Utilities are facing tomorrow’s challenges with yesterday’s infrastructure. New approaches to data and AI can help providers bridge the gap today and prepare for the future.
The UK’s utilities providers are grappling with new challenges under a unique set of constraints. As highly regulated private companies with an obligation to serve every customer, they must walk a fine line between regulatory compliance, customer experience and investor returns.
Now, new pressures are emerging, driven by climate change and geopolitical instability. What’s more, utilities must face these very modern challenges with infrastructure built for a bygone age, hampering their ability to mitigate and respond to threats in an agile manner.
These are serious issues for the sector and they’re issues that data and AI technologies are well placed to address. I was honoured to speak on this topic in a fireside chat at the Future of Utilities Summit 2023, along with Levent Ergin, Global Chief ESG Sustainability Strategist at Informatica.
Here’s my summary of the key points we discussed on the day.
Changing market dynamics
Today’s utilities are having to cope with rapidly-changing dynamics in an unsettled global landscape. Their assets were designed for a world in which energy and water were produced and managed at source, for example. Now energy supply is becoming decentralised, with users able to generate surplus capacity that they can sell back to the grid, vastly complicating metering and billing.
Demand is becoming harder to manage too, with extreme weather events producing new patterns of consumption and geopolitical events leading to uncertainty of supply. Utilities need to be agile in terms of anticipating and responding to unforeseen events, but their data and infrastructure often can’t provide the required visibility in an actionable timeframe.
Growing customer activism
The past year has seen a huge rise in customer activism, driven by environmental concerns as well as concerns over the cost of living. Gas and electricity customers increasingly want to know where their energy is coming from and how sustainable it is, and they want to be able to assess and choose their energy sources based on granular information from utilities providers. On the water side, we’re seeing an unprecedented level of consumer awareness of where water comes from, how it’s managed and the problems caused by ageing infrastructure. Consumers are becoming increasingly vocal about leaks and increasingly frustrated when utilities seem not to be addressing the problem.
Utilities recognise the need to address these concerns in order to restore public trust. There is an urgent need to put data to work in smarter ways, whether to give consumers the energy information they need, or to predict and prevent water leaks. Smart(er) meters, the Internet of Things and AI can all help—but all require investment, and some may not happen without regulatory intervention.
Building resilience to cyberattacks
Cybersecurity fears are a key reason utilities have been reluctant to modernise. Energy grids and water infrastructure must be protected against malicious interference from every source, from casual hackers to state-sponsored cyberwarfare. As much of the operational environment still runs on 1970s SCADA technologies, connecting it to the Internet of Things could open up new attack surfaces.
So there’s a dilemma here for utilities providers: stay safe but unable to move with the times, or modernise and potentially increase the risk of attack. Today’s pressures mean modernisation is really the only option, but it has to be done with cybersecurity very much front of mind.
One interesting and under-explored aspect of this is: can cybersecurity become an opportunity, rather than just a preventative measure? Having very secure data enables controlled data-sharing with third parties, which can potentially deliver all kinds of benefits—to utilities, to customers and to society. Customer consent is often a sticking point here, but when customers see that sharing their data has a benefit—like helping to prevent leaks—they’re often happy to agree.
Meeting new ESG reporting requirements
Another driver for digital transformation is the need for rigorous and accurate sustainability reporting. To date, there has been a patchwork of voluntary ESG reporting frameworks, but now the International Sustainability Standards Board (ISSB) is creating a global standard, and the UK has already made Task Force on Climate-Related Financial Disclosures (TCFD) reporting mandatory for large companies and financial institutions.
The inadequacy of current reporting has been highlighted by Climate TRACE, launched at COP27 last year. It uses sensor data, geospatial data, satellite data and AI to accurately measure emissions, and has found that actual emissions are three times higher than reported. So ESG data collection and reporting needs to improve—and this too will require investment by utilities companies.
Faster decision-making with AI and machine learning
Investment in digital technology is necessary for utilities to move with the times—but the right investments can also deliver significant upsides. Utilities already produce vast quantities of data every day, but they’ve barely scratched the surface of what that data can do. Applying AI and machine learning can unlock a huge amount of value, from predicting and preventing water leaks, to anticipating and managing spikes in demand, to identifying areas for cost savings, to understanding where to focus efforts to manage down emissions.
Cognizant is working with one UK water utility company to embed sensors in their network so they can prevent leaks or detect them very quickly when they happen. That not only makes sound business sense for the utility, but it also means better value for customers and improved stewardship of precious resources for the whole of UK society.
