Updated 17/01/2023
In this historical period of instability and uncertainty, prices for electricity, gas, water and waste management services are inevitably rising, eventually impacting the resilience of entire economies and individual consumer bills. Organizations operating in the utilities sector are similarly going through a time of great stress. Yet, despite it all, the energy transition is accelerating.
Energy and utilities have always been an integral part of a conversation about complex and strategic issues. This is happening, we might say, at the intersection of different worlds: technology, economics, finance, industry, culture, and it is unfolding over long time horizons. So, we will talk about the new utility industry trends.
Utilities sector: the context
The 5 utility industry trends we highlight in this post will change the energy landscape in the near future and simultaneously help reshape our everyday reality (in fact, they are already doing so). To better understand these issues, let’s pause for a moment and broaden our gaze to the entire context.
The war in Ukraine and the energy transition in Europe: greater energy efficiency and lower economic growth
According to the latest Energy Transition Research from DNV, an international company specializing in assurance and risk management services, the energy transition in Europe will not slow down due to possible disruptions in Russian gas supply, but will continue to accelerate. Compared to forecasts prior to the start of the conflict in Ukraine:
- 34% of the energy mix in Europe in 2024 will come from non-fossil fuel materials (up two percentage points).
- Total gas consumption will decrease by 9% in 2024.
- Energy emissions will be 2.3% lower in Europe between 2022 and 2030.
- The share of solar energy in particular will grow, increasing by 20% in 2026.
The dramatic situation in Ukraine is likely to shift the attention of companies and governments to the development of low-carbon energy-related technologies (such as renewables and nuclear), and while it is likely to produce greater energy efficiency, in the medium term economic growth will tend to be lower than previously expected.
The utilities market in Italy: decarbonization and digitalization
The study Italy and energy dependence: diversifying sources and investing in renewables for a less constrained and more decarbonized future market, recently presented by Agici and Accenture’s Utilities Observatory, provides a snapshot of possible scenarios that would advance the decarbonization goals set for 2030. In general, the research focuses on a number of interventions that push in the direction of a gradual enfranchisement from gas dependence. In fact, it now seems clear that accelerating the country’s energy transformation is necessary not only in relation to the delicate historical moment we are living through but with a view toward anticipating the benefits for the environment to the nearer future.
Claudio Arcudi, Head of Energy & Utilities at Accenture Italy, also includes digital tools in the mix of interventions and policies that can make our country system more competitive:
“Utilities and energy companies must create a virtuous ecosystem around onshore and offshore, particularly by focusing on wind and photovoltaics. Investments in renewable energy must be part of a systemic approach to decarbonization that is now possible thanks to digitalization. The Internet of Things, artificial intelligence, and big data will be the critical success factors of this new energy system”.
The role of technology in the development of business models in the utilities sector
Just a year ago, in the article, Tech architecture matters more than ever before, Accenture confirmed the role of technology in the utilities sector, emphasizing its importance in developing the business models of the future. According to Accenture, the new utility leaders are also, if not primarily, technology leaders, and the future value propositions they will be called upon to formulate will be defined as much by technological capabilities as by business strategy, so implement new utility industry trends.
- 83% of utility executives agree that business and technology strategies are becoming inseparable, even indistinguishable (Source: DNV).
This is because “A utility’s ability to generate value will increasingly be based on the limitations and opportunities of its technical architecture”.
- 88% of utility executives believe that their organization’s ability to generate value will increasingly be based on the limitations and opportunities of its technology architecture (Source: DNV).
A modular cloud-native vertical model based on microservices can provide utilities with the necessary flexibility, resilience, and responsiveness to cope with changes in a market that is profoundly affected by external factors that are often unpredictable or uncontrollable. Think of those since 2020: conflicts, extraordinary weather events, the recent pandemic.
- 90% of utility executives agree that, to be agile and resilient, their organizations need to invest in digital transformation that relies increasingly on the cloud.
Now that we have provided some reference points for navigating through such a difficult-to-interpret environment, we can identify the major trends that will change the utilities sector.
What are the utility industry trends?
1. The 5G revolution: toward decentralized management
One of the utility industry trends is 5G. 5G is the fifth-generation mobile network, the new global wireless standard that is capable of transferring data 10 times faster than 4G with up to 1,000 times more capacity, and enabling the connection of many devices simultaneously. Now, a process of change is taking place in the utilities sector: centralized systems are becoming decentralized.
This means that as more (renewable) energy sources are connected to the network, the network becomes more complex to manage.
In addition, 5G mobile networks have low latency. That is, there is less delay in communication from one point to another, in other words, the time between sending information and its response. This property creates new opportunities, especially in terms of cloud computing within the utility industry trends. Data moves with greater speed between multiple devices (such as smart meters and sensors) and the cloud, where it is analyzed and used to trigger certain actions.
According to the Power and Utilities Industry Outlook 2022 published by Deloitte, in 2021:
- 58% of executives surveyed were already implementing 5G or running pilot projects;
- 26% of respondents in the power and utilities industry reported that 5G communication technologies were already integrated into their company’s strategy,
- 36% planned to incorporate them.
