Metering & Smart Energy International had the opportunity to speak with Julien Groues, Senior Vice President, EMEA for C3 Energy at last European Utility Week. Here he shares some thoughts on the direction the utility business is moving in, where opportunities lie for utilities utilizing analytics and the value they can derive.
Where is the utility sector going?
Electricity systems have largely been physical systems in the past, consisting of wires and other equipment. However, in the last few years this environment has become significantly more IT enabled and is being transformed into a communication rich environment through the addition of sensors on the network and sensors at customer premises.
Several things have happened over the past couple of years to drive this transformation: firstly, the cost of sensors has decreased dramatically and at the same time the cost of communication has decreased, which means that sensoring the network – putting sensors into homes or putting a sensor on a transformer or on a piece of generation equipment – is becoming much cheaper.
Secondly, the flow of energy has always been uni-directional and that is now changing through the addition of distributed energy onto the grid.
At any point on the grid, whether it’s at a customer’s premises or on the transmission or distribution network, we now see generation equipment, be it a wind turbine or PV or geothermal. This is changing the dynamics of the system.
The need for much better controls for balancing the grid and for managing the entire relationship across this value chain is critical.
We now have access to information on specific components of the grid, which, combined with what has been happening in the information technology world – lower costs of processing power and storage through cloud computing – creates an enormous amount of processing power to apply to grid data at a fairly low cost.
There have been advances in analytics, especially machine learning, which improves the predictions that can be made based on artificial intelligence using realworld data.
When all of these things are combined, namely the information from the sensors along with the information from the existing operational systems, we get an unprecedented opportunity to provide enormous value to the utility sector.
For example, by implementing energy efficiency programmes or by improving the performance of a piece of generation equipment, we can improve the efficiency, reliability and security of the grid.
So what can analytics provide to utility companies?
We have done a lot of analysis with McKinsey and found that across the entire value chain from generation all the way down to the customer, there is approximately $300 of value per meter that can be captured through analytics.
That is $300 per meter of recurring value annually.
McKinsey determined that the economic value is shared between the consumer and the utility company. Value is demonstrated, for example, through money saved, efficiency gains, decreased power loss or by shifting planned maintenance work to become more predictive.
The $300 per meter value is real. There are large scale deployments that prove this. You don’t need to wait for your entire network to be sensored, or for your entire customer base to have smart meters before you can start to derive benefits. These types of projects can be deployed very fast – most of them are deployed within six months – so utilities can start deriving value very quickly and achieve a return on investment in less than a year.
Performing analytics is not as difficult as one might think. I don’t mean to imply that it is not a complex problem but analytics companies have invested hundreds of millions of dollars in creating excellent technical platforms that make analytics a far less complex problem for a utility to manage.
For example, through analytics utilities can predict asset failure and modify their asset replacement strategies. Instead of saying, “This year I’m going to change all of my transformers that are 25 years or older,” a utility would say, “This year I am going to replace all of my transformers that are at risk of failure.” In this way, utilities are completely changing the way they do things.
This has both operational and capital expense implications. Many utilities are benefiting tremendously from doing things in an analytical manner and the big difference in the last few years is that, while a number of people have been talking about analytics, we are now starting to see full-scale deployments of analytic systems across a number of utilities.
One of the things that this industry needs is visionaries. The reality is that utilities cannot afford to take undue risks – the power needs to stay on and consumers need to continue to receive the electricity that they expect. A lot of things depend on utilities operating the way they are meant to – hospitals, food production, water treatment, banking – and if it doesn’t work, we have a problem. So while it is true that the utility sector is traditionally very conservative, there are still things that can be done to improve the efficiency and reliability of supply through innovation.
Some utilities have taken a profound leadership position in terms of technological innovation and are reaping the rewards.
We have worked extensively with Enel and Engie in Europe. Both of these companies have focused extensively on what it means to be a digital organisation. Engie is a large and extremely diverse utility across many different aspects of the power value chain, including transmission, generation from traditional sources such as nuclear and coal as well as renewable energy, to electricity retail. They are making a significant investment in their digital transformation and the work that we have done together in terms of customer engagement has been very interesting, specifically how to better manage relationships between utilities and their customers through the application of analytic software.
Utilities have sometimes been challenged by customer engagement. What is it that you are bringing to the table that is going to change the way they interact going forward? How are you presenting the information that you now have available in a way that the utilities can utilise on behalf of the customers?
Utilities have been in a challenging position traditionally, because people expect to go home, turn on the lights, and things just work. The electricity system is expected to work all the time and when it doesn’t, typically consumers get upset.
Many utilities across the world have done a phenomenal job in terms of improving their customer relationships, both in deregulated markets or even in captive, regulated markets, and are now ready for the next step.
We are able to help utilities improve their customer engagement and satisfaction through providing portals for the customer whether it be online or on a mobile device. This gives people access to the information they need when they need it; they can be alerted to changes in the system, such as outages, or notified about the possibility of a high bill, for example.
One of the biggest challenges utilities face is that their customers are never totally sure how much electricity they are consuming until they get the bill. Through analytics and better information sharing, utilities can identify when a customer’s consumption is higher than normal, or how much they’re spending on heating or lighting or appliances. Today, utilities are taking customers on a journey, making sure they understand how much energy they are consuming and what it costs; how they compare to other customers within the same area, with the same type of house or the same number of people in the household.
Our information empowers utilities make recommendations about ways that customers can save on energy bills, such as changing light bulbs or installing an efficient thermostat. The advice will, of course, be determined by each customer’s unique set of circumstances. The last thing a utility wants to do is recommend that somebody install a more efficient air conditioning unit when they don’t even have one.
This is how a utility can improve the customer journey; by segmenting their customers, disseminating the right information at the right time, monitoring campaigns and adjusting messaging to improve program results, utilities can ensure that they continue to drive customer satisfaction and reduce churn.
These analytics offerings are both gas and electricity utilities. A lot of our customers are actually dual-fuel utilities who offer both gas and electricity services. Of course, some of the challenges that gas and electricity providers face are a little bit different, but the way they can utilise data to improve efficiency and make predictions is very similar.
What would you say is the biggest challenge for utilities at the moment, in terms of adopting analytics and getting into an analytic mind frame?
Many utilities are focused on technology deployments, and are asking themselves how best to get their smart meters deployed, how to sensor the grid or what customer engagement strategy they should deploy.
Because a lot of the deployments are still in the early stages of this cycle and because utilities are very much in the wires business as opposed to the analytics business, development is progressing slowly.
We are still very much in the “let’s deploy some of the technologies out there” stage, rather then asking “what do I have available today?” A lot of people think that in order to implement an analytics project, they need more data. However, many utilities already have a lot of data available and they don’t necessarily need to add sensors to the grid to start unlocking value from the data. Obviously, the more sensors you have, the more information you have, and the better your predictions will become, but most utilities are already able to make very good predictions across most aspects of the utility value chain based on the current available data, which will improve over time as more sensors are placed into the network.
The first challenge is really one of timing – when do you start? Considering where we are right now, the earlier you start, the earlier you will start seeing the benefits.
The second challenge is that a lot of the existing systems do not communicate with one another, so they tend to have a large number of siloed systems. Whether it’s due to different systems, different integrators or even just different technologies, utilities can end up with a very diverse environment of systems.
Another challenge is that a lot of the systems are getting old and people are having difficulty extracting data from older systems. This is where analytics companies are able to help – by extracting the data from the various systems and consolidating it into a single system, utilities are able to apply analytics on one federated system.
This interview first appeared in Metering & Smart Energy International Issue 6, 2015.