Our survey respondents plan to explore many capabilities in the next 1–3 years as part of their digital strategies (figure 9). While many of the efforts have yielded optimal results, some lag behind with respect to usability and the interface between the online and traditional sales channels. Please click "Accept" to help us improve its usefulness with additional cookies. Global battery storage capacity at customer sites is projected to rise by 516 GW by 2050.4. hereLearn more about cookies, Opens in new Plants have higher heat rates and availability, are more demand-responsive, and profitable. The list of possibilities goes on once a company becomes a digital enterprise. Through a cadence of meetings and approval steps, concepts can flow to the right teams with a minimum of governance. More precisely, this means finding the points in the value chain where digitization would make the largest revenue contribution in the next year or two. The power and utilities industry is seeing unprecedented opportunities for innovation and growth from rapid technological advances and cost declines in areas such as solar power, battery storage, wind power, electric vehicles, smart buildings, two-way power flows, microgrids, and more. Utilities struggle with digitalization – especially in retail business Similar to the smart home market, utilities struggle to make use of digitalization in the customer segment as well. A digital enterprise continuously redefines what it offers, how it delivers, and how it operates to drive competitive differentiation, maximize profitability, and minimize enterprise risk. Approaches where short-term progress can be measured easily with performance indicators, such as customer growth, have been particularly successful. Ltd., for her editing and production support. Learn about Digital utilities stand to reap big rewards by improving processes, increasing understanding of the customer, empowering employees, boosting security, and mitigating risks. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. Simply select text and choose how to share it: Digital innovation By digitizing the customer experience, utilities can simultaneously improve satisfaction and lower costs. With the latest digital and mobile technology, utilities can more easily incorporate all work into a single view with universal access. Unlike in a conventional engineering approach, the teams work by an iterative test-and-learn principle. Source: SNL Energy, accessed October 30, 2018. In Deloitte’s survey, 95 percent of power sector respondents agreed with the statement “Digital transformation is a top strategic priority at my organization.”14 But how can they approach this transformation and what are the pitfalls to avoid? In order for smart utilities to benefit the community, he said, all parties need link and match cooperation. Taking action against systemic bias, racism, and unequal treatment, Key opportunities, trends, and challenges, Go straight to smart with daily updates on your mobile device, See what's happening this week and the impact on your business. The agile test-and-learn approach, on the other hand, requires an IT environment that can flexibly respond to changes in portals, mobile apps, and other aspects of the end-user interface. Why? Of course, these opportunities are also opening doors for startups, entrepreneurs, and companies from adjacent industries who may compete with incumbents and disrupt the industry. As they plan to meet the digital challenge, utilities can fortunately draw on a wealth of experience from recent change programs in diverse industries. The digitalization of energy systems can provide various benefits, allowing utilities to: Maintain grid stability and reliability. For utility companies to keep pace with the changing paradigm in power generation, distribution and storage, they need to become more responsive and agile just like living beings. These stably support the large transactional systems that enable the day-to-day operations of the business. Improve customer engagement Utilities must keep pace with the changing relationships with and expectations of their customers. It will use new skill sets and new ways of thinking, such as agile and design thinking. The DSO gained 50 percent efficiency and saved EUR 9.44 million over 10 years in capital expenditures.11. This report provides a detailed overview on how digitalization changes energy consumption in transportation, the industry and the residential sector. A common thread runs through these four types of forces—digital. Wastewater leaks are also problematic, as utilities can be fined for releasing contaminants into the environment, not to mention the safety hazards for people, property, and impact on the image of a … Productivity tools for employees. Some actions are automated through the company’s automated distribution management system (ADMS) and other automation software (see sidebar, “Digital platform enables distribution system planning”). This involves not only adopting exponential technologies but incorporating a “digital mindset” into the organization’s DNA. On the far right are companies that independently develop digital technologies and are already reaping the benefits of rapidly scalable capabilities. This orientation helps ensure that initiatives are undertaken according to their value and the corresponding need for change. In the early stages digital disruption bypassed the incumbent players to access end customers. While solid and dependable, the sector wasn’t generally considered cutting-edge, innovative, or exciting by any stretch of the word. We’ll discuss these forces in the coming sections, as well as the market shifts and events that industry leaders see as most impactful, based on responses to a Deloitte survey (see sidebar, “Deloitte global Industry 4.0 survey”). New market entrants, increasingly frequent cyberattacks, and natural disasters are also high on the list of impactful