Since the first power grids came online in the 19th century, the generation and distribution of electricity has largely been an engineering challenge – and one that has been met with a huge degree of success. We now have in place large-scale grids that transport energy from power plants to homes and businesses, via a network of substations, transformers and transmission lines.
The work of the engineering teams responsible for designing, building and maintaining these grids should be applauded – in the developed world at least we have a reliable system that is generally free of outages and service disruption. Today however, the companies that operate and manage these networks are facing the biggest single change to the way they operate since power grids came into existence: the emergence of smart grids.
Towards a Data-driven Power Grid
The smart grid has come about in response to a wide range of factors, chiefly population growth, the industrialisation of emerging economies and the scarcity of fossil fuels. Combined, these factors are driving the need for more intelligent and resourceful energy grids, which maximise electricity production by integrating renewables into the network, and ensure that energy wastage is kept to an absolute minimum.
Smart grids meet this challenge by bringing to the distribution of power a new level of intelligence and data-driven insight. This intelligence drives network applications that meet energy efficiency requirements, including the ability to automatically balance power supply and demand in the distribution grid to deliver a deeper insight into how consumers are using their energy. In fact, if implemented correctly, smart grids have the power to transform the entire energy landscape and allow us to use dispersed forms of power generation, such as domestic wind generators and solar panel systems.Renewable energy sources such as this are not as predictable in their outputs as traditional fossil fuel-based power plants and there are also a lot more of them. It is only through the intelligence of the smart grid that such sources can be integrated witha national power infrastructure and used to provide a meaningful source of power.
Through smart meters, moreover, utilities are able to gather ever increasing amounts of data on how customers are using energy. This insight enables the utility to manage its business to exactly match real-world customer behaviour, bringing about unprecedented levels of efficiency. This data also enables the energy company to accurately manage the grid during periods of high and low demand, helping to conserve energy and encourage savings; savings that can either be passed on to the customer or re-invested into the grid to enable further improvements. It also allows the identification and exploitation of consumption patterns identified by the data,so the utilitycompany can provide bespoke offers and financial incentives to customers who prove adept at reducing their levels of energy consumption.
On the customer side, smart meters are key to making power use more sustainable. Smart meters, combined with in-home displays, record and display energy usage in near real-time. This delivers an overview of energy consumption, which can help create awareness of energy usage, build engagement and encourage users to adapt their consumption patterns accordingly. For example, through the information provided on in-home displays, customers are able to see just how much energy – and money – is being wasted by leaving electronic devices on ‘stand-by’ mode. When customers see they can lower bills as well as save energy it is more likely that they modify their behaviour.
The Rise of Computer Science and Data Analysis
As utilities move from the traditional, analogue method of power distribution to smart grids, there are going to be fundamental shifts within the utility itself. Perhaps the most important of these is the new job roles that will become important to the utility’s business.
As we have seen, in the past the main challenge facing utilities was an engineering one: maintaining the physical infrastructure of their grids. Now, with the smart grid, they have another challenge to deal with: the collection, storage and management of data. In addition to being centres of engineering excellence, utilities must now also master the arts of computer science and data analysis. From an internal, operational perspective this is one of the biggest challenges utilities will have to face as they roll out smart grids.
To meet this challenge, utilities will in many cases need to take on new specialist staff, who are at home with analysing vast amounts of data for key insights. They will also need to ensure they have the right technologies in place: software and hardware resources that can store and manage this treasure trove of data, making it instantly available across all business functions; from sales to billing, marketing to finance. In short, smart grids are making utilities into data-driven organisations. For those organisations that can manage this transition effectively, the benefits will be vast.
Unprecedented data availability—coupled with sophisticated analytics solutions—will drive utilities to evolve many aspects of their businesses. For example, asset risk analysis can help identify and avoid operational risks, such as major or catastrophic events. As a result, utilities can integrate work and asset management systems with field operational performance data to better assess risk. As utilities gain the ability to analyse this ‘big data’, they will realise deeper levels of insight into how their own businesses operate and into their customers’ needs.
A New Approach to IT Systems
Historically, utilities have split their operational infrastructure from their other technology requirements. On one side is a discrete set of distribution software and hardware known as operations technology (OT), designed to ensure a safe, secure and reliable flow of power. On the other, various departments within the business are using separate IT functions to address financial and customer needs.
Today utilities are increasingly finding that OT and IT needs to be integrated in order to optimise business performance. Emerging customer and community needs, such as managing increased energy demand, requires close co-ordination between grid operations and customer-facing departments. None of a utility’s separate business departments can effectively address the customer needs alone, which is why energy providers must make this change.
