2020 vision for utilities: What’s the prescription?

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Do you remember the 90s? It seemed like every company and organization had some sort of strategic plan that had “2000” in its title. And they were all going to achieve and exceed these Year 2000 goals … if their systems didn’t crash at 12:00:01 on January 1, 2000!

So now we're 17 years into this new millennium; seems like it was just last year that we all wore those “2000” glasses on New Year’s Eve. Many companies are well into their plans to transform their business by the year 2020, and many industries continue to transform at breathtaking speed. This brings us to utilities.

The recent publication of IDC Energy Insight’s Top Ten Utility Predictions for 2017 paints a picture of an industry that's already undergoing a great deal of change and is poised for a total transformation, one that might leave it looking and behaving nothing like the industry many of us grew up in professionally. If you have an opportunity to check out these predictions, it makes for some interesting, thought-provoking reading.

How do these predictions look from the perspective of utility analytics professionals? I’d like to highlight three of them and share some thoughts on how they'll impact the industry.

  1. Competition: "By 2020, non-utility companies and digital disrupters will seize 20% of the energy retail market, tripling the profitability gap between thrivers and survivors."

This is tricky. As a whole, the utility industry has made great strides from the days of having “ratepayers” to acknowledging that there are customers who are fluid in their wants and needs. And now these customers have more choices than ever.

Chuck Newton, President of Newton-Evans Research Company and a noted industry observer for the last 35 years, commented on how these new competitive forces are changing the traditional utility landscape: “I think we'll see increased competition between traditional electric utilities and new market participants that match up merchant power suppliers offering green power with retail service providers, while utilities themselves become more market-driven within the next five years.”

This new energy market screams out for the need for better management of the electrons themselves, as well as the consumers of these electrons. How will traditional energy management systems and SCADA support these new markets with bi-direction energy flows on the grid? How will renewable and microgrid challenges like intermittency and connectivity be addressed while ensuring reliable, affordable power for consumers?

2. Asset digitization: "By 2020, 25% of utilities will integrate asset performance management investments with sensor data and cognitive capabilities, boosting asset efficiency and reducing maintenance costs."

According to a study from Navigant Research, cumulative utility spending on asset management and condition monitoring systems for the power grid will total $49.2 billion during the period from 2014 to 2023. The asset management promised land at the end of this spending cycle is one where asset failures are almost completely predictable, driving new levels of reliability, power quality and customer satisfaction.

“We are at the precipice of a massive shift in how utilities manage their assets," says Bill Roberts, a Director in the SAS Asset Performance Practice. “Changing a century of reactive maintenance practices does not happen overnight. The good news is that we're seeing utilities starting to grasp new maintenance models that are data and analytics driven," Roberts continues. "For instance how can transformer maintenance and replacement practices be modeled using diverse data sets like smart meter data, oil temperature data, and weather data?"

3. Customer experience (CX): "Failing to deliver superior customer experiences, only 1 in 5 utilities will raise customer satisfaction scores by 10% or reach positive net promoter score (NPS) by 2018."

As noted above, utilities are now keenly aware of the customer-centric environment. The challenge is one of both process and technology & data. On the process side, automating manual processes is a death wish for customer engagement goals. The processes need to be rethought and redesigned to account for richer, deeper customer data that is actionable in near real-time.

Rachel Dell, Senior Systems Engineer in the SAS Customer Intelligence Practice, commented on these challenges: “The role of utilities providers has changed. In order to satisfy customers, utilities are being propelled into action by the clear need for high-quality communications. The modern customer interacts on their terms, through whatever channels they choose, and have a much-higher baseline expectation of convenience and services than ever before. Programs such as demand response, appliance efficiency replacement rebates and storm preparedness communications, build loyalty and are critical to execute well. This simply cannot be accomplished with traditional manual programs and reactive actions. Communications will inevitably fall short if they're not informed by a full view of a customer, including visibility into predictive future behavior. Advanced analytics provide customer service representatives with the means for more intelligent, prescriptive cross-channel interactions and, therefore, increased customer satisfaction.”

One common thread through these examples is that utilities already have much of the data and systems required to operate more effectively and efficiently in an industry that's becoming more complex every day. The call is to now take that next step and put this data to work in a predictive and prescriptive environment.

For more, download this white paper: How Analytics Reveals New Utility Customer Value

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About Author

Mike F. Smith

Mike Smith is a 26-year veteran of the utility ‘smart grid’/IT/automation, information services and media business, and is currently the Utilities Principal Industry Consultant for SAS, where he is involved in client engagement, thought leadership, and business development activities to drive growth of the business unit. Immediately prior to joining SAS, Mike was Vice President, Sales & Marketing at E Source. He was previously Vice President, Utility Analytics Institute where he has been responsible for product development, business development, and growth of the division. Mike is a graduate of San Jose State University (BA, Economics) and is a veteran of the US Army (Captain, Infantry).

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