events and concerns. To begin, they must develop a digital transformation strategy that can be successfully embedded and scaled in the organization. The dimensions of these exciting opportunities can be understood in three developmental waves, comprising productivity and efficiency, the customer experience, and new frontiers. Digitalization of Utilities. We'll email you when new articles are published on this topic. Certain services may not be available to attest clients under the rules and regulations of public accounting. already exists in Saved items. Digitalization is strategically crucial for the sector as a whole, as a digitalized industry is more likely to deliver lower costs, optimized production, greater flexibility, and increased energy efficiency. Digitalization of utilities. Since 2014, utilities have been increasing their investment in digital infrastructure. Although digitalization of energy sector is progressing at a fast pace, energy and utilities companies are only approaching the Energy 4.0 and smart energy concepts, nevertheless paving the way to digital transformation of the entire industry. Not infrequently, however, the potential benefits of such efforts are underestimated. Enjoy the journey. All power and utilities executives represented organizations with revenue of US$500 million or more, with more than half (51 percent) from organizations with more than US$1 billion in revenue. The formidable economic advantages of energy efficiency have been pursued mainly by large energy-intensive industrial companies. To thrive amid these challenges, the utility of the future will be a fully digital system. It enables the organization to become more outcome-focused, continuously innovating and iterating at a fast pace. For utilities, the improved customer processes are also more cost effective. The platform delivers a personalized, data-driven customer experience in real time, as well as services such as home energy management enabled by AI; transactions management; and other products and services in addition to electricity. Many projects within the utility have a digital focus and are using techniques of the digital economy, such as agile development. But to thrive in this bright future, power and utility companies will need to develop new capabilities and transform their working environment. Digitalization and digital maturity can help power & utilities companies to answer the challenges of decarbonization and growing demand. This means that today’s utilities face a digital transformation of their organization and business. Digitalization in Utilities – What is it and is it worth it? To strategy and technology—the two main work streams of traditional business transformations—design must therefore be added as a third prerequisite of the digitization effort. View more content for the Power & Utilities sector, Opportunities abound in today’s power and utilities sector, and more will likely open as the future unfolds, marked by three growing trends: electrification, decarbonization, and decentralization. It improves design by using cross-functional teams to understand end users more deeply and meet their needs more nearly. the utility and consumer scale ‒ and develop new partnerships and offerings beyond the regulated business units. Top management would do well to afford these teams the greatest possible freedom when it comes to taking action, since experience shows that agile teams foster digital success. What is design thinking and why is it so popular? For the same time period, US Energy Information Administration data shows US retail electricity sales for all sectors increased just 1.8 percent, averaging about 0.2 percent annually. Smart grids are more efficient and less capital intense, allowing for predictive maintenance and better asset health. The opportunities are present all along the power-industry value chain, from generation to customer relationship management (Exhibit 1). MVCs are a series of tactical, measurable change actions. Although the actual implementation in many utilities may still be not be significant, there is already a unanimous voice for taking this journey to full digitalization. Start with the end user. By moving from a focus on functions or products to an orientation toward the customer journey, utilities can unlock significant value. They can use digitization to streamline operations and enhance customer services. On the left side of the continuum are organizations that are still dabbling with traditional technologies in the “exploring digital” phase. As part of the digitalization process, utilities are dealing with new challenges their organisation may never have previously faced. Utilities are partnering with cities and builders to implement sensing technology and data analytics in “self-learning” buildings, as part of integrated municipal energy and environmental planning. Text-size A A $1.3T Value to be captured globally through digital transformation of electricity sector from 2016 to 2025 $299B Digital Utility market size by 2025 45% The companies that take it will be ready for future market challenges. The following three vignettes illustrate digitally enabled innovations that are coming into focus over the next few years from the perspective of the future utility customer, power company employee, and asset manager. DTTL (also referred to as "Deloitte Global") does not provide services to clients. Digitalization of Energy Systems, a report by Bloomberg New Energy Finance ... Utilities face pressure from customers, government policy and regulation to improve their businesses. Utilities in competitive retail territories as well as traditional regulated environments are struggling to retain customers and fend off new threats in distributed generation. The digital transformation of our society or the digitalization of everything (DOE) is a topic that’s grabbing headlines everywhere today. Our “see, think, do” approach to