2. Smart grid: smart grids for greater resilience
The second utility industry trend is smart grid. The smart grid is a set of electricity information and distribution networks that functions very differently from the old distribution system. Whereas previously there was only one direction of energy transfer (from the distributor, to the energy supplier, to the user), today smart grids enable multidirectional distribution. Thanks to the increasing use of renewable energy sources, smart grids optimize distribution – generating plants are decentralized (private homes and businesses and no longer single distributors) – and minimize possible overloads and variations in electrical voltage (Source: Acea).
Smart grids are also called “smart” grids because, thanks to digital technologies, they enable two-way communication between utilities and their customers and detect malfunctions, friction, and delays along transmission lines in a timely manner.
They also manage to increase grid resilience in the face of extreme and frequent weather events, are able to integrate clean energy resources such as solar and wind, and support distributed energy resources, including electric vehicles and solar power.
Smart meters are a key component of the smart grid:
- they record energy consumption, for billing purposes
- they collect information for remote reporting
- they allow consumers to see and adjust how much energy they are consuming in real time, without the need to physically access the meters to get a reading.
On the user side, the savings in operating costs are substantial. On the utilities’ side, the information transmitted by smart meters allows them to better manage their assets, particularly distributed energy resources such as solar panels or storage tanks.
3. Artificial Intelligence.
Wherever there is a large amount of data, there is an opportunity to implement artificial intelligence programs to produce advanced analytics and extract insights useful in making subsequent decisions. From asset inspection to energy load forecasting, to customer service, utilities are finding AI and machine learning to be extremely powerful and flexible tools for improving process accuracy and efficiency.
Utilities can make the inspection of transmission and distribution resources more precise through the use of drones powered by artificial intelligence applications. Unmanned and equipped with cameras, the drones collect thousands of images of conductors, transformers and other equipment. These images are then analyzed to identify resources at risk of failure.
High spatial resolution remote sensing is proving faster and safer than traditional manual inspections, minimizing costly power outages and the risk of forest fires.
4. Augmented reality
With augmented reality (AR), utilities can now overlay digital assets on top of the real world and use the physical environment as a backdrop for increasingly accurate simulations.
AR is different from virtual reality, which completely replaces the real environment with an entirely digital (virtual, that is) one. AR creates digital scenarios within the physical environment and actively uses it to draw inferences from the real world.
The utilities sector is finding augmented reality applications a valuable support for carrying out field operations, increasing their safety, from production to supply, all along the supply chain. 3D models of real equipment generated in real-time can find solutions to real problems quickly and efficiently. By equipping mobile AR devices, information about various assets can be retrieved immediately, thus facilitating on-site maintenance.
AR also makes it possible to develop particularly successful training and education programs: experienced workers can guide work remotely while remaining in constant communication with field operators.
5. The digitization of utilities
The latest Salesforce survey, How Technology Can Improve Energy & Utilities Customer Satisfaction reports how digitized companies in the utilities sector now outperform those that have yet to integrate and upgrade their legacy systems. The latter, in fact, lack flexibility and are no longer able to provide a personalized and quality service that meets the standards expected by their target audience, a prerequisite in today’s crowded and hyper-competitive market.
Especially in times of crisis, customer experience is a key differentiator. In fact, 80% of users say that the experience provided is as important as the products and services. In particular, users today expect to be able to:
- easily report outages and problems
- rely on timely support, on every channel
- have technical staff intervene to resolve the problem, either in the field or remotely
- monitor all activities, through their personal account
- take advantage of personalized content
While climate change is increasingly producing extreme weather conditions, the choice between different types of technologies has expanded greatly (think of currently available solutions that leverage artificial intelligence, cloud, and edge computing, just to name a few examples).
Technological advancement has brought significant benefits not only in solving critical on-the-ground issues related to energy production and distribution, waste disposal, or water management, but also in the communication of businesses, which have begun to prioritize the educational, informational, and operational needs of their target audiences by tailoring their messages and services to increasingly accurate user profiles.
If we then shift the focus to building a brand-customer relationship, among the technologies most effectively employed, we find:
- digital tools and channels that enable more advanced forms of personalization. These types of self-services create new opportunities for engagement and increase user empowerment by helping to decrease the volume of calls to call centers;
- artificial intelligence applications, through which utilities can enhance customer interactions and streamline and simplify both transactional and communication processes, resulting in reduced costs;
- programs for automation, which can also be used when the entire system goes down, solving contingent problems of excessive load, for example, that could be encountered in call centers;
- systems for the collaborative management of multichannel document creation, storage, and distribution processes, where transactional and CRM data are enhanced and transformed into documents and communications in a full multichannel perspective;
- products for the dematerialization of tax and document processes, which ensure compliance with Italian and European rules, reduce the costs for document and tax management, and facilitate interactions between the company and its customers, with positive effects on the customer experience (this is the set of tools developed within RegTech).
More and more utilities, from multinationals to start-ups, provide their users with customized apps, microsites, and interactive videos, also accessible via mobile devices, that allow them to manage and pay their bills, independently update their customer profile, resolve outages, provide alternative scheduling, and explore topics of interest. In short: smoother and more immediate communication between user and utility company.
One final observation: to be able to harness the potential of all the technologies we have discussed and thus improve the customer experience, it is necessary to provide for their integration into company infrastructures, which can also be very complex and often need to be modernized to be able to withstand an increasing load of increasingly sophisticated interactions.
The business opportunities offered by the five trends we have outlined in this post produce an immediate benefit that can be felt throughout the supply chain, from production and distribution to payment and outage management, to communication with end customers.