Utilities providers are the backbone of a modern society. But factors like the global COVID-19 pandemic, economic disruption and geopolitical events have cast a complex backdrop, intensifying the already intricate web of challenges and innovations facing the industry.
From the transformation of energy utilities driven by the forces of decarbonisation to the imperative of water security management, environmental issues and the critical need to address energy trading volatility, utility companies are navigating unprecedented disruption. Amidst these challenges, UK regulator cost pressures are becoming more targeted as the utility companies seek to seize opportunities presented by digital technologies, data and AI, sustainable practices and evolving customer demands.
Building on recent research at Gartner, we’ve delved deep and pulled together our insights and strategies on how business and technology leaders can guide their organisations through this transformative journey.
1. Customer centricity driving operating model changes
Utilities are undergoing a profound transformation; moving away from operating models focused on internal operations to a more decentralised industry with great focus on the customer and environment. In this new paradigm, utility technology and business leaders will play a pivotal role in making sure that their digital technology strategies and investments align with this shift. Customer-centric and external facing operating models emphasise sustainability, environmental responsibility, and community engagement, which are becoming increasingly important for utilities looking to thrive in a changing landscape.
2. Flexible resourcing models
The energy landscape is evolving rapidly, with intermittent renewable energy sources displacing large-scale fossil-fuel generators that underpin the grid baseload. Operational Technology (OT) has continued to rapidly evolve from dumb sensors to two-way IoT sensors that have given unprecedented insights. The OT systems have also long been under the control of the engineers and separate from business IT systems. Utility technology and business leaders will play a key role in uniting these systems to bring about a revolution that will enable enhanced operational integrity, provide insights into the optimal way to handle the fluctuations and unpredictability associated with renewable energy sources and create opportunities for AI to proactively respond to emerging issues.
3. Water security management
As we have seen on a few occasions in 2023, water utilities face a growing challenge in managing effluents and maintaining water quality. Failures in water security can have devastating consequences for water utilities, their stakeholders and ultimately their customers. This trend emphasises the importance for water utility technology leadersto address the key challenges and opportunities using data and AI. Digital technologies and data-driven solutions play a critical role in monitoring and ensuring the quality and security of water supplies, which is essential for public health and the environment.
4. Evolving energy markets
The illegal full-scale invasion of Ukraine by Russia in 2022 led to one of the most turbulent times in recent history. These geo-political issues compounded the challenges faced by the UK utility sector during a period of decarbonisation and energy transitionleading to grid instability and market price volatility. The impact of these shocks to the system will have an ongoing impact on the operational and financial landscape of utilities. Utility technology leaders must carefully consider the impacts of electricity market volatility on their IT strategies, operating models, and spending. The ability to adapt quickly to changing market conditions and efficiently manage energy trading operations is crucial for maintaining financial stability and ensuring a reliable energy supply.
5. AI-driven decision making
Before embracing AI, utilities need to focus on decision intelligence, which is the ability to make informed and data-driven decisions proactively. Decision intelligence is a prerequisite for the execution of AI, regardless of the technology used. Utility technology leaders should prioritise and manage the demand for enhanced decision making, especially as the organisations integrate their OT and IT capability to give holistic views of operations. A decision intelligence capability starts with linking business and tech/data strategy through a ‘strategic linkage model’, building the right foundations (people, process and technology) for your key use cases and then leveraging data analytics, artificial intelligence and machine learning to improve decision-making processes, enhance operational efficiency and drive innovation.
6. Composable architecture
Utilities are under pressure to become more agile and resilient, especially in the face of operational and business challenges and disruptions triggered by global events. Composable architecture offers a solution by enabling utilities to build flexible and adaptable systems and infrastructure. Composable and microservice architecture can sometimes be perceived as the same thing, but while microservices are usually a key component of a composable approach they aren’t the only type of solution used. Composability is the idea of creating a tech stack of best-fit tools for different areas of business and connecting them via APIs so solutions can be easily added, changed and removed as needed.
Working through your technology and data strategy with partners like Transform, utility technology leaders should explore how composable architecture can enable flexibility in delivering business outcomes, reduce technology obsolescence, and improve the ability to respond to changing market conditions. This approach supports the long-term sustainability and competitiveness of utilities.
7. Changing customer experience
During the energy and water transition and cost of living crisis, customer experience (CX) is emerging as a defining factor for utilities. Historically, customer engagement focused on transactional interactions related to commodity services. However, in this era of transition,companies like Octopus lead the disruption in the UK and CX is becoming critical. Technology leaders can leverage digital technologies, data and AI to design a CX strategy that aligns with the evolving needs and expectations of customers. This includes personalised services, real-time communication and seamless interactions through digital channels.
Tightening regulations, increased stakeholder scrutiny, and the impact of climate change on assets and infrastructure are posing significant environmental challenges for utilities. Customers' changing attitudes and expectations are also creating opportunities for utilities to demonstrate their commitment to sustainability. Technology leaders should look to align their digital strategies and technology investments with climate change risks and sustainability goals. This involves implementing green technologies, reducing carbon emissions and promoting environmentally responsible practices throughout the utility's operations.
In 2023, Transform won the DataIQ Awards - Data for Good - Environmental, Social and Governance (ESG) Data Award.
Described as 'a real game changer' by the judges, our work on the Net Zero Systems Tool for DESNZ, helps UK government departments make informed decisions to achieve Carbon Net Zero, using data visualisation.
In conclusion, the utility sector in 2024 will be navigating a complex landscape marked by evolving business models, technological advancements and shifting customer dynamics. Utility business and technology leaders will play a strategic role in shaping the future of their organisations by leveraging digital and AI technologies and fostering innovation to ensure a sustainable, resilient, and customer-centric utility sector.
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