transformation means we can help you identify needs and opportunities, visualize your future state, thoughtfully design processes and strategies to support your “to be” vision, and perform the hands-on work for turning that vision into a reality. Digital transformation across the utilities value chain. The topics of resilience and digitalization proved valuable and timely because when the pandemic halted travel and events, the Forum itself had to demonstrate resilience and go digital. With the rise of distributed generation, alternative energy sources, and the data-driven customer interface, utilities are intersecting an information-based digital economy. Utilities are looking to a new generation of digital projects. CIOs in the utilities sector must modify their organizations to explore innovative provisioning business models. Digitalization. For more on ecosystems, see Mike Armstrong et al., “Business ecosystems come of age,” Deloitte University Press, 2015. Recent reports on digital solutions indicate long-term strategies are becoming a norm across the power industry. Copy a customized link that shows your highlighted text. Taking these steps can set your organization on a sound path to becoming, and one day being, digital. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. To realize these digital opportunities, utilities need to transform operations. Sources: US Bureau of Economic Analysis, National Income and Product Accounts, Table 1.1.6. Utilities can use information from smart meters to realize additional applications in this new business area, alone or with partners. We strive to provide individuals with disabilities equal access to our website. Such innovations are ushering in new and disruptive competitive risks—and opportunities—for enterprises that have historically enjoyed dominant positions in their industries, including the power industry. In our work with leading organizations, we find that companies often struggle with the complexity of these changes. has been saved, Digital innovation As control rooms isolate, utility workers practice social distancing and repairs must be made while using the proper protective gear, the task of keeping the lights on is becoming even more challenging. Digitalization in utilities | Dimensys Gas is losing ground; electric power can be generated on a small scale, and even water treatment can be decentralised. Overlaying these trends is the advance of digital technologies, sometimes at a breath-taking pace. Develop a journey map that plots out the series of MVCs over a selected time horizon. To further reduce carbon emissions, some groups are advocating electrification of end uses such as transportation, water and space heating, and industrial processes. For utilities invested in the right analytics capabilities, they enable data-based analyses, planning, and diagnostics. Instead of delivering one project at a time and not releasing it until all stages are complete, teams are scoping projects more fluidly, delivering smaller releases more frequently, and iterating in cycles and sprints. Once a team is established and the underlying agile management philosophy is articulated, the work quickly proceeds to decisions about mobile platforms, development tools, and new talent recruitment. Press enter to select and open the results on a new page. The utility industry traditionally was a rather slow mover in technology adoption but is challenged to be a fast mover when it boils down to digital transformation and the adoption of specific technologies to enable the smart infrastructure, processes and data it needs to be future-proof as competition increases, customer demands change and the industry is in full flux. Our flagship business publication has been defining and informing the senior-management agenda since 1964. Efficiencies in energy and facility maintenance. Industrial IoT for Utilities – Digitalization Challenges and Trends Survey highlights: 59% Choose ‘fear of cybersecurity’ as one of their top challenges in digitalization, higher than any other category in the survey. With such tools, utilities can optimize staffing levels at power plants and manage the intricate energy terrain of renewable and conventional sources, trading options, and patterns in demand. Thepower and utilities sector was traditionally where many parents or grandparents parked their savings as they got older, attracted by low volatility and stable returns. BloombergNEF, New energy outlook 2018, accessed March 15, 2019. These companies may be vulnerable to new market entrants or other types of competition if they do not take steps to move forward. Source: Marlene Motyka et al, Deloitte Resources 2018 Study–Energy Management: Businesses drive and households strive, Deloitte Insights, 2018. For the success of most digital transformations, therefore, two-speed IT architecture is needed. Deep Dive Digitalization beyond data aggregation: NYPA's progress The New York Power Authority set out to become the first fully-digital utility in the United States, and that goal is … The agile approach. Organizations cannot ultimately “be digital” if some departments have adopted a digital mindset while others have not. Generators and ‘prosumers’ are motivated by cost reduction, additional revenue streams and new services. Start by defining your organization’s ambitions and then chart a path to success by developing a road map to achieve those ambitions. View in article, For more on human-centered design, see Jim Guszcza, “Smarter together: Why artificial intelligence needs human-centered design,” Deloitte Review, Issue 22, January 22, 2018. The earlier or quicker utilities can prevent the waste of treated water, the higher the savings, not to mention the boost in customer confidence. Technologies such as artificial intelligence (AI), Internet of Things (IoT), cloud, and blockchain can catalyze new business or operating models, help new entrants disrupt the sector, and enable