We just released our annual top 10 predictions for utilities worldwide. The predictions enable the IDC Energy Insights team to reflect on the current year and on what the future holds for the industry. This year, it’s fair to say, there was a lot to think about.
2022 has given us the worst energy crisis in a generation, especially in Europe, with day-ahead power prices growing more than 500% since 2020, and natural gas futures spiking by more than 1,000% year on year in August. We all knew price volatility was going to be part of the game, at least in the initial stages of the energy transition (at least until we sorted out functioning flexibility markets and deployed enough storage in the system).
But no one was really prepared for a pandemic, followed by a war in Europe, by the world’s biggest energy exporter.
Let’s not forget climate change, with some of the worst heatwaves, draughts, and floods in decades (if not centuries) and the huge impact they have had on the so-called energy-water nexus.
While these are only a few of the challenges that have grabbed the headlines in the past 12 months, utility companies are increasingly accepting the unpredictable world they operate in and are becoming more resilient, predictive, and flexible in their operations. They don’t have a choice, as there is no time to stagger slowly toward the overarching goal of net zero.
Significant investments are needed, and a critical mass of technologies must be deployed at pace to transform energy and water systems for the better.
Energy transition, climate disruptions, and social sustainability have demonstrated that utilities are at the heart of economic resilience. Utilities must become business and infrastructure platforms to lead decarbonization, foster demand efficiency and circularity, and promote electrification.
Utilities can create positive outcomes by mastering their day-by-day execution in:
- Technology: to accelerate and scale sustainable energy, the electrification of transportation, and the sustainability of industrial clusters (and more broadly the economy)
- Data: to drive purpose across power generation, energy and water delivery, markets, customers, energy services, and new clean energy supply chains
- Ecosystems and their emerging operating models: to generate new value
These elements combined will make utilities trustworthy to customers, employees, suppliers, shareholders, and society as a whole.
Given all this, here are the top 10 predictions for utilities:
- By 2025, a third of competitive gentailers will have set up integrated supply, efficiency, decarbonization, and electrification service portfolios, growing average profit per customer by more than 20%.
- By 2023, 60% of competitive power generators and traders will have AI-powered forecasting capabilities in production, helping to improve day-ahead demand and price forecast accuracy by more than 15%.
- By 2027, driven by the need to detect and manage behind-the-meter flexibility, 70% of electric utilities in advanced markets will deploy distributed resource management and demand response solutions.
- By 2024, 50% of gas utilities will use cloud platforms and drones, aircraft, or satellites equipped with image-based detection technology to detect fugitive emissions and deliver on net-zero targets.
- By 2024, 25% of utilities will invest in new talent management applications to become skills-driven high-performance organizations, boosting work productivity and quality by 15%.
- In 2023, pushed by energy price and security concerns, 55% of energy suppliers will leverage energy system data to identify those at risk of fuel poverty and foster more efficient consumption.
- By 2026, 60% of utilities will converge IT and operational technology (OT) security personnel, technologies, and processes to better protect against both cyber and physical threats, reducing overall security breaches by 50%.
- By 2024, 70% of utilities will use specialized sustainability SaaS platforms to track and report scope 1 and 2 and estimate scope 3 emissions to meet regulatory and financial disclosure requirements.
- By 2027, longer droughts and more volatile energy prices will have pushed 40% of water companies to invest in IoT- and AI-based smart applications to cut non-revenue water (NRW) and power consumption by 20%.
- By 2025, 50% of utilities will implement a platform approach to operations, integrating core applications, improving visibility, management, and efficiency to boost tight operating margins.
For each of these predictions, the IDC Energy Insights team has developed a detailed analysis, with associate drivers and IT impact and guidance for utilities. A selection of these predictions will be presented by IDC Energy Insights analysts in an live webinar on Thursday, December 1, at 16:00 CET.
To complement the top 10 predictions, the IDC Energy Insights analyst team also develops a series of recommendations for utilities that have embarked on the energy transition journey. This year’s recommendations are:
- Deliver on your purpose. Sustainability, decarbonization, and electrification offer endless opportunities, so it’s easy to get overwhelmed by the possibilities. Balance immediate urgencies around security of supply and consumer protection, without losing momentum on long-term net-zero goals. Focus resources and efforts on energy transition use cases and initiatives that support and enrich your company’s future business portfolio.
- Nurture your internal resources. The decade-long talent drain in the utilities industry has been exacerbated by the global skills and talent crunch that affects all sectors, including technology companies. The old practice of relying on technology partners and IT and business service providers to cover skill gaps is no longer sufficient as many of these companies have themselves also been negatively affected. It’s imperative to focus on internal workforces to boost productivity and work quality and to improve employee experience and ward off the “Great Resignation.”
- Rekindle your relationship with customers. The global energy crisis and economic uncertainties have made energy consumption (and related costs) top of mind for customers across all sectors. Now is the time to become true energy advisors, supporting customers with personalized, timely, and valuable offers around sustainability and new energy products and services. This could have a long-term impact on customer experience and revenues from new business models.
- Engage in ecosystem innovation. Collaborative innovation and co-creation are crucial to successfully navigate the accelerating pace of energy transition. In many cases, emerging utility business and operating models also require cross-industry ecosystems, so an ecosystem-first mindset is a powerful tool. Establish an internal engagement platform that brings together business stakeholders, technology partners, end users, and start-ups with a focus on idea conversion and incubation and an end goal of driving operating models to generate new value.
Support the integration of the energy system. Work with regulators and policymakers to link different production modes with different types of demands through the most sustainable and cost-efficient physical, digital, and market infrastructure. Support the creation of markets where price signals guide consumers to the cheapest and most efficient decarbonization option. Drive the creation of physical links between existing and new energy carriers. Digitize the system to harmonize demand and supply, orchestrate markets, and link energy flows.
IDC Energy Insights analysts Jean-François Segalotto, Gaia Gallotti, Daniele Arenga, and Roberta Bigliani will be onsite in Frankfurt for Enlit 2022. They look forward to meeting you and discussing their predictions and more.