20,000 miles travelled, three speeches given, 11,000 attendees mingled with, dozens of interesting industry people met and a small dash of jet-lag. We’ve just come back from Asian Utility Week 2019 with our heads full of insights from the many people we spoke with.
An Energy Sector at tipping Point
As the Asian economy continues to grow, its energy sector is at a tipping point. In the past, the region’s strong economic growth has relied on relatively inexpensive fossil fuels. Today, as with the rest of the world, there is an urgent need for a transition to a more sustainable future. The region’s utilities face a paradigm shift as the industry strives to balance the energy trilemma of affordability, sustainability and security.
What’s more, the region’s energy demand is set to increase dramatically. According to the International Energy Agency, Southeast Asia’s energy demand is set to grow by almost two thirds by 2040, representing a tenth of the rise in total global demand. With these factors in mind, it’s no surprise that the delegates at ASUW19 were discussing how utilities could succeed in this rapidly transforming energy market. As a startup based in Europe, it was fascinating for us to hear the up-to-the-minute take on utility trends from an Asian perspective.
As well as chatting with the many delegates who visited our stand, we were fortunate to be joined by colleagues from Tenaga (TNB), China Light and Power (CLP) and our partner network. They sat down and gave us their views on the direction of travel for utilities in Asia.
Some of the trends they spoke to us about are similar to those we’re seeing in Europe, but there are differences too. As our colleagues pointed out, the two regions have taken different paths in their energy sector development. Many countries in Asia have not undergone the liberalisation that has been common in European markets. This has advantages for utilities in Asia who take advantage of leap-frogging some of the challenges that their European counterparts have had to negotiate. They can take a different and exciting route to the next generation of utilities.
Digital Transformation comes into Sharp Focus
For us at the Greenbird stand, it felt that it all came down to digital transformation. We had many conversations around this topic; what it means and how to go about it. Digital transformation determines how utilities can effectively react to the changes in the environment they operate in, whether that’s understanding consumers, harnessing new technologies or leading the way to a more sustainable future. It also determines the role utilities can play in tomorrow’s energy landscape. Get the digital transformation right, get the future utility right.
So, hot from ASUW19, let’s take a look at the key utility trends in Asia.
1. Renewables, Renewables, Renewables
Asia is turning to renewables to meet its burgeoning energy demands.
The transition to more sustainable energy must be one of the most discussed trends in energy markets around the world and Asia is no different. The Association of Southeast Asian Nations (ASAEN) has set itself a target of 23% renewable energy by 2025. 62% of the world’s renewable energy jobs are now in Asia, with China and India taking the largest shares. China is now the world’s largest producer of wind and solar energy. The largest continent on the planet is moving to a more sustainable future.
Asian consumers are playing their part in this transition, with a growing desire to save energy. So, are Asian consumers following the same trend we are seeing in Europe and becoming prosumers?
This depends on the region. Our colleagues pointed out that the Chinese government is encouraging Distributed Energy Resources (DERs) as a means of saving energy and increasing reliability. However, in urban areas such as Hong Kong where people live in high-rise buildings, generating home energy is not an option.
The intermittent nature of renewables brings challenges to utilities, but this is an area where digital transformation can help. Integrating data from smart meters, the Low Voltage grid and DERs, and applying AI and data analytics helps utilities understand how consumers are using energy. This enables utilities to identify what measures can be put in place to balance the grid.
2. The Rise of Electric Vehicles
While some areas of Asia have become enthusiastic adopters of Electric Vehicles, take-up across the region is patchy. The rise of Electric Vehicles (EVs) is both a headache and an opportunity for electric utilities.
China is now the largest EV market in the world and the market there is growing twice as fast as in the US. Other countries in the region such as Malaysia and Australia are taking longer to adopt EVs. India’s government is planning to move to 30% EVs by 2030.
A variety of businesses from car manufacturers to oil companies see EVs as the future and are investing in the area. It’s a trend that provides opportunities for electric utilities as EVs are predicted to take a large share of the increasing demand for energy. However, with more demands on the grid and the unpredictability of charging behaviour, EVs also present major challenges for the Distribution System Operators (DSOs).
Once again, digital transformation offers solutions to these challenges. Data from EV charging stations or from domestic chargers helps utilities to predict energy peaks and to balance the grid. It also gives utilities valuable insights into consumer behaviour. EV charging data puts electric utilities right at the centre of this growing technology.
3. A closer relationship with consumers
Insights from data are bringing consumers closer to their utilities.
As a younger generation works its way up through the population, they bring with them new ways of behaving, new expectations and new demands on utilities. This generation is more concerned with saving energy and money. In many parts of Asia, consumers cannot choose their supplier.
However, they can choose how they consume energy.
