Brian Bradford looks at how utilities are optimising their customer engagement using cloud computing, plus other factors driving utilities to adopt cloud technologies.
I t wasn’t that long ago when utilities looked at “cloud computing” with scepticism at best and disdain at the worst. Today, however, they see it as essential to their survival and a fundamental asset in meeting ever-evolving expectations and turning data into an opportunity to modernise and evolve their operations. A recent study shows that a vast majority (71%) of utilities now use cloud software, up from just 45% three years ago.
Many utilities have dipped their toes in the cloud waters with enterprise applications, such as enterprise resource management (ERP) or human capital management (HCM).
74% of utilities plan to spend more on cloud technologies in the next 3-5 years, including an increase in operational cloud technologies.
As cloud computing has become a defacto standard in information technology, this wider acceptance in typically reticent industries such as utilities may not be surprising. However, the top driver for this move may be. Respondents in the survey noted that improving customer experience was foremost in their cloud ambitions. But not every cloud has a silver lining. Utilities still cited security and regulatory acceptance as barriers to cloud adoption.
So why cloud and why now? Here is what 150 global leaders from investor-owned, municipal, cooperative and district/federal utilities had to say:
Customers expect more
Energy distribution is no longer a linear equation where a customer uses a resource and is billed for it. With the emergence of solar, batteries and electric vehicles, customers are increasingly becoming energy producers themselves. They are looking for more information regarding their overall usage and bill and how to lessen the impact of both. And they expect all this with the higher levels of customer service and personalisation they now enjoy in other sectors, such as retail and banking.
The growth of these renewables, coupled with the data explosion from meters and other devices, is requiring utilities to rethink everything from their billing structures to new value-added services to meet the demands of this new utility economy and improve customer satisfaction.
Many utilities are responding to these changes by expanding their communication channels, digitising basic services, creating more self-service options and offering new products and services tailored to the needs of different customer segments.
Utilities see cloud technologies as a means to provide the speed and control to meet these customer expectations. As such, it made sense that a continued investment in customer experience and engagement (31%) and customer information (29%) cloud systems made the top five investment priorities for utilities in the coming years.
Data becoming a curse and an opportunity
64% of respondents noted that cloud computing is critical to their company’s future success. A key driver is the need to manage an ever-growing pool of data better. A recent article in noted that “US electric companies have installed 98 million smart meters as of year-end 2019, covering more than 70% of all households.” The piece goes on to add that the number will rise to 107 million by the end of 2020. Smart meter data offers utilities rich information on everything from household uses to insights on unlawful squatting and more. Couple this with the sea of data coming from the increasing proliferation of the Internet of Things (IoT) devices and customers’ home energy systems (smart thermostats, EV chargers, batteries, etc.) and/ or network sensors and it’s easy to see why utilities are drowning in data.
Utilities realise that it is becoming too great a task – and risk – to manage this influx without a significant investment in tools that can capture and ingest, store and analyse grid edge, supply chain, and customer data quickly.
Utilities hope to use the technological flexibility provided by cloud technologies to innovate by using data to solve business problems from grid optimisation to managing distributed energy resources (DERs). Cloud flexibility will also help in ensuring the right data is consumed by the right person at the right time across the utility enterprise.
Jason Rodriguez, CEO of research firm Zpryme recently noted, “Utilities are seeing the impact that digital transformation is having on their business model. The challenge is so much greater than simply capturing millions of disparate data points. Utilities need IT tools to manage and drive better business decisions, and cloud computing provides the agility to more effectively integrate data and predictively use it.”
Utilities remain concerned about security (85%) and privacy (81%) and also rated these as the most significant barriers they face when it comes to using or expanding cloud computing.
But, as opposed to several years ago, the reasons have evolved. Concerns are no longer about the vulnerability of cloud computing technology itself, but rather a growing barrage of increasingly sophisticated cybersecurity threats. Whether it is IoT devices, field area networks, or 5G networks, utilities are operating in a hyper-connected digital ecosystem that can provide new and varied opportunities for nefarious actors to expose their networks. Last year (as reported by E&E News) saw its first attack on a wind farm – demonstrating that bad actors will look for any chinks in a utility’s armour to reach their goal.
Utilities recognise that they need to stay vigilant and that will require help from both regulators and vendors. Many vendors are spending millions to ensure security for the industry.
Rethinking the role of regulators
While improving, many regulators globally still don’t allow for utilities to earn a rate of return on their cloud investments, which impedes upgrading legacy IT systems. While utilities recognise/value the role that regulators play in approving their prudent expenditures, 26% cited regulatory acceptance as a continued barrier to cloud adoption. Utilities want significantly more clarity from regulators on the ability to earn a rate of return for a cloud investment. At this point, cloud deployments have occurred at utilities because they see the technical benefits of applications; however, for widespread adoption to truly accelerate, it will be necessary for these investments to be properly accounted for.
However, the majority of utility respondents (75%), also note that regulators can play a substantial role in helping protect customer privacy and security. While utilities are already prioritising the protection of customer data, they readily acknowledge the need for oversight.
Building on cloud wins
The lowest-hanging fruit for utilities to prove the value of cloud computing is traditional business management process applications. Cloud for ERP, supply chain, customer experience and HCM are becoming crucial for utilities. These areas provide utilities with a runway for proving the reliability and value of cloud applications because they do not impact mission-critical operational infrastructure. Perhaps more importantly, for the long-term health of the utility, moving these systems to the cloud can help attract new talent to replace the retiring workforce. Utilities need to compete for the best talent over the next decade, and having flexible and easy to use internal software applications will be an important factor as digital natives choose the types of companies they want to work for.
With a few enterprise cloud wins under their belts, 43% of utilities have increased their operational spending by at least 25% over 2015 levels.
As a result of the global industry trend towards grid modernisation, utilities have spent a significant amount of money on operational systems over the last decade. It is not surprising that areas like meter data management (MDM) and advanced metering infrastructure (AMI) are the most advanced when it comes to cloud deployments. 84% report that cloud for AMI and cloud spending on applications such as mobile workforce management (80%), MDM (79%), and GIS (78%) is imminent. These are the IoT applications that are producing the most amount of data right now, and these are the sectors that most impact reliability and energy affordability.
Perhaps the most interesting long-term expected growth for operational cloud applications lies in distributed energy resource management systems (DERMs) and demand response management systems (DRMS).
Utilities see the long-term trend of customer renewables and energy efficiency, and they recognise that cloud solutions for these next-generation technologies will be crucial to maintain grid reliability. A number of utilities, such as Exelon and SoCalGas, are already seeing the benefits.
The adoption and interest in cloud technologies in the utility industry from three years ago to today is hardly recognisable. Utilities are realising that old ways of thinking can no longer stifle ingenuity and innovation. With evolving regulatory requirements, increasing customer expectations, and cloud-native market entrants manoeuvring to capture their customer’s mindshare, utilities must move faster to maintain their market position. The cloud offers one of the critical avenues to get there. SEI About Brian Bradford
Brian Bradford is vice president of utilities within Oracle’s Industry Strategy Group.
The Oracle Cloud offers a complete suite of integrated applications for Sales, Service, Marketing, Human Resources, Finance, Supply Chain and Manufacturing, plus Highly Automated and Secure Generation 2 Infrastructure featuring the Oracle Autonomous Database. For more information about Oracle (NYSE: ORCL), please visit us at www.oracle.com.3