incumbents to reach new levels of performance. Your organization’s DNA defines how you: Are organized (structure, physical space, geography, capabilities), Operate (process, technology, governance, talent), Behave (leadership, policies, rewards, performance management). All these new initiatives towards digitalization which in the business as usual scenario in the pre-COVID world would have taken well over a decade are … The future power company has real-time situational awareness of its generation, transmission, and distribution assets. Our Digitalization solutions allow you to manage day-to-day performance safely and reliably. All the same, digital capabilities allow utilities to enter new business arenas, whether alone or in partnership. Digitalization is when you use digital technologies to change a business model and provide new revenue and value-producing opportunities. New twists on design, processes, and ways of doing business also offer opportunities and fresh ways to approach challenges—or to challenge the status quo. In the 1970s, power utilities were digital pioneers, using emerging technologies to facilitate grid management and operation. Big-picture thinking on innovation in the retail power sector, Managing cyber risk in the electric power sector, Energy management: Paused by pandemic, but poised to prevail. Utilities are left to clean up the mess. Digitalization of Water means adopting a smarter approach to water management. On the growing mandate for cleaner energy sources from customers, more than half of all residential respondents (53 percent) in Deloitte’s 2018 annual Resources Study said that it is extremely or very important that part of their electricity supply comes from renewable sources, trending upward since 2013. Digital technologies offer unlimited potential to transform the world’s water systems, helping utilities to become more resilient, innovative, efficient, empowering them to arrive at more economically viable strategies. In articulating their digital vision, companies must first identify the position they want to occupy on the digital terrain, with respect to data, services, and devices. And special thanks to Jaya Nagdeo, assistant manager, Deloitte Support Services India Pvt. Besides smart metering, utilities are expected to leverage digital platforms for many of their operations. 8 The Digital Utility: New challenges, capabilities, and opportunities requires support from senior leaders and, ultimately, from the entire company. Eventually, every utility will have undergone digital transformation. Many utilities already offer solutions for networked energy management that include the remote control of buildings. Nothing is protected. Today digital business is everywhere around us, and companies that master digital technologies are creating new markets and disrupting the existing ones. In the end, the company improved efficiency across its entire scope of operations and saved hundreds of millions of dollars. Digital foundries should have leaders who understand how to best prioritize and allocate funding to implement digital projects. Subscribed to {PRACTICE_NAME} email alerts. For more on the Future of Work, see Deloitte’s collection at /content/www/us/en/insights/focus/technology-and-the-future-of-work.html. Furthermore, a seamless multichannel platform is a requirement for the profitable analysis of customer behavior through the entire customer journey. As digitalization becomes a top priority for utility CIOs, they must work with stakeholders from IT and business to pursue digital optimization and digital transformation. 0 Likes 209 Views 0 Comments . As all aspects of the global energy system become more digital, we are already seeing better outcomes for electricity producers, end consumers, the economy, and the environment. Culture. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the "Deloitte" name in the United States and their respective affiliates. It’s an ongoing process that won’t end anytime soon. And because of repeatable processes, it’s less likely to require heavy governance. How digital do we need to become? The full report Gartner 2019 CIO Agenda: Utility Industry Insights is a “must read” for insights on: Where utilities are focusing their digital innovation efforts In the 1970s, power utilities were digital pioneers, using emerging technologies to facilitate grid management and operation. Learn more and contact a senior consultant. Digital is transforming the way power & utilities companies operate. Ideally, organizations should adopt an innovation process that enables them to rapidly design, test, and iterate each concept through to launch. In order for smart utilities to benefit the community, he said, all parties need link and match cooperation. She is based in San Francisco, California. The aggregation and real-time action of energy assets and industrial loads could provide accurate frequency regulation and demand response, providing new revenue streams for struggling fossil-fuel assets. Digitalization is being rapidly adopted by multiple disciplines in the public and private sectors, and is ongoing in mature disciplines such as education, healthcare, energy, manufacturing, utilities management, transportation, and infrastructure development. Water utilities are not on the sidelines of this wave of change. Since 2014, utilities have been increasing their investment in digital infrastructure. However, energy demands are expected to grow between now and 2040. In particular, an increasingly large network of sensors, communication technology and data storage/management. To understand how companies are investing in the connected web of digital and physical technologies that enables digital transformation, known as Industry 4.0, Deloitte fielded a survey of 361 executives in 11 countries in the Americas, Asia, and Europe. The motivation for industry digitalization will be different for each player. A key challenge