This issue is often overlooked during smart grid implementations, meaning the utility cannot enjoy the full benefits of its new network. Those that removethesiloes that have previously separated engineers from the rest of the business will, therefore, have an opportunity to jump ahead of their competitors and lead the way in the implementation of smart grid technologies.
Once utilities embrace the convergence of IT and OT, they will need to evolve their network models, as these will become out-dated and unable to efficiently support the needs of the next generation energy infrastructure. The smart grid will bring with it a range of new devices that will need to integrate with the grid – most notably smart meters, but also home renewable sources and electric vehicles.
As a result, the energy infrastructure will become more complex as it will have to manage new devices and capabilities. For this reason, utilities must deploy an effective and modern network management system capable of handling every part of the energy network to ensure they maximise investments and take full advantage of the opportunities available in the region.
The Utility of the Future
We are at the beginning of a sea-change in how we produce and consume energy. This will embrace how energy is created, how it is transmitted and how it is measured. We will fundamentally change our relationship to energy as we try to be more sustainable and efficient in our habits. For the utility the changes will be even deeper. A whole new approach to energy distribution will become widespread – the smart grid – changing how utilities structure their businesses. Data and data analysis will lie at the heart of the new grid, providing the utility with the intelligence and insights it needs to improve its business and make the grid more effective. Those utilities that understand the increased importance of data to their businesses will be those that ultimately succeed in this new energy landscape.
Is the Price Right?
Oracle explores the challenges faced by utilities when it comes to pricing
A month rarely goes by without the topic of rising energy prices hitting the news. Although energy suppliers are reporting record profits, consumers are faced with ever-increasing bills, creating a storm of controversy: why do utilities appear to be making huge financial gains while their customers have to dig even deeper into their pockets?
Most customers living in developed economies have no choice but to buckle to the demands of their provider and pay the charges. The supply of power and water is almost considered a God-given right and trying to get through the day without some form of energy is almost unthinkable. Understandably, consumers are beginning to question their bills, which mean utilities must work to educate them around the associated costs and outline the processes that help to keep costs down.
Wholesale Costs & Investment
First and foremost, it’s important to highlight the costs incurred by energy providers today. Fossil fuels such as gas and oil are dwindling, yet demand for energy is increasing. As such, the wholesale price of energy is rising, which means utilities have to pay more for this precious and limited resource. Such a scenario means energy providers are unable to run a sustainable business without increasing prices.
Similarly, the energy sector is undergoing its biggest change since the first power grids were rolled out in the 19th century. Utilities and governments around the world are working to implement smart grids, which maximise electricity production by integrating renewables into the network, and ensure that energy wastage is kept to an absolute minimum. Smart grids meet this challenge by bringing to the distribution of power a new level of intelligence and data-driven insight enabled by network sensors, including smart meter devices. This change is critical to the future of energy supplies, yet large-scale investment is required. While government investments will go a long way to meeting the financial demands, they do not satisfy them entirely.
As utilities work to resolve the fractured relationship with their customers, it’s critical that they begin to engage with them on a much larger scale and deliver a superior customer experience so that they feel they are getting value for their money. However, Oracle research suggests most utilities are failing when it comes to customer service, with customers saying they only receive a satisfactory experience a quarter of the time.
Work needs to be done, and utilities should start by being transparent with their consumers about the price of energy. This can be achieved by implementing customer-centric customer care and billing solutions. By explaining and breaking down the associated costs of supplying power – from generation to distribution – energy providers will be able to show that there is little room for manoeuvring when it comes to setting prices. Additionally, being open and honest will begin to engender customer trust, which will help address some of the disharmony.
Utilities should also engage their customers in energy incentive programmes that will benefit all involved. By educating customers on the best and cheapest times to use energy, such as doing washing at night, energy providers will not only enhance the services they are offering, but will also help customers spend less. Simultaneously, this approach empowers utilities to use energy more efficiently, which is a significant focus for all involved in the distribution supply chain.
Integrating renewable energy into the power grid will also enable utilities to keep costs down. By deploying IT solutions allowing them to add and balance an additional power source in the grid, utilities will not have to purchase as much wholesale power, and the associated cost will not be passed on to the consumer. Additionally, implementing a renewable energy initiative empowers utilities to increase energy efficiency further by reducing reliance on high-emitting fossil fuels.
There is no short answer to resolving the challenges and disharmonies created by rising energy prices, but by taking some crucial steps, energy providers will begin to repair the customer relationships that have been damaged in recent years. By enabling customers to take control of their own energy usage, utilities will be able to help keep costs down while increasing energy efficiency; a scenario that benefits all involved. To most, robust, affordable electricity and power is considered a right, and utilities and governments must ensure this continues to be the case.
Information from Adebayo Sanni (Country Manager, Oracle Nigeria) and This Day was used in this report.