« Back Reflection 08.02.2019

The digital future of the energy utilities industry

Tomi Kyllönen, Development Director, Aidon (left), and Mikko Viitaila, National Technology Officer, Microsoft Finland.

A combination of technological advances and shifting customer expectations is driving transformation in the energy utilities industry. According to Deloitte, while the power and utilities business model has remained relatively the same over the past century, utility providers are not exempt from the growing influence of these transformational forces. Change is beginning to unfold quickly.

Smart connected devices, known as the Internet of Things (IoT), enable collaboration, integration and data exchange between the physical world and computer systems over existing network infrastructures. Mikko Viitaila, National Technology Officer, Microsoft Finland, points out that IoT devices are evolving along with platforms at faster rates, and when these two worlds connect, that’s when things really start happening.

“Trends have been visible for a while, and now they’re coming to life at an accelerated speed because of this phenomenon that individual pieces are mature enough to be connected,” he says. “The power lies within the connections.” Viitaila points out that we’ve had IoT for ten years, but only now is it really mature enough to start being properly utilised.

A peek into the near future

“Cloud transition is the big thing in the industry in general,” Viitaila states. His company has built a cloud platform called Microsoft Azure. “The future will consist of a global network of data centres. Everything will be connected and current things will be augmented. Whatever you can think of, it will be connected to the internet, making things smarter.”

As edge computing becomes more prominent in the years to come, Viitaila says that data centres will be used for heavy computation, but the cloud will spread to the edge. “Whatever type of smart device people will have, it will use this kind of invisible computing. In the future we will have one big unified platform that we can leverage, no matter what way we use it.”

AI and machine learning tie into this – they are data hungry and need lots of computing power. “Data centres will train models, and trained models will get deployed to the edge,” he says.

Tomi Kyllönen, Development Director, Aidon, considers the implications of these trends on smart metering. “The energy market is developing towards more frequent meter reading, first from hourly readings to one every 15 minutes and even more frequently in the future. Additionally, Aidon’s customers aim to utilise to a large extent the great variety of monitoring data provided by the meters. This presents the need for greater data processing capability and storage capacity. Here scalable and flexible cloud platforms can provide the solution,” he says.

Managing DSO data streams

As today’s DSOs must be able to manage massive data streams that are collected in real time and turn those into actionable insight, the move to edge computing makes sense. Instead of sending data to the cloud and waiting milliseconds for countless decisions from millions of devices, computational analytics takes place at or near the sensor or user level. This decreases the back-and-forth time required in traditional cloud approaches and lowers data transmission costs.

In the context of smart metering, edge computing means that the intelligence is in the meter, says Kyllönen. For example, DSOs could benefit from applying real-time trained machine learning algorithms to the meters which would be capable of and responsible for making decisions on load control as an application of demand response. The need for such functionality increases in future with the deployment of micro production, battery storage and local energy communities.

To achieve success in ever evolving digital ecosystems, however, collaborating with platform owners is but one aspect. Traditional energy utilities should undergo a digital transformation, which will allow them to develop new revenue streams from new business models.

As far as this is concerned, Viitaila talks about the digitalisation journey pillars — customer service, business processes, product development, and employee empowerment — that are most relevant to DSOs. First, he says that employee empowerment is relevant as fieldwork is required; digitalisation could have a big application there. “In addition, product development is applicable as IoT and sensors come into play. Customer service is another, as digitalisation can help DSOs provide their customers with a better understanding of their energy consumption.”

Opportunities and benefits

Connected to this, a McKinsey report notes that some of the most intriguing opportunities in the energy utilities industry are in services and products beyond the meter. “Consumer services will require an entirely new set of capabilities that many utilities have not adequately developed.”

Kyllönen states that in Finland, a report by the Smart Energy Working Group — under the Ministry of Economic Affairs and Employment — suggests that DSOs would offer a platform for third party players such as aggregators who will then offer demand response services to customers. “This means that while the service for controlling the customer’s energy consumption is sold by a third party, the demand response controls will be made possible through the DSO’s IT system. This could be an example of how DSOs become closer to customers, or consumers, and how DSOs’ systems to a larger extent will be IoT platforms.”

In terms of benefits, energy utilities can realise value in the short term as IoT can lead to cost savings and regulatory compliance. In the long term, as the industry becomes more connected — driven by regulation, customer demand and lower total cost of ownership, for example — IoT can help to balance demand and improve services.

How to overcome challenges to digital transformation

As digital transformation continues to take root in the energy utilities industry, the direction is becoming increasingly clear. The pace of change, however, is less certain.

“The first step is to get started,” advises Viitaila. “How are organisations making use of AI? Where are they on their journey?”

By their very nature, digital transformations also bring about a cultural shift, so the next step involves people. “Decisions should involve everyone on the ladder. The journey should include all employees.”

Last, Viitaila shares that a study revealed recently that companies in Finland are more or less in the piloting phase and tend to be stuck there at the moment. “So, people should get going, be brave and try things.” As if to reiterate the importance not only of courage but of agility, he ends with this crucial piece of advice: “Try small, but try — and fail fast.”