Electrons to Insight: The Coming Shift in the Utility Business Model
This is a guest post from Michael Kanellos, Technology Analyst, OSISoft. Michael is a technology analyst at OSIsoft and has covered the high tech industry for over 20 years.
What will utilities do next?
That’s the multibillion dollar question for the power industry. One on hand, renewables, demand response services and gains in efficiency are potentially putting a ceiling on their future. On the other hand, running the grid is becoming more costly and complex than ever with the emergence of EVs and IoT. More work, less opportunity: it can be a scary picture.
In some jurisdictions, the response to this dilemma has been for utilities to become common carriers. They don’t sell power or generate it. Instead, they manage the wires and infrastructure that connect consumers and power producers.
But there is even more they can do. Utilities are also a source of untapped expertise in running complex networks in real time. Instead of simply selling electrons, utilities began to sell cloud-based services or other technologies to large power consumers, solar companies, and others.
Sempra Energy, for instance, which owns the power utility for San Diego, recently launched a subsidiary company called Pxise for microgrid software and services. (Disclosure: OSIsoft incubated Pxise with Sempra.). Both the technology and business model are novel. In the past, if a utility developed something like Pxise, it would have stayed in-house: the single customer would have been the utility itself and the benefits would have only been enjoyed by the people and businesses living in the service territory. Now, potentially, innovation can travel worldwide.
Others are embarking on the same path. Last year, Edison International spun out Edison Energy that helps customers with complex energy portfolios. PJM, meanwhile, has developed an application called DIMA (Dispatch Interactive Map Application) that gives technicians a control room view into operations. PJM uses the application internally for the benefit of its dispatchers now, but is exploring ways to commercialize it. Tokyo Electric Power in Japan is looking at ways to develop new services.
Regulators, likewise, are on board. One of the more interesting parts revolves around data sharing. In a nutshell, regulators are telling utilities that they will likely have to share certain types of data such as circuit maps with solar producers and others. Data and analytics based on real-time data, however, could be monetized.
“Basic data should be available to all providers, but utilities might legitimately earn a return for costs incurred in producing and cleaning up data that delivers value to providers,” said John Borchert, director of energy policy at Central Hudson Gas and Electric, in article by Herman Trabish in UtilityDive. “It might be done through an unregulated arm of the utility or the commission could decide it is an appropriate revenue stream for regulated utilities.
Granted, we’re still at the start of the utility transformation. Policy frameworks will have to be implemented and then tweaked over time. Not all of these attempts to sell advanced technology will work either. Utilities, rightly, will also have to contemplate how such a shift might impact their role as impartial service providers. It will take a massive cultural shift too.
But starting to think of them as technology companies that happen to sell electrons rather than electricity providers that happen to have a tremendous wealth of technology expertise could be the first step into a new future.
About ARC Advisory Group (www.arcweb.com): Founded in 1986, ARC Advisory Group is a Boston based leading technology research and advisory firm for industry and infrastructure.
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About the Author:
Janice Abel is a principal consultant at ARC and lead analyst in the areas of enterprise manufacturing intelligence, manufacturing execution systems, operational analytics, batch management software, and operator training simulators.”
Janice has done extensive research and consulting on automation technologies spanning the entire spectrum of process and manufacturing industries. Her experience includes over 25 years of helping both suppliers and end user clients develop strategic plans to market, adopt, and use technologies. She has been doing research and consulting for the chemical, oil & gas, pharmaceutical and biopharmaceutical, consumer products, medical devices, and other industries throughout most of her professional career.