is to adopt this approach not only within a specially trained “digital” team, but across the entire enterprise. See Terms of Use for more information. By systematic analysis, companies can learn the value opportunity of each area and the feasibility of attainment. But some bright spots are on the horizon that can help chart the path forward. Share. It’s easy to get stuck in this phase of continually implementing individual digital projects, rather than integrating digital capabilities enterprisewide. Most transformations fail. Digital is the pervasive thread through all of these disruptive forces—as a catalyst, a disruptor, and an enabler. View in article. Getting senior leaders on board One challenge for many utilities will be persuading senior leaders, many of whom have spent almost all of their careers in the sector’s more predictable But at the same time, large enterprises such as today’s electric companies can take advantage of these opportunities to disrupt the industry status quo themselves and remain competitive and profitable. The digitalization of energy systems can provide various benefits, allowing utilities to: Maintain grid stability and reliability. Generation assets are becoming more flexible, with the intelligence to self-ramp, self-balance, and self-diagnose. View in article, Heather Stockton, Mariya Filipova, and Kelly Monahan, The evolution of work: New realities facing today’s leaders, Deloitte Insights, 2018. It should be designed around the company’s existing value drivers and strengths, including the product portfolio, technical competence, and customer proximity. Adrian Booth is a principal in McKinsey’s San Francisco office, and Niko Mohr and Peter Peters are principals in the Düsseldorf office. Never miss an insight. This report will discuss the multitude of forces disrupting and driving change in the power and utilities sector, explore the exciting future the industry is moving toward, and help companies plot a digital path to thrive in that future. Engineers will eventually be provided with information about potential maintenance contracts for customers. The power industry is in an unusual position as it is expected that the industry achieves full decarbonization by 2050. Ltd., for her research, editorial, and design contributions, and Rithu Thomas, assistant manager, Deloitte Support Services India Pvt. Similar to the smart home market, utilities are struggling to make use of digitalization in the customer segment. For more than 20 years, Wei has directed high-impact engagements from strategy through execution, working at the intersection of innovation, digital technologies, operations, and organizational maturity. 0 Likes 209 Views 0 Comments . After analyzing the customer journey, one company streamlined its product portfolio by 30 percent and established a customer-friendly digital channel for its core products. View in article, Deloitte Industry 4.0 Investment Survey, 2018. Decentralization / Digitization / Energy Market / Utility / ... For this to happen, utilities would have to understand the opportunities (and pitfalls) of digitalisation, they would have to set up long-term strategies, hire staff or mandate existing digital utilities … are such complex ecosystems. Real Gross Domestic Product, Chained Dollars and US Energy Information Administration, Electricity Data Browser, accessed March 18, 2019. To activate this catalyst, a company should determine: How digital are we today? The key drivers were higher-quality data and effective process automation. Oil and gas companies have long used digital technologies to improve decision making for exploration and production assets, including reservoirs and pipelines. Figure 4 illustrates a sampling of features and benefits of the future power company employee experience. View in article, Capital expenditures for 59 of the largest US electric, gas and water utilities tracked by S&P Global have reached new highs every year since 2010, rising 116 percent from 2009 through 2018. Oil and gas companies have long used digital technologies to improve decision making for exploration and production assets, including reservoirs and pipelines. A network of sensors, drones, cameras, and other devices provides a continuous stream of data on the status and performance of power plants, lines, towers, substations, transformers, poles, and other equipment. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. Follow RSS feed Like. Ideally, the innovation process will enable your organization to rapidly design, test, and iterate each concept through to launch. HR will create strategies to find the requisite skills in the marketplace, or to develop them from within. We help our customers and partners accelerate the digital transformation to gain further productivity and growth. The digital revolution is coming to the power industry. Or they can be disruptors that open the door to new market entrants—such as technology platforms that aggregate output from distributed energy resource (DER) owners and bid it into wholesale electricity markets. This is because the methods for identifying opportunities and installing solutions have been costly and labor intensive. Mobile enablement for employees is quickly becoming a powerful productivity-boosting capability. When executives were asked to indicate the top priorities for their business in the next 3–5 years, their responses were heavily weighted toward improving productivity, reliability, and operational efficiency, while they ranked “using insights from advanced analytics to better manage new resources” slightly below that (figure 6). View in article, Deloitte, “NGIN solutions drive your future,” accessed March 19, 2019. Suzanna is a senior manager in the Deloitte Center for Energy Solutions of Deloitte Services LP, analyzing global energy trends, with a focus on the power and utilities and renewable energy sectors. 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