The utility industry is changing fast -- but where is it going? Each year analysts at IDC offer their predictions for utility industry trends for the coming year and up to five years hence. Here are their first five predictions, and how they related to smart grids and smart grid technology.
1. Utilities will hunt for flexibility and innovation in their operations and business models. Key drivers for this trend are increasing distributed generation, more renewables, consumers becoming more active grid participants, as well as virtual power plants, and more. "Business flexibility will impact legacy IT systems and will call for more agile IT capabilities," says IDC. Smart grid technology is an essential part of this evolution, both for delivering services to customers and interacting via energy markets.
2. Microgrids will force business model change. Or at least, microgrids and similar service opportunities will require utilities to adapt their IT and distribution networks. Microgrids offer many opportunities for enhancing grid reliability and flexibility, but they present additional monitoring, control, and integration challenges. Also, IDC notes that there are "increasing examples of utilities creating new service revenue streams" by supporting or creating microgrids. Utilities should take advantage of these opportunities, because "left unaddressed, microgrids will displace a growing portion of utility generation and distribution revenue."
3. Shifting focus, roles for utility CIOs. IDC predicts that utility CIOs will be be playing a larger role in business and operations, including working more closely with line-of-business departments on cybersecurity. Smart grid cybersecurity is among top smart solutions that utilities will be investing in over the next two years.
4. IT & OT convergence will affect the CIO role. Smart grid technology and strategies are requiring more collaboration between IT and operations departments, and shifting the skills needed to develop and support the smart grid. Consequently, blending the IT and OT silos was a hot topic at the recent European Utility Week conference.
Looking ahead at this trend, IDC predicts: "More than 65% of new utility IT initiatives will have a direct involvement from business executives. Moreover, IT investments will be treated in the same way as any other company investment." Also, utility CIOs will become more open to alternative sourcing for IT services (especially cloud services). Fast-changing needs for IT skills will yield new challenges for finding IT talent.
5. Eroding revenues and growing capital and operating costs will force utilities to develop analytics strategies. Margins are getting tighter in the utility business. To thrive as a business, utilities now must be able to closely monitor, control, and project (in real time) what's happening with energy markets, generation, grid performance, consumption and demand patterns, and assets. Smart grid technology can provide a wealth of data, and analytics for meter data management and more are becoming an essential business and operations tool.
See part 2, covering the smart grid implications of IDC's predictions 6-10.