In a digital future utilities will provide smart services in addition to reliable power supply
Electric utilities are facing an unprecedented set of opportunities and challenges in the emerging energy revolution. They need to squeeze every ounce of productivity out of their aging and regulated asset base, figure out how to manage the distributed renewable energy resources, along with the future massive integration of electric plug-in vehicles and deal with the complications and changes in the regulatory landscape. At the same time the decline in demand and revenue from the regulated asset base has them thinking about digitalization, monetization of data and alternate sources of revenue.
Utilities are now examining digital solutions as the next stage of development. When I was at the Energy Thought Leadership Summit in March, I invited electric utilities to get in touch with me and discuss the transformation in strategy and business models the energy industry faces and how ABB can help them in that process with its digital offering, ABB AbilityTM. The response was a clear sign of how eager electric utilities are to make the leap into the digital future for new value creation and capture.
The main opportunity for electric utility companies lies in their ability to digitalize and redefine their role, business models and eco-system in the emerging electrification value chain resulting from the Energy Revolution, Fourth Industrial Revolution, and the Transportation Revolution (digitalization, electrification and automatization of transportation). As transport and industries transform and increasingly become electrified and digital, the convergence of mobility, data, and electrification creates new opportunities for monetization and profitable growth. In this new paradigm electric utilities would be able to create and deliver new value with services on the edge of the grid and beyond the meter and offset their Regulated Asset Base.
In essence the digital transformation represents a shift from being simply a network provider to becoming a platform, and a service provider, redefining the role of electric utilities as well as the value they bring to the consumer. This is akin to the communication revolution in the telecom and media industry in the early to mid-2000’s, when companies started to add subscriptions beyond basic services, including streaming music, and movies. They have subsequently continued to invest billions acquiring content, data, and other capabilities expanding their service portfolio to providing value added services like home security monitoring, automation, and soon to come electrification services.
Utilities could follow a similar path. Even their pricing strategy could be similar. Instead of charging customers for the kilowatts of energy they used, providers could charge a standard fee. My current phone and internet bill is much higher than it was 10 years ago, even though I was paying for every minute I talked on the phone at the time. Today voice is free, but my bill contains a host of extra services; streaming, live-gaming, virus scans, home security, and more.
With the new digital infrastructure and capabilities, utilities can deliver new ancillary services and products that will offset the regulatory asset base while generating accretive and profitable revenue growth and enriching customer experiences. These electrification-as-a- service solutions can be easily added at relatively low additional costs as the technical workforce and knowledge is already in place.
A few companies have already been experimenting with this model, including Sweden’s utility Vattenfall. Branded as InHouse, Vattenfall offers smart energy services for building owners. The InHouse business concept combines local energy with energy specifically tailored to a consumer’s needs and consists of four components: InHouse Heat, InHouse Electricity, InHouse Charging and InHouse Smart. The services are subscription based and customers either pay a monthly fee based on the number of kilowatt hours consumed or a fixed charge.
For many commercial and industrial companies, electrification is mission critical but not core to their business. With digitalization and connected solutions from ABB, utilities can , deliver significant value in providing electrification as a service around power stability, resilience, reliability, optimization, efficiency, load disaggregation, etc. More importantly utilities will then be able to utilize the data collected from these services to load shift and offset their Regulated Asset Base.
Such new applications could also have a direct or indirect impact on third parties or members of the same ecosystem. For example: a stable power supply leads to safer production. Fewer incidents occur leading to the so-called “symbiotic participation” with insurance providers who will reduce their premiums because of probable decreased incidents. It is similar to companies that provide financial incentives to employees to exercise and live a healthy lifestyle. The insurance providers often provide activity trackers and other subsidies to motivate employee participation.
In its more than 130 year history ABB has been pushing the limits of electrification and will continue to do so. ABB AbilityTM is our unified, cross-industry digital offering. It extends from device to edge to the cloud with devices, systems, solutions, services and a platform that enables customers to increase productivity and lower costs.
With an installed base of 70 million connected devices, 70,000 digital control systems and 6,000 enterprise software solutions, ABB has already helped many customers across many industries to make the digital transition. We have a four-decade-long history of creating digital solutions for customers. ABB is therefore the ideal partner to help utilities to realize the tremendous productivity and performance improvements that digitalization delivers.