The digital transformation is spreading across all the industries and the energy sector is no different. In fact, there are opportunities all along the value chain. How is the digital transformation going to impact utilities and energy? What are the opportunities and challenges of digital transformation? Read below!
Untapped potential sounds better than a-little-tapped potential, so I decided to go with it, even though, the energy industry has already started utilizing the possibilities digital technologies offer and slowly enters the world of digital transformation. There are mobile apps that help customers track their utilities, pay the bills and manage their outage. But there are many more things that can be implemented all along the energy value chain and expand the digital transformation.
Data-driven supply and demand control, smart grids and smart pipes, back-office automation and more. Digital transformation in the energy sector is much more than the customer experience. While it helps to make it better, the benefits are much greater. By implementing new technologies we can tackle environmental and sustainability issues.
It may seem that utilities are at a disadvantage here — after all, other sectors like IT and finance are far ahead when it comes to the digital revolution. But I believe that’s not the case. If anything, it can be a kick-start. Utilities can now avoid making the mistakes other industries made like not thinking big enough. How exactly can digital technologies impact the energy and utilities industries?
Increased Efficiency, Increased Profits – with Digital Transformation
According to McKinsey¹, introducing digitization can boost profitability by 20 to 30% for utilities. And that’s a rather conservative estimate. Utilities can increase efficiency and profits through those three things: smart meters and the smart grid, digital productivity tools for employees, and automation of back-office processes. If utilities invest in data analytics they can use them to analyze, plan and diagnose.
Implementing smart meters and smart grid is the ultimate way to optimize power plant operations, analyze demand patterns and suit the supply to the customer demand. The same applies to increasing employee productivity and automating back-office tasks. With platforms like smartphones and tablets, technology will become a tool to manage workloads.
Improved Customer Experience thanks to Digital Transformation
Multichannel customer journeys and integrating different platforms to work together seamlessly is another way utilities can gain competitive advantage, attract and retain customers and even increase revenue at the same time. When competing with giants like Google or Amazon, the customer interface is proving to be extremely important. By creating multichannel customer journeys, energy and utilities industries can retain more customers and collect and analyze more data.
Predictive analytics are already successful in other economic areas and in utilities it will be no different. Machine learning algorithms that can predict which customers are willing to pay more for additional services, provide automated customization for customers and make the users’ lives easier.
Smart Homes, Smart Cities And More
The digital transformation in this area has already begun, but there’s much more to do still. Governments are launching IoT adoption programs to encourage better energy use. When working with them, utilities can use a wide range of options such as mobile apps for usage management.
Utilities can also use information from smart meters to build additional applications that provide remote control and management of buildings. With technologies like Alexa or the Google Assistant, smart homes are no longer a future concept. Utilities need to adapt to the changes we’re seeing today. And implementing technologies into their toolset is the way to go.
Besides a lot of opportunities, the digital transformation also presents some challenges upon the energy and utilities industries. First of all, both short and long term regulations can impact the adoption of new technologies in those industries. While some encourage change and innovation, some are more strict and can become an obstacle. Besides that, there’s also the obvious matter of energy sources.
We all know that Earth’s natural resources are limited and recently governments and societies have become more aware of this issue. This impacts the regulations as well as how utilities operate in the customer environment. There’s more pressure to use innovative, sustainable solutions. While on the topic of customers — the people have become more demanding and their needs and expectations are changing rapidly.
Keeping up with customer preference can pose a challenge but at the same time, if utilities can do it, they will gain a competitive advantage.
The adoption of new technologies like Internet of Things and Big Data has already started among the energy industry. But there’s still room to grow. I think that the opportunities technology can bring to this area are really great from every angle. Especially from a customer’s point of view. But not only that, it also will help us become a more sustainable civilization in general.
If you’re looking to build tech-based energy or utilities solutions, contact our team to find out which technologies will be best for your project.
The digital utility: New opportunities and challenges https://www.mckinsey.com/industries/electric-power-and-natural-gas/our-insights/the-digital-utility-new-opportunities-and-challenges