In recent blogs, I have talked about practical ways that utilities can take a data-driven approach to managing assets more effectively; and to interacting with their customers in ways befitting a 21st century digital organisation.
I’ve intentionally remained practical and grounded, keeping away from the (often not entirely unwarranted) hyperbole and predictions of doom of so many utilities blogs today. However, this one might be a little different.
This time, let’s focus on critical support functions such as HR, Finance and Regulation. It’s no exaggeration to say that in the next 20 years or so, a utility business will need entirely different skill sets in their workforce; their revenue streams will come from very different sources and how they are regulated will have changed beyond all recognition. As such, these unsung heroes of the back office need to be very concerned right now about what the future might look like and how they can ensure their business thrives as part of it.
We may not be certain yet what the utility business model will look like in 20 years. But it’s sure to look very different. Some would have us believe in a series of autonomous micro-utilities, islanded and self-sufficient in energy, water and waste management. They describe a future where centralised infrastructure is obsolete. And I think they might be right. Less apocalyptic scenarios exist, of course. But new entrants such as Tesla are demonstrating already that even these could be massively disruptive.
If utilities are to survive, they need to be part of the change. And they need to find new ways to make money. This is dawning on many already, admittedly. And what’s also becoming clear to them is that their current regulatory regimes are holding them back from doing many of the things they’d like to. There’s only one logical conclusion to this: eventually, regulators are going to realise this too. No, seriously. And when they do, I foresee not regulatory evolution, but genuine revolution.
We all know that regulators can be slow to change, and that they tend to follow industry and market conditions, even while believing they lead them. But a day is coming when regulators will no longer incentivise utilities to buy plant & equipment with a 40-50 year lifespan, stick it in the ground and collect virtually guaranteed returns. Hands up who is ready for that day. And who knows what we might see instead? An entirely CO2-per-kW based regime? One incentivising innovating-to-zero policies? Whatever the case, it’s time that your Regulation department was doing some very detailed scenario planning. You know, that sounds like some complex analytics to me.
Financing the future
Capex aside, let’s think about revenue streams. Energy efficiency measures reduce revenues. Electrification of transport can increase revenues. But not if vehicles become energy autonomous. Home solar plus storage can take customers entirely off-grid, or can give then excess energy to sell back to the grid. These go in the revenue debit column too. I could go on. For quite a long time. New revenue streams to replace all these debits can be risky and complex and can take a long time to deliver real returns. So Finance departments need to be doing their own detailed scenario planning, considering potential futures today. Again, that sounds like some complex analytics to me.
And so we come to HR. A Department that has not had its troubles to seek in recent times. Many today see an aging workforce and a shortage of STEM (Science, Technology, Engineering & Maths) graduates in the pipeline. Several are already doing something about it. And this is still the right thing to do. Core STEM skills will still be critical to a utility, whether managing HVDC or installing and operating autonomous community multi-utility systems. But will that be enough? I don’t think so. The utility of the future will need new and different skills too. People comfortable looking for and trying out the next big new thing. People comfortable with a culture of innovation, that allows failures on the road to discovery. And people that trust data and analytics, not tradition and gut feel. It’s the HR team’s responsibility to scope and plan for bringing these people into their organisation at the right time, in the right places. Yes, that sounds like some complex analytics to me too.
Clearly, each argument above is nothing more than a different lens on the same set of challenges, opportunities…death spirals…whatever you wish to call them. Just as clearly, I’m not the first person to have thought of them. HR, Finance and Regulation departments in utilities around the world are already at some point in the 5 stages of grief, worrying about many of the things I’ve talked about. Many are planning their futures. And some are investing in the magic of data & analytics too.
But these are not just multiple views on a single set of challenges. They’re also multiple views on the same data sets: about your organisation’s capabilities and financial health; about how regulation and market forces will affect your future profitability; and about the new skills and capabilities you will need to create a successful future.
The very existence of your business in 20 years’ time is what’s at stake today. How much more confident could you be of your future if each department broke out of their traditional silos of information and analysis and instead worked on the same set of trusted, verifiable, integrated data? A single version of the truth, if you will.
Has there ever been a more compelling case for a single, integrated data & analytics platform?
About the author
David Socha is Teradata’s practice leader for Utilities and Smart Cities, advising utilities on how they can transform their businesses through data and analytics. He began his career as a hands-on electrical distribution engineer, keeping the lights on in Central Scotland, before being a part of ScottishPower’s electricity retail deregulation programme in the late 1990s. After a period in IT Management and Consulting roles, David joined Teradata to found their International Utilities practice.