We just released the yearbook Top 10 predictions for utilities worldwide. The predictions allow the IDC Energy Insights team to reflect on the current year and what the future holds for the industry. This year, to be fair, there was a lot to think about.
2022 brings us the worst energy crisis in a generation, especially in Europe, with electricity prices up more than 500% since 2020 and natural gas futures up more than 1,000% on the year in August. We all knew that price volatility was going to be part of the game, at least in the early stages of the energy transition (at least until we sorted out the flexibility markets were working on and installed enough storage in the system).
But no one was prepared for the pandemic after the war in Europe, the world’s largest energy exporter.
Let’s not forget climate change, with the worst heat waves in decades (if not centuries), floods, and the huge impact they have on the so-called energy-water nexus.
While these are just a few of the challenges facing newspapers over the past 12 months, utility companies are increasingly embracing the unpredictable world in which they operate and are becoming more agile, predictable and flexible in their operations. They have no choice, because there is no time to gradually move toward the ultimate goal of net zero.
Significant investments are needed, and a critical mass of technologies must be rapidly deployed to transform energy and water systems for the better.
The energy transition, climate change and social sustainability have shown that utilities are at the heart of economic sustainability. Utilities need to be business and infrastructure platforms for electrification, leading to decarbonisation, increased efficiency and circularity of demand and electrification.
Utilities can create positive results by mastering the routines of:
- Technology: to accelerate and scale sustainable energy, transport electrification and the sustainability of industrial clusters (and the wider economy)
- Information: targets electricity generation, energy and water supply, markets, customers, energy services and new clean energy supply chains
- Ecosystems and their emerging operating models: creating new values
Together, these elements make utilities reliable for customers, employees, suppliers, shareholders and society as a whole.
Considering all this, here is the top 10 predictions for utilities:
- By 2025, one-third of competitive gentiles will have integrated supply, efficiency, decarbonization and electrification service portfolios, increasing average revenue per customer by more than 20%.
- By 2023, 60% of competitive power generators and traders will have AI-powered forecasting capabilities in production, helping to improve day-ahead demand and price forecasting accuracy by more than 15%.
- By 2027, driven by the need to define and manage flexibility behind the meter, 70% of power grids in developed markets will use distributed resource management and demand response solutions.
- By 2024, 50% of gas utilities will use cloud platforms and drones, aircraft or satellites equipped with image-based detection technology to identify fugitive emissions and deliver on net-zero targets.
- By 2024, 25% of utilities will invest in new talent management applications to become high-performance, skills-based organizations, increasing productivity and quality of work by 15%.
- In 2023, due to energy price and security concerns, 55% of energy providers will use energy system data to identify people at risk of fuel poverty and support more efficient consumption.
- By 2026, 60% of utilities will integrate IT and operational technology (OT) security personnel, technologies and processes to better protect against cyber and physical threats, reducing overall security breaches by 50%.
- By 2024, 70% of utilities will use dedicated sustainable SaaS platforms to track and report Scope 1 and 2 and estimate Scope 3 emissions to meet regulatory and financial disclosure requirements.
- By 2027, prolonged droughts and volatile energy prices will prompt water companies to invest in IoT and AI-based smart applications to reduce non-revenue water (NRW) by 40% and electricity consumption by 20%.
- By 2025, 50% of utilities will implement a platform approach to operations, integrating key applications, improving visibility, control and efficiency.
For each of these predictions, the IDC Energy Insights team developed a detailed analysis driver integration and IT impact and guidance for utilities. A selection of these forecasts is provided by IDC Energy Insights analysts live webinar Thursday, December 1, 16:00 CET.
To complement the top 10 predictions, the IDC Energy Insights analyst team develops a series of recommendations for utilities embarking on their energy transition journey. This year’s offers:
- Reach your goal. Sustainability, decarbonisation and electrification offer endless opportunities, so it’s easy to miss out on the possibilities. Balance the short-term around security of supply and consumer protection without losing momentum on long-term net-zero goals. Focus resources and efforts on energy use cases and initiatives that support and enrich your company’s future business portfolio.
- Improve your internal resources. A decade-long talent drain in the utilities industry has been exacerbated by a global skills and talent crisis affecting all industries, including technology companies. The experience of relying on technology partners and IT and business service providers is no longer sufficient, as many of these companies themselves have been adversely affected. Focusing on the internal workforce is essential to improve productivity and quality of work and improve the employee experience and prevent the “Great Retirement.”
- Revitalize your customer relationship. The global energy crisis and economic uncertainty have brought energy consumption (and associated costs) to the attention of customers in all sectors. Now is the time to become a true energy advisor, supporting customers with personalized, timely and valuable recommendations on sustainability and new energy products and services. This can have a long-term impact on customer experience and revenue from new business models.
- Engage in ecosystem innovation. Co-innovation and co-creation are critical to successfully managing the energy transition. In many cases, emerging profitable business and operating models also require cross-industry ecosystems, so ecosystem-first thinking is a powerful tool. Create an internal interaction platform that connects business stakeholders, technology partners, end users and startups with the ultimate goal of driving idea conversion and incubation and driving operating models to create new value.
Energy system integration support. Work with regulators and policymakers to connect different production modes with different types of requirements through the most sustainable and cost-effective physical, digital and market infrastructure. Price signals to support the creation of markets that direct consumers to the cheapest and most efficient option for decarbonisation. Drive the creation of physical connections between existing and new energy carriers. Digitizing the system to match supply and demand, organize markets and connect energy flows.
IDC Energy Insights analysts Jean-Francois Segalotto, Gaia Gallotti, Daniele Arenathe and Roberta Bigliani will be in Frankfurt Enlit 2022. They look forward to meeting you and discussing their predictions and more.