Anyone who has opened a bill from a utility company recently might be forgiven for overlooking the fact that providers of electricity, gas, and water are facing tremendous cost and market pressures of their own. Margins are notoriously thin. And everything from short-term spikes in commodity prices to volatile weather events to seismic shifts in market dynamics puts pressure on utilities to increase their operational efficiency. Following is a quick look at some of the operational challenges utilities face and the strategies they’re using to adapt.
A changing asset management mix
Regardless of how it’s generated, energy is an asset-intensive business. It always has been. Since the industry’s earliest days, producers and distributors have focused on squeezing the maximum value from their assets. But the traditional approach of work-order-driven preventive maintenance is giving way to a more proactive approach—one where intelligent self-monitoring equipment gives utilities unprecedented insight into the health and performance of equipment. Utilities can combine this data with advanced analytics to create optimized maintenance strategies that help ensure maximum uptime, longer asset life cycles, and the lowest possible maintenance costs. They can better monitor assets in real-time to improve their response when issues do occur. And they can adopt a more predictive approach to maintenance and anticipate emerging issues before they mushroom into larger, costlier problems.
If utilities aren’t selling energy, they’re losing money. And it’s less expensive to shut down a transformer for planned maintenance than replace one that has overheated and failed. Utilities are discovering that data is their secret weapon in maximizing asset value. With remote sensing and IoT devices, companies can create a central repository that streamlines their analysis and response to asset maintenance, usage, and failures. It can also help them digitize the procurement and allocation of spare parts, work, and logistics services that are critical to keeping operations running smoothly.
The decarbonization revolution
The market has spoken. The shift to renewable and more sustainable energy sources is well underway. You can’t scan a news site without reading about a utility’s window for achieving a carbon-neutral future.
But while renewable energy grows more affordable and attractive for consumers, it presents a new slate of operational challenges to utilities. Producers and distributors have to navigate a new world of highly variable weather-driven power generation and its impact on demand models. They also need greater visibility into consumer demand, with the added variable of the power generated by consumer-owned rooftop panels. And at the same time, utilities still have legacy infrastructure and assets to maintain, given that companies will continue to rely on traditional sources to some degree for the foreseeable future.
One of the key resources for managing this increasing operational complexity is the use of machine learning algorithms to analyze the data from a growing network of smart meters. Utilities can gain a more holistic view and granular visibility into consumer power consumption and generation to better gauge when and how to combine traditional and renewable sources. Also, the same asset management resources discussed earlier can help optimize investment in renewable, sustainable infrastructure to enable utilities to keep costs in check and meet their service commitments.
A more competitive, deregulated landscape
The era when the utilities industry was known as a staid and predictable sector is over. In today’s deregulated environment, new players are upending markets and threatening established providers and distributors. Distributed energy resources (DERs) have introduced a decentralized model that’s at odds with the traditional paradigm. As a result, established utilities are focusing on transforming their siloed operations that are dependent on inflexible, outdated legacy systems. They’re also modernizing operations to accommodate energy at the “grid edge” to meet the demand for sustainable and renewable energy sources and to maintain their foothold against up-and-coming competitors. At the same time, providers still face the challenge of staying within the guardrails established by public utility commissions. So they need the flexibility and agility to respond to a more crowded and competitive market—along with the discipline and accountability that keeps them in good stead with regulators.
It’s a time of transition for the utilities industry. And in this more dynamic and volatile era, the organizations that can optimize their core processes and embrace change rather than fight it will position themselves for current and future success. This will require tight synchronization of demand-side management and the smarter operation of assets to minimize waste and inefficient practices. It will also require a keen analytical focus to drive greater efficiency throughout a distributed supply chain and to maintain focus in a more decentralized environment.
Interested in learning how utilities are reinventing operational efficiency? You can learn more here.
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