According to February 2022 figures from the Department for Business, Energy and Industrial Strategy, energy supply made up 21% of all carbon emissions in the UK, second only to transport (24%) and ahead of business (18%), residential (16%), agriculture (11%) and waste management (4%) [1].
With such responsibility comes an opportunity to show leadership in the mitigation of climate change. Many of the dynamics are in motion and are leading to seismic shifts in our industry already. Over the next decade, Distribution Network Operators (DNOs) will experience a transformation in how they operate, as they evolve from passive networks into flexible system operators proactively managing a decentralised range of Distributed Energy Resources (DERs). In its latest Future Energy Scenarios report, National Grid ESO estimates that wind and solar generation could make up at least 66% of the GB energy supply by 2030 compared to 43% currently [2].
Increasing interdependence
The consequences of such rapid decentralisation are far-reaching. Thedemocratisation of energy will empower individuals to become more than just passive consumers. Instead, they will be participating in the network by self-regulating their energy use and storing and sharing surplus power with the grid during peak periods.
Elsewhere, the parallel transformation of the transport sector to achieve net zero requires sophisticated new ways of network management within utilities. In Marchthis year, the UK Government published its Electric Vehicle (EV) infrastructure strategy, which included a commitment for the UK to reach 300,000 public charge points by 2030 – a tenfold increase on the available number today [3].
When combined with the acceleration in DERs, this places demands for new kinds of network modelling solutions on DNOs. Enzen is currently supporting two DNOs in the UK to analyse network constraints, so they can manage the flexibility inherent in this new era of distributed generation. Yet the challenge extends well beyond network systems. How can utilities as a whole thrive in this new cross-sector erathat’s characterised by an increasing interdependence between consumers and utilities and between utilities and other sectors?
Dissolving traditional silos
Transitioning from traditional top-down power distribution to more transactive, decentralised energy networks requires utilities to handle a multi-directional flow of energy, data and money. DNOs will also face the challenge of matching intermittent and distributed energy supply with dynamic demand in real-time.
As a result, pricing models, payment systems and platforms built around traditional one-way transactions from rate-paying customers will need to adapt to multi-sided markets incorporating real-time reconciliations, potentially across everything from blockchain–based trades to micropayments.
Disruption is also occurring between traditional sector silos, as diverse industriesincreasingly intersect around clean energy. For example, McKinsey predict that a diverse mix of green hydrogen, EVs and batteries will account for 25% of additions to flexible grid capacity by 2050 [4]. Such cross-sector collaboration is exemplified by the pioneering West Midlands Regional Energy System Operator (RESO), which has seen Enzen partner with city councils, utilities and academia to create a smart local energy system integrating heat, power, transport and technology. In total there are now over 60 smart local energy system projects involving over 180 organisations working together across the UK which are expected to attract up to £500 million in industry investment [5].
One city is exploring a Multi-vector Energy Exchange where businesses, universities, homes, landlords and institutions can trade surplus energy on an automated platform on a half-hourly basis. And others are pioneering intelligent load management systems that communicate with household appliances and automatically reduce consumption or share surplus power with the community to relieve stress on the grid.
People power
All this will demand cross-sector systems and standards for everything from cybersecurity to safety, alongside more open data and interoperable technologies.Therefore, the other challenge for utilities will be complementing these wider industry changes with the sustainable transformation of their operating models. Many utilities are already accelerating the digitalisation of everything from operations to customer communications so they can integrate data and transactions from diverse sources. The target outcome is seamless end-to-end digital experiences encompassing all stakeholders, from industry peers to employees, customers and new talent.
Broader social changes make the creation of truly digital utilities essential. A McKinsey study showed that from 2018 to 2020, utilities that maintained or improved digital satisfaction saw overall customer satisfaction rise by an average of 2%, whereas utilities that experienced a decline in customers’ digital satisfaction saw overall customer satisfaction decline by an average of 1% [6].
Meanwhile, the Energy and Utilities Skills Partnership found that with 27% of the utilities’ workforce likely to retire in the next decade, the sector needs to recruit or retrain 48% – or 227,000 – of its current employees by 2030 [7]. Attracting and keepingtalent through digital experiences on a par with those enjoyed by customers will be a critical aspect of this, especially as millennials become a larger part of the workforce.
A new ecosystem
As well as engaging differently with new technologies and other sectors, utilities will fundamentally have to engage differently with people, whether its customers, employees or stakeholders.
Data is in many ways the driver here. Thanks to the growth in Behind-the-Meter generation, utilities will be able to harness live energy consumption data from homes to improve forecasting, grid flexibility and catalyse new consumer behaviours. Real-time data from household appliances can drive new ‘as–a–service’ models where consumers only pay for the refrigeration and heating they use.
The rise of the digital workplace means utilities need to reconfigure organisational cultures around data by digitally integrating all divisions, dissolving departmental data silos and upskilling workers in emerging fields such as data science, while simultaneously opening up their data to other networks in the process, as advocated by the Energy Digitalisation Taskforce.
Continuing this logic further means companies could share renewable manufacturing resources, power sources, supply chains and skills across sectors to drive combined economies of scale for new net zero innovations, with utilities convening a new vast ecosystem of diverse tools, technologies, specialisms and suppliers.
A major transformation
Utilities have the opportunity to help drive net zero transformation across every sphere of society, catalysing wider changes not only in technologies but in markets, workplaces, consumer cultures and mindsets. This is about more than incremental investments in individual solutions and is instead about championing society-wide digital integration.
Set in the context of economic upheaval, political uncertainty, rapid technological change and a challenging regulatory environment, the scale of the task is not minor. But as with any transformation, it all begins with a compelling vision. The first step is to reimagine the role of utilities in the 21st century digitalised world, and collaboratively chart their journey from service providers of life essentials to active champions and agents of long-term socio-economic change.
Author: Sanjay Neogi, Head of UK and Europe, Enzen
Sources
https://www.nationalgrideso.com/document/263951/download
https://www.gov.uk/government/publications/uk-electric-vehicle-infrastructure-strategy
https://www.euskills.co.uk/about/energy-utilities-skills-partnership/skills-strategy-2020/
