For more than a hundred years Utilities had a simple task: to pump out power to businesses and individual households in a secure, reliable and relatively affordable way. It was a system of one-way traffic and, as long as the Utilities were able to scale up to deal with growing demand, both governments and citizens were kept fairly content.
The fourth industrial revolution, which continues to transform almost every aspect of our lives, means that this model – if it hasn’t already – is quickly becoming outdated. In our increasingly hyperconnected world, customers expect more from an on-demand economy and Utilities is no exception.
According to the European Commission, almost 17% of energy consumption across the EU now comes from renewable sources and, by 2020, about 72% of European consumers will have a smart meter for electricity. The traditional approach of building power systems at scale has therefore given way to the need to create flexible business structures that can accommodate renewable energy and a surge in consumer demand for new digital offerings.
With energy generation no longer Utilities’ sole preserve – and consumers and businesses increasingly acting as generators in their own right – systems have to adapt in order to host power flow in both directions. The likes of solar power, battery storage, electric vehicle charging and micro grids will all create new areas of business and new concepts of value between Utilities, their customers and their partners.
More flexible, more integrated
With Business 4.0 fundamentally altering their long-established models, Utilities need to reimagine themselves to both discover and create this new value. Thanks to technology, every customer is now unique and they have been quick to adopt digital tools to take ownership of their energy consumption and spending. This places new demands on Utilities and those that want to succeed will have to embrace some of the risk and integrate this new value into their operations and infrastructure as soon as they can.
This is the Emerging Energy Value Ecosystem, and Utilities that want to succeed in it must find ways to adopt new roles, responsibilities and revenue streams by working more closely with their customers, partners and even competitors.
This is, at its heart, about the integration of digital technologies into the Utilities sector, with data as the new currency. As newly-empowered consumers demand change, a joint study from TCS and IDC Energy Insights has found that two-thirds of European Utilities are already using machine-generated data to meet the challenges of this new landscape, with tools like the internet of things (IoT) and artificial intelligence (AI) reliant on open and high-quality data to power them.
Seize the growth potential
The industry shouldn’t fear these changes. On the contrary, they’re setting the Utilities sector up to be one of the biggest drivers of global growth – a driving force of Business 4.0. According to the TCS and IDC Energy Insights study, European Utilities are making headway in developing fresh revenue streams – these new products and services will soon make up more than 10% of revenues for 36% of European Utilities.
Overwhelmingly, more than three quarters (79%) of C-level executives in the industry think that distributed generation – power generation at the point of consumption – will be tied to these new revenue streams in some way, and that low-carbon producers will be the most important players in the Utilities industry by 2020.
But this potential can only be fulfilled if Utilities become more nimble, build new ecosystems and evolve their business models. Our research also shows that the industry is starting to make this shift now, with half of European Utilities creating joint ventures to explore new ways of working, while 60% are now collaborating through strategic partnerships. Almost half (47%) are even running new businesses within the perimeters of their organisation, while just over a quarter (26%) are creating dedicated strategic units for new ventures.
Utilities also need to make sure their digital technology infrastructures can bear the load of this change. There’s an awareness across the industry that moving systems and software to the cloud is vital to evolve business models, with the TCS and IDC Energy Insights showing the UK and Germany leading the way over Nordic and Southern European markets. However, in a world of changing consumer expectations where each customer is more valuable than ever before, more than a quarter of respondents said they’ll invest more in social media than any other area of technology over the coming years. This wave of social investment will finally make social networks fully fledged customer engagement channels that also generate next-generation consumer intelligence.
The industry should be excited by all this. The new Emerging Energy Value Ecosystem, driven by Business 4.0, will push them closer to their customers and will see them evolve into real-time digital enterprises. To realise the potential of this vision, Utilities need to seek strong technology partners, embrace the flexibility of the cloud and understand data as a new currency. It’s these elements that are heralding huge changes in the industry – and powering the future.
For more information on the report, please visit TCS’ dedicated microsite: http://info.tcs.com/tcs-idc-research-emerging-energy-value-ecosystem.html
Sudheer Warrier is VP & Global Head Utilities at TCS.