:
- Smart meters and the smart grid. Innovations in this area are critical for energy utilities, providing huge quantities of data that enable better analytics, data-based analyses, planning, and energy diagnostics. Research by the Energy Saving Trust shows that more than 60% of people said they would be encouraged to be more energy efficient if they could understand how much their daily energy use was costing them. Also, smart grids are more efficient and less capital intensive, allowing for predictive maintenance and better asset health. Smart meters are also a requirement for the advanced credit and collections algorithms that can identify which customers will need help in order to avoid default.
Multiple tools exist to analyse information including local diagnostic tools and highly complex planning instruments. And with these tools, utilities can optimize staffing levels at power plants and manage the intricate energy landscape of renewable and conventional sources, trading options and demand patterns. Digital technologies such as smart meters enable energy companies to not just collect and manage their data more effectively but can help them optimise their processes, make better predictions, meet their compliance requirements more effectively and introduce new products and services and improve existing ones.
- Digital and mobile employee productivity devices. Mobile enablement for employees is quickly becoming a powerful productivity-boosting capability. Since smartphones provide the platform, grid companies can now digitise the core process of work management to greater effect. This means better asset management, engineering, planning and scheduling, as well as execution and task completion. Since the 1990s, this process has been managed through ERP (Enterprise Resource Planning) systems, which have generally been unwieldy and difficult to use as well as scale. With the latest digital and mobile technology, utilities can more easily incorporate all work into a single more powerful view with universal access.
- Back-office digital process automation. The first wave of automation at utilities is already well underway. Administrative processes in customer management and billing (including changes in provider, address or product) are escalating in volume. Distributed generation and multiple channels are resulting in more complex and error-prone processes. The rewards of process standardization and automation are therefore growing all the time. Process-efficiency opportunities are also showing themselves in the significant variations among retail providers in cost per customer, the cost of resolving errors and billing enquiries.
Navigant Research forecasts robotic process automation (RPA) as an answer to all this in the energy sector to grow by well over 25% between 2018 and 2027. Energy players will increase investments in RPA to improve operational efficiency in many areas. Its use is expected to be high within the contact centre, in the back office and in field operations. It will allow utility staff to focus on more valuable processes, to be trained in new areas or to be taken out of the business. Overall, such task automation helps to dramatically cut utility operations costs.
So this may all be far less headline-grabbing than the Internet of Things and the like, but there are clearly multiple ways that digital is already driving energy players to look at transforming existing processes to become leaner and fitter for the future. And that’s before they even look at creating new, more disruptive, digitally-based business models!
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