IoT – Panacea or Death for Power Generation Utilities?

By Kripal Attawar, October 7, 2016

The power industry is faced with many challenges today but they can probably summarized by the three R’s – Relevance, Revenue and Regulation. There is no doubt that the major and local utilities all around the globe are in transition.

Let’s talk of relevance – as we see solar, wind and other renewables enter the consumer and enterprise markets, the utilities will no longer have captive customers. Customers have choices, and while green policies demand lower power consumption, population growth and the inability of the energy providers to keep up with demand, means customers are constantly looking for new options. The Internet of Things (IoT) offers tremendous potential – on paper at least – to address the demands of the consumer’s growing list of needs. Strangely, in this environment of growing need, there are utilities who are facing revenue challenges as customers become more efficient and also take advantage of alternate sources of power. One thing is sure – power is central to everything we do in our modern lives.

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The question is whether the power utilities can maintain a central role in this evolution. I believe they will, and IoT will play a crucial role in the transformation. The question is how? I believe the central grids that power us today have to be dramatically modernized at all levels – generation, transmission, distribution and consumption (not to mention security, which not only threatens the companies but citizens too!). It is similar to the transformation that engulfed the telecommunications industry that continues to this day. Many people wrote them off as dinosaurs at the start of the internet age but we spend more on telecommunications today (per household) than we did in 1995 – by several orders of magnitude! Most of that spend is with the major national and international service providers with smaller players providing competition and price pressures.

The same will be true of utility companies. Their challenge will be to improve efficiencies (more power for less) and customer service (customers will have real choices). IoT is the only way forward to save millions and establish customer loyalty while delivering into a more competitive market. In addition, the utilities have to find new sources of revenue.

That brings us to revenue. As an example, what is the impact on energy consumption of electric cars? Today, only about 0.4% of Americans drive plug-in electric cars (that number is 1.6% in California) so what will the impact be of another 2% or 3% of Americans driving plug-ins? Today the average American spends around 5% of their income on gasoline for their cars – how much of that revenue will go electric?  Like the telecom companies, the utilities have to find new sources of revenue and increase share of wallet while the amount of power per consumer drops. In the same way that people no longer have just a home phone and a cable TV service at home, but a home phone, individual cell phones, potentially TV and Internet service, home security and more all from the same provider. The fact is, that though the telecom providers bemoan the advent of ‘over the top’ players like Apple and Amazon, the truth is they now have a much larger share of the consumer wallet than when they were monopolies delivering landline phones.

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The point, I believe, is that the utilities are still central to our power consumption as consumers and they will and need to use that leverage to transform into customer centric service providers delivering multiple power and internet based services, and they cannot do this without IoT. Analytics, with the new addition of Big Data is the brain, while IoT is the tool that can empower the utilities to reduce operational cost, improve customer service and find new sources of revenue. It is their key weapon in the war of transition. It is also good to note, that countries that have limited or poor utility infrastructure will also mimic the telecom industry where entire nations went from near zero telecom service to entirely cell phone based communications. The democratization of telecommunications will repeat itself in the utility sector. With it will come, new sources of revenue – so I believe the challenge is not death but time to new revenue? But of course, democratization of anything brings with it new regulations, risks and expectation.

So, what of regulations? Most people are preoccupied with the new ‘green’ regulations that vary by country, state and even continent. No matter what, change is coming, and carbon and other regulations for cleaner energy are headed our way. Again, since the cost of a new plant is prohibitive (not to mention the time to build a new plant), IoT is a major player in managing the transition to cleaner fuels. Old plants will still need to function for several years (it has taken the telecom companies two decades since the advent of the internet to transform to where they are today). So how can we meet regulatory demand with the older plants – analytics (to understand and refine) and IoT (to decide and execute) is the key. While we preoccupy ourselves with ‘green’ priorities (rightfully so in my opinion), we may not be paying enough attention to the one thing that could derail all attempts at building a better, cleaner world – security! And, that is both physical and cyber. Our Utilities around the world are poorly secured physically, which means that they could easily be targeted by those who wish us harm. Also, on a new front, there are dark players who (even before IoT) could sit in their living rooms and bring down the grid without ever stepping foot in your country or city. It is important to remember that without power there would be no internet. As an example, the UK government (one of very few) has taken the view that it must take responsibility for securing the grid – not many other countries have. So, power is incredibly critical. While we clean up our utilities, improve safety and service, we cannot ignore security.

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So what do the three R’s mean for the utility companies? I believe they offer a great opportunity to transform while they maintain a critical role in our daily lives. That leverage places them in a great position to become even bigger players in our lives, offering us more and newer services while also hopefully making us safer. But, they have to deliver better, cleaner, more reliable power at a cheaper price as a fundamental. That means modernizing the existing infrastructure by combining old and new power generation systems, delivering into a multi directional grid, while looking for new technologies and business opportunities including and beyond the traditional utility sector.

Analytics and IoT will be critical to this journey. IoT is not a panacea but a tremendous opportunity. Beware grand projects. Start small, learn correct, and then scale.

Author Profile
Kripal Attawar

Kapi Attawar, as Executive Vice President of BCT, supports BCT's key initiatives specifically aimed business development in the US along with handling Marketing and large strategic accounts. Kapi has over 20 years of high technology international executive experience in the industry. He spent two decades running International Marketing and Alliances for various high technology companies. Kapi holds a degree in Mechanical Engineering from the University of Loughborough, UK and a Masters from the University of Salford in the U.K.

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Kripal Attawar

Kapi Attawar, as Executive Vice President of BCT, supports BCT's key initiatives specifically aimed business development in the US along with handling Marketing and large strategic accounts. Kapi has over 20 years of high technology international executive experience in the industry. He spent two decades running International Marketing and Alliances for various high technology companies. Kapi holds a degree in Mechanical Engineering from the University of Loughborough, UK and a Masters from the University of Salford in the U.K.

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