Digital Priorities: A roadmap for technological transformation

A roadmap for technological transformation

As the power sector in India seeks to address several existing and emergent issues of electricity quality, reliability, access and affordability, as well as high renewable penetration, digital can be a key enabler for organisations to address imminent challenges and to leverage potential opportunities, notes a new report by KPMG in India.

The report, titled “The Power of Digital”, was released by Dharmendra Pradhan, Minister of Petroleum and Natural Gas and Minister of Skill Development and Entrepreneurship, at ENRich 2018: New Partnerships for New Energy in Delhi, organised by KPMG in India. The report takes stock of digital trends in the power sector and includes a survey of 12 power and utility (P&U) leaders in India, among other things. It notes that two out of three P&U leaders are considering end-to-end digital transformation for their businesses as they begin to comprehend that digital enablers are required across their operations.

Smart Utilities presents a quick roundup of the insights from the report…

The need to think beyond utility

The report notes that digital technologies other than being an enabler are also threatening the traditional utility model, forcing utilities to think “beyond utility”. Advances in technologies such as data analytics, smart appliances, artificial intelligence (AI) and machine learning (ML) are enabling organisations to develop innovative solutions and business models that allow customers to optimise their electricity consumption and also generate value by evolving into prosumers.

The key fallout is the blurring of industry boundaries, with electricity-related services being targeted by new competitors such as technology players and platforms. This is forcing utilities to expand their frontiers and look at customer retention measures as well as new models of revenue generation.

Emerging themes: Digital priorities

Asset life cycle management

According to the report, one of the digital priorities for the sector today is asset life cycle management. Digital solutions in asset life cycle management include predictive maintenance, condition monitoring, reliability-centred maintenance, asset tagging and tracking for better inventory management, digital twins, and forecasting and scheduling, all enabled through sensors, data analytics, robotics and AI.

Asset life cycle management has tremendous potential, and significant value can be gained from digital investments by reducing operations and maintenance costs, ensuring higher reliability of the network, and decreasing downtime. Data-driven decision-making further aided by AI helps in better and more informed decision-making. Predictive maintenance reduces maintenance cost and hence improves the business case as well.

The intelligent grid

Digital technologies help forecast the supply of renewable energy better and manage the grid optimally. They also allow process enhancement through solutions for real-time load management and controls enabled by highly interconnected and smart devices. Further, analytics of the data generated from these smart devices and interconnected systems may allow a better understanding of demand and supply in real time and in advance.

Better forecasting tools leveraging data that reflects the actual weather conditions closer to the site can help reduce variations in solar generation. To handle these variations better, grid operators will need to maintain contingency or reserve margins. There are various ways in which these margins can be maintained. These include supply-side measures such as contracting for additional thermal, hydro or gas capacities and storage solutions, on the one hand, and demand-side measures, on the other. Demand-side measures include demand response  solutions wherein consumers voluntarily reduce their demand in response to a grid operator alert in return for an incentive. While this measure has not been deployed on a large scale until now, the rise of renewables and the enablement of digital transformation by digital technologies will likely make this a viable solution for grid managers.

There are two potential segments for DR applications. These are irrigation water pumping loads and consumer air-conditioning loads. Dynamic scheduling can be enabled by using digital technologies wherein loads can be switched on and off according to grid exigencies in a remote or automated manner. Digital interventions may enable grid operators to meet their commitments to renewable generators and make the network resilient to and free from fluctuations. This can yield financial benefits for all stakeholders and could be a win-win situation for both generators and consumers, making it a truly intelligent grid.

Digital enablement of workforce

The digital technologies available today have the potential to significantly improve workforce efficiency, whether in field operations or in back-office functions. The affordability of these solutions has also improved in the last few years. Technologies such as applications on smartphones and tablets, sensors and AI to identify and predict problems and to alert the field force about their maintenance jobs, drones to inspect equipment before a physical inspection is warranted, wearable devices to identify location and safety, and augmented reality (AR) to assist remote field workers by a senior worker at a central location are a reality today. Self-service avenues are important for achieving a seamless customer experience as well as for optimising the load on service agents, both on and off the field. Organisations in this sector are at varying levels of maturity and readiness when it comes to adopting these digital workforce enablement solutions and are still to achieve full-scale digitalisation. Leading companies are investing in these solutions and looking at integrating them with their asset management digitalisation projects to achieve full potential. Standardised and digitalised processes improve the quality and overall worker experience.

Digital customer management

Customers who are accustomed to enjoying a seamless digital customer experience in other industries are pushing the players in the power industry to offer products and services that work impeccably and smoothly across the channels of their choice. In the industrial segment, with the advent of deregulation, reduced cost of solar and storage, and the expanding adoption of smart technology, alternative energy options are likely to be increasingly available. In Europe and the US, customers already have the power to choose their energy provider based on the experience, service, and cost they desire or require. Digital customer management requires a data-driven approach to be able to offer much more than just electricity. Indian P&U firms are realising the need – and seizing the opportunity – to offer customised and other new services that go beyond the energy spectrum. However, offering these services is lower on their priority list as compared to the need to achieve operational efficiencies. Going forward, strategic alliances between utility firms and technology vendors in the areas of smart home and energy management solutions, among others, are likely to emerge.

Digitally enabled customer-centric business models

Digital technologies can enable utilities to go beyond the conventional business model and enter consumer applications. Examples of such applications are home automation services, security and surveillance services, and energy management services. Association with start-ups, too, offers innovative solutions in varied areas such as building energy management, smart city services, clean air solutions, and smart electric vehicle charging models. Decentralised generation through solar rooftops and battery storage solutions is also emerging as a fast growing business model. With the rapidly falling costs of deployment, smart meters offer interesting business model opportunities. These include consumption analytics, demand response, energy management services, and network efficiency-related applications. The smart meter roll out is expected to be 12 million by 2022. This could lead to a services opportunity of Rs 21 billion by 2022.

The declining costs of distributed solar rooftop systems and battery-storage solutions can be a strong combination posing a threat as well as an opportunity to power utilities. A solar-storage combination can deliver on-demand power at Rs 7-Rs 8 per kWh by 2022. This can lead to the rapid proliferation of this behind-the-meter solution, which, in many ways, may be beyond the reach of utility companies. Utilities will need to innovate to develop new business models, or else risk losing out to new entrants in this space. Digital technology will play an important role in providing a platform for the integration of these solutions.

The way forward

Several of the larger P&U companies in India are considering the adoption of digital technologies and have started deliberating on their desired path. Many companies are currently evaluating solutions that deal with specific areas such as cost optimisation and efficiency. The approach to digital must take a holistic and enterprise-wide approach where, first and foremost, organisations need to formulate their “digital vision” and identify the core areas for digital interventions based on their business strategy and objectives. Exploring and prioritising the core areas and the relevant and appropriate digital interventions would be the second important step.

Incorporating digital capabilities also requires taking a hard look at critical competencies and corporate culture. Other essentials for a digitally driven organisation include data-driven operations, a sound technical foundation, and an environment that nurtures entrepreneurship and focuses on innovations.