20 Dec 2019 Electricity Themes I’m Tracking
Like most, I figured I would write some form of recap or prediction post(s) at year’s end and this one is the first of what might be a few different articles to come over the next few days. They’ll be a mix of industry, regional, and personal reflections that should be set up a great framework for growth and focus in 2019.
This one focuses on the themes I see taking hold in the power sector over the next 12 months. New technology-related trends like electric vehicles and cybersecurity have combined with on-going challenges surrounding aging assets, extreme weather, and regulatory uncertainty to create innovation opportunities in one of the world’s largest and most important industries. As a result, here are the themes I’m particularly interested in next year as the utility business model continues to evolve.
Which network takes the lead in connecting the grid?
Utilities, along with the largest energy consuming industries (manufacturing and transportation), are in the middle of a transformation which includes connecting virtually everything to a network. In total, these three verticals alone are projected to spend $132B related to the internet of things.
Yet, the available networks (3G, 5G, Bluetooth, and WiFi) all have shortcomings that keep them from becoming the industry standard. Verizon and AT&T are working on 5G IoT specific networks, but it is still incredibly difficult to get 3G coverage in some rural parts of the country where key assets are located, much less 5G and it is often cost-prohibitive at the enterprise level.
The answer is likely a combination of networks that are built on the tradeoffs for latency, computing power, battery life, and of course, cost. Where latency isn’t an issue and battery life matters, protocols like LoRWAN could begin to see wide adoption, especially at the computation and control layers.
How will the industry close the skill gaps in the workforce?
The energy workforce will look increasingly different in the coming years. Today, 1/3 of the workforce is compromised of manual work rather it be administrative like accounting and data entry or physical labor in the field. That number is expected to reduce to 1/4 in just the next few years.
With the continued rise of IIoT, it’s no surprise that the jobs most in demand require the data science and software skills the industry is sorely missing, especially given most utilities are HQ’d outside of traditional tech hubs.
However, the chart below from the World Economic Forum highlights a major hurdle for startups looking to grow within the sector- 64% of companies still don’t understand the opportunities for implementing new technologies. As a result, founding teams that have industry expertise or have developed go-to-market strategies tailored to helping customers in the industry uncover use cases are likely to have distinct advantages.
Will machine learning finally begin to reduce operational costs?
Regardless of demand growth or stagnation, operational costs will continue to move to the forefront. If demand grows, the need for grid management will rise too and ML presents an interesting solution to load balancing and predictive asset maintenance. If demand shrinks and/or power prices decline, operational efficiency will become even more important in preventing subsequent deterioration.
C3IoT and Uptake Technologies, both of which raised over $100M in the last year, are leveraging this trend for growth. However, the energy industry still has a large number of endpoints that are yet to be moved online and data fidelity remains a problem.
The efficacy of predictive analytics should continue to increase with the continued deployment of distributed assets (meters, lighting, thermostats etc..) while the data processing costs decline in large part due to edge computing and cheaper networks.
Can utilities begin taking steps to merge EV’s onto the grid?
EV’s present the most interesting dichotomy when it comes to the consumption of electricity in the next decade. On one hand, they will dramatically change the demand and shift the time of peak usage. On the other, they can eventually be used at storage, demand response, and provide leading indicators into future power consumption (i.e. a utility tracks EV density and predicts consumption from that information).
Facing bold predictions of EV availability and adoption in the near future, utilities must begin thinking about how to serve this demand. However, if utility grids are not updated and expanded soon to support networks of widely available charging stations, EV adoption might become impaired or a drain on our already aging infrastructure.
Will a winner in the cybersecurity space emerge?
Source: Utility Dive
This year, Utility Dive’s annual state of the union had cybersecurity has the number one issue of concern according to executives with over 80% naming it a “very important” issue.
While power grid stakeholders will spend over $5 billion globally on securing infrastructure in 2018, only a small portion of that will be dedicated to operational technologies and smart systems.
These grid modernization efforts are an ideal time to design and implement digital security protocols and provide an opportunity for adapting existing mechanisms and processes to the OT space – from industrial control systems to smart meters. While the industry is still heavily service oriented, we’re starting to see hints of software companies gaining ground and expect that trend to continue into the new year.
Overall, I expect the industry to continue its evolution from a rate-based revenue model to one that is rewarded for efficiency and performance. If regulators begin to set those policies in-motion, the trends above will accelerate and tomorrow’s utility model will look very different than today’s.