To be active participants in their energy consumption, consumers must have access to their data through apps. Utilities have long histories (118 years in CLP’s case) and have built up considerable trust with consumers over that time. The constant connection to utilities through consumption tracking apps brings customers closer still.
Once again, we see the importance of digitalisation and digital transformation. Improved integrations and better access to data enable utilities to constantly improve the quality and flow of insights to their customers.
4. An Aging Workforce
As with many areas in the world, the utilities sector in Asia has an ageing workforce. This is driving companies to take a new approach to hiring, helped by digital transformation.
Many Asian countries such as China and Hong Kong are seeing a rapidly agwing population. The region’s working-age population is also graying with its average age expected to rise from 37 in 2015 to 40 in 2050. As with their US and European counterparts, utility engineers are reaching retirement age and utilities struggle to replace them with younger workers.
As our colleagues in Asia pointed out, digital transformation offers part of the solution to this global utility problem. With increasing digitalisation, new technologies can be harnessed to do the work that was traditionally done by engineers, for example fault detection and facility management. A new generation of employees can be hired with different skills such as innovation or emerging technologies.
5. The Development of a New Utility Culture
A disrupted energy sector sees new market entrants arrive from outside the industry driving a new culture within traditional utilities. This culture is collaborative, innovative and rests on a Digital DNA.
Asian utilities are facing similar disruptions to their European counterparts as new entrants join the energy sector. These entrants are often agile startups with capabilities in new technologies. They are offering consumers better, more in-depth insights than traditional utilities.
As I said in my speech at ASUW19, traditional utilities and startups move at different speeds; utilities tend to move at a slower pace than the more agile startups. Asian utilities are recognising that by forming partnerships with these new market entrants, they can jump on the technology, strengths and agility of startups.
This new direction requires a change in mindset; a realisation that a collaborative rather than competitive approach is one that gets results. Changing the culture of a large, established company is not easy. It takes time and the buy-in and support from senior managers.
This collaborative approach contributes to a culture of innovation. As the Digital Natives become energy consumers and customers, Digital Natives must also become employees who can connect with the new generation of energy consumers.
As we have already seen, another route to bringing innovative thinking into traditional utilities is to hire a different type of employee, skilled in areas such as economics, innovation, and AI rather than engineering.
Again, digital transformation is important to innovation. Freeing data from silos by effective integration means that people with a variety of skillsets across many departments can collaborate to produce innovative ideas.
Becoming a digital utility, fit for the future, means developing Digital DNA. What do we mean by this? It means ensuring that ‘digital’ is at the centre of everything the utility does, not just bolted on as an afterthought. It means developing a new culture or mindset and a new operating model. As we’ve seen, digitalisation is vital for utilities to thrive in a future where data-driven insights from renewables, electric vehicles and consumers enable innovation. Using data and extracting insights from them leads to more agile, innovative and competitive utilities.
6. The Future Utility: The Utility as Lifestyle Provider
As utilities become skilled at gathering data-driven insights, we will see a shift away from tariff pricing towards a service delivery model.
To the new generation of Asian consumers, the product they are buying from power utilities is not electricity. As our Asian utility colleagues pointed out, the service their customers are buying is light, heat or power. Electricity is the tool that delivers these services.
Energy tracking data is the raw material that can lead to innovative new services. Utilities of the future may well be offering services such as insurance or elder care in addition to their energy packages.
7. The Future Utility: A platformed digital utility
The future for DSOs is to become the platform operator at the centre of an energy ecosystem. From this position, they can further develop into the platform operator for the Smart Cities of the Future.
The future utility in Asia is connecting supply and demand. How can DSOs best achieve this? By providing a platform and being at the centre of an energy ecosystem, utilities can bring these two sides together. We’ve already seen how a shift towards renewables, a rise in electric vehicles and increasingly engaged consumers are key trends in Asia.
Becoming a platformed utility enables them to integrate renewables, to plug in local energy production and EV charging and to harness the power of new technologies such as AI and data analytics. As more and more people switch to EVs, utilities gain data and insights into what’s happening in cities and towns. They are on the path to becoming the platform for the Smart Cities of the future.
For most utilities in 2019, this may seem a trend that is at some distant point in the future. However, we are already seeing forward-thinking utilities embark on the journey that will take them to this end goal. How does this journey start? It begins by integrating data from smart meters, from AMI and meter-to-cash processes, it begins by integrating operational technology with IT. This gives utilities the ability to access data that was previously hidden. It gives them the ability to apply data analytics and AI and gather improved insights. The journey begins with digital transformation.
Get the digital transformation right, get the future utility right.
We hope you are as inspired as we are from these market insights and experiences from Asia. 2019 is shaping up to be a very exciting year. And we hope you will join us in Paris, 12 – 14 November 2019. We are super excited to be part of the European Utility Week.