Six trends sweeping through Australia's electricity utilities market

14 September 2020 Consultancy.com.au 7 min. read
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Australia’s electricity utilities market is facing a wave of change, spurred by changing consumer demands, regulation, the rise of renewable energy and decentralisation of energy production.Ian McRae and Alex Lal from State of Matter share six trends that are sweeping through the industry and their implications. 

Trend 1: Customers


Trend
Customers are demanding more and becoming more educated. They are price sensitive and understand the value of data. 

Implications

  • Utility customer relationships need to change from passive to integrated
  • As prosumer customers will become or have already become competitors
  • Ongoing reduced electricity consumption (excluding electrification trend) leads to “death spiral” 

Examples

  • More than 2 million residential solar panel rooftops on over 20% of Australian households with 7.8 gigawatts of capacity
  • Integrated “behind the meter”, wind, solar and battery industrial scale set-ups
  • Greenfield, microgrid enabled developments where property developers are in partnership with utilities providers
  • Energy efficiency firms moving from cottage industry to maturity at scale 

Trend 2: Technological Change


Trend
Rapid technological developments are optimising existing business models, opening up new markets to traditional utilities and accelerating the move from centralised to distributed energy generation. Developing the right technology strategy to navigate a transforming industry will be crucial for utility providers.

Implications

  • Short term technologies mostly on concerned with improving efficiencies whilst longer term technologies focus on customer value
  • New entrants into the market will command attention as their business models revolve around new, innovative technologies
  • Cultural transformation across many utilities must advance hand in hand with technology to harness its full potential

Examples

  • The use of drones in inspection regimes has drastically reduced safety risks & lowered costs associated with risk assessments, manual inspections & insurance premiums
  • OT/IT convergence, enabled in part itself by new technologies (such as IoT), will enable more direct control and complete monitoring of assets and grid ops
  • AI is being used in energy trading to help improve forecasts given its ability to systematically evaluate large volumes of data 

Tend 3: Digital Transformation 


Trend
Digital transformation has the potential to deliver competitive cost structures, unlock the power of big data and provide new ways of engaging with customers. In a recent Cordence Worldwidestudy of utility and energy companies, almost 75% of participants agreed that digital transformation is their top strategic priority.

Implications

  • Robotic process automation in billing & metering activities as well as AI solutions in maintenance & asset mgt will deliver increasing operational accuracy & efficiency
  • Digitised customer interface solutions & predictive analysis is driving competitive, customer centric behaviour
  • Cloud data centre solutions provide holistic & flexible data for CRM, asset management & grid ops applications – offering actionable data analytics insights

Examples

  • Customer interface solutions including chat bots, mobile apps & self-service portals are being implemented over 65% of industry participants
  • Blockchain is being used to revolutionise energy trading and facilitate peer to peer data transfer and only increase with the introduction of 5 minute settlements
  • IoT devices can monitor grid activity and plant assets allowing predictive maintenance models to be introduced

Trend 4: Electrification 


Trend
New technology and regulation are creating new electric ‘appliances’, many with significant grid loads. The most significant new appliance is the electric vehicle (EV) but there are others including the move from gas to electric boilers. 

Implications

  • These devices have the potential to substantially increase grid loads in a non-traditional way and in very different locations
  • EVs have the ability to act as grid wide storage devices
  • Capacity requirements across the value chain will be challenged both in terms of the grid, peak loads and billing infrastructure

Examples

  • Major traditional car manufacturers are investing billions in new EV manufacturing platforms and vehicle designs
  • New players are entering the market at pace and are well funded
  • The regulatory environment is changing; at least 14 large jurisdictions have banned internal combustion engine vehicles as soon as 2040
  • The Netherlands aim to remove all gas boilers from residential properties by 2050 

Trend 5: Core Value Chain 


Trend
New forms of generation, transmission capability, distributed resources and storage are being developed and commercialised at a rapid rate.

Implications

  • Current fossil fuel based generation is already more expensive than new forms of generation
  • Efficient transmission technology will allow long haul interconnections with lower loss rates and at a lower price
  • Distributed generation and storage will become a competitor to traditional integrated systems

Examples

  • Thermal solar provides a base load power source, completely renewable and at lower price points than coal
  • Saudi Arabia and North African countries have plans to build and connect ‘follow the sun’ solar generation that will connect to European grids
  • New wind turbines are using water pumped storage in their masts
  • Integrated, behind the meter generation, plus battery installations that are purpose built for industrial applications 

Trend 6: Cyber Security 


Trend
Security for critical infrastructure is crucial for social and economic reasons. Digital and connected device growth and IT and OT convergence increase the level of cyber security risk. Regulators are now forcing the utility companies to improve cyber security. The industry is responding however there remains a lot of work to be done.

Implications

  • Cyber security impacts multiple domains and is an organisation wide concern not just a ‘problem for the CIO’
  • Actors cover a wide spectrum from activists, criminals and nation states meaning it the threat can many different form
  • The potential impacts of cyber security breaches are serious 

Examples

  • Hackers penetrate a water utility pump to gain access to the industrial control system
  • Sandworm Trojan malware developed by a foreign state penetrated computers from a US critical infrastructure utility
  • End users hacked Puerto Rico’s smart meters to reduce bills, leading to annual loss of $400 million
  • Hackers used stolen credentials to gain remote access to the Ukrainian grid cutting power to 30 sub-stations

Meeting these trends

How are existing electricity utility companies and new players approaching these trends?

Key theme
Major disruption to traditional value chains create significant opportunities for those who ‘lean into’ industry transformation.

Actionable strategies

Develop a clear understanding of strategic intent
- Realign funding and delivery models accordingly

Scan ongoing industry trends
- New energy and sustainability from periphery to core

Build efficient, change-oriented culture
- Digitisation of core business processes
- Robust and adaptive supply chains

Design “CyberFirst” to protect critical infrastructure
- Integrated approach for IT/OT and Cyber

Adapt business operating models
- Build capability through employee-centric ways of working