March 1, 2018 | In the Media
Regulatory support needed for digital revolution
Regulatory support needed for digital revolution
As utilities continue to remake the grid for the twenty-first century, they need the support of federal and state government, policy makers, and regulators. Maintaining reliability and strengthening resiliency requires continued digitalization of many aspects of the business and integration of operations technologies (OTs) and information technologies (ITs) within utility organizations. While going through the digital transition, customers’ needs and wants will heavily influence the pace of change, as will the guidance being provided by regulators.The availability and the choice of digital systems and platforms most easily integrated into existing OT/IT functionality will also play a role. At a minimum, regulars will ensure that customers remain engaged and that they will continue to have opportunities to bypass the utility with distributed energy resources and microgrids through third parties. These parties will demand such engagement. Regulators interested in having access to more data to ensure that utilities are continuing to serve customers well while making progress on the myriad of public policy goals encouraging a cleaner and safer grid would be wise to challenge utilities to pursue aggressive innovations.
At the same time, these regulators must install the regulatory paradigm to support the investments in digital deemed necessary.
DIGITAL SHIFT
A digital shift is on the horizon.
Some utility executives operating in competitive markets are pursuing aggressive investment strategies to bring about the digital revolution. Others are taking a “wait-and-see” approach. They are looking for signals from regulators that such a strategy is supported and consistent with regulators’ wishes.
Most industry participants and observers are aware of being at the precipice of the digital shift, and customers are anxious for it. Customers of all ages are eager to simplify their interactions with utilities, and millennials are looking for their utility to be as easy to interact with as their online e-tailer. Immediate and easy interaction and responsive attention and action are mainstays of the digital shift.
Distributed energy in the form of renewables, fuel cells, geothermal, demand response, storage, and a host of other leading-edge technologies demand smarter grids with new digital capabilities. Utilities are beginning to reorganize around the capabilities of new technologies. Many utilities are breaking down silos internally, opening new channels of communication and decision-making within the organization and investing in new digital and data analytics platforms to improve grid operations and enable a more mobile and responsive workforce.
State and federal regulators can support the digital shift by developing rules and regulations that support investment in digital to improve operations and customer service. Regional planning organizations can support the digital shift by insisting that interactions and communications with market participants are proactive and well-coordinated and that relevant market data and information are easy to access and understand. The digital experience helps on both counts.
Utilities and regulators agreeing on revenue streams through leveraging customer insights available from anonymized data, new platform services, and development of new products and services offer opportunities for utilities and third parties to support and propose dawning of the digital age. Data collected through advanced metering infrastructure (AMI) smart meters and customer interactions with the utility provide a wealth of actionable data. New OT and IT systems and integrations into a utility-wide data analytics platform offer opportunities to use or sell data and insights as new revenue streams. Of course, operationalizing these opportunities within the utility requires significant organizational realignment.
Utilities, regulators, third-party providers, and customers are interested in combining and analyzing data sets from traditional disparate utility systems by employing new and enhanced customer relationship management systems (CRMs) and data analytics. These will automate processes and insights, providing new customer insights that had previously gone unnoticed. Knowing the “voice of the customer,” segmenting markets, journey mapping customer interactions, and tabulating and drawing insights from these data provide the opportunity to monetize said data. Electricity growth can be expected to grow significantly with electrification of transportation. More charging stations in buildings and parking lots, new rate structures, and locating generation closer to load will require a reconfiguration and more digitalization of the grid.
From an operations perspective and with full support from regulators, utilities are striving to meet strategically growing demand, differentiate services, and simplify customer interactions with digital services. Utilities are reducing customer disruptions and improving notifications with advanced digital and mobile outage management systems, driving efficiencies by digitizing workforce management, and improving customer engagement and satisfaction. Utilities that have already invested in AMI, which can automate two-way communication between a smart meter and the utility, have plenty of data and now require investment in new IT and redefined business operations to create value for customers.
Regulators still set rates and return on equity (ROE), and ROE is not guaranteed. And regulators have their own public policy interests to satisfy, giving them say over what investments qualify as prudent. Aligning rate structures and returns to desired behaviors will ensure that utilities make the best use of data to maximize value to customers, shareholders, and society.
Retail energy service providers strive to capture a piece of the market, offering customers technology and services that in many regulatory jurisdictions, utilities are not allowed to offer, thereby enhancing customer value. To increase market share and provide more customers with differentiated services, third parties are looking for ways to use data analytics and insights available now only to utilities for their own use.
DIGITALIZATION OF THE GRID
Digitalization of the grid offers better customer engagement, increased penetration, efficiency of distributed energy resources, more accurate realtime data around energy use and outages, faster diagnosis and repair of outages, personalized customer communications, and improved operational efficiency of the grid to anticipate outages and prevent them from occurring.
Within the utility, digital provides for a more agile business with open-access data that supports data-driven decision-making, proactive rather than reactive operational and workforce management, and more immediate data and situational reporting to regulators and policy makers. Digital also provides opportunities for improved operations, through reduced operations and maintenance costs, improved grid maintenance, and spare parts and fuel management. Regulators can support the digital shift by providing commensurate rates of return on modernization and data analytics.
In return, regulators should demand of utilities common data standards and upgraded IT, OT, AMI, meter-data management and CRM systems. Regulators need also to ensure that digital risk management and cybersecurity concerns are correctly addressed.
GOALS ARE BETTER INFORMATION AND IMPROVED EFFICIENCY
Regulators throughout the country are advocating that utilities invest in grid-modernization strategies and technologies to varying degrees, to improve customer choice and value and provide customers with greater control over energy use and energy bills.
One goal is to spur technological innovations and consider alternatives to traditional utility investment in transition and distribution facilities to improve grid reliability and resiliency. A second goal is to improve business processes to reduce operational costs, better manage assets, and improve customer service. With more grid automation, two-way communications, utility and customer digital applications, and advanced metering infrastructure, data are being captured to provide insights to utility business and system operations and customer-use profiles. The challenge is to make the best use of such data and information for maximum benefit.
Utilities are being challenged to become energy integrators and distribution system operators optimizing and balancing supply and demand, and to do this, they need data. To collect and archive data for analytics, utilities need to invest in upgrading aged OT and IT systems. Making use of data to improve asset utilization and maintenance, advanced analytics improve system operations, provide insights to improve utility investment planning, and identify new investment opportunities that will position utilities to provide for the seamless interface with customers and third parties necessary for a twenty-first-century grid. This is where government, regulators, and customers come in.
Such investments need support.
DeCotis, Paul A. (March 2018). “Regulatory Support Needed for Digital Revolution.” Natural Gas & Electricity 34/08, ©2018 Wiley Periodicals, Inc., a Wiley company.
