This article was brought to you by ASUG and PwC.
The utility industry is in the midst of massive disruption.
Once, being a utility company was more straightforward. You had a monopoly over a region, so you built power plants usually running on coal, oil, or natural gas to supply the needs of that area. You could count on predictable customer growth, plant expansion, and revenues.
That has changed.
Increasingly, more customers—as well as governments and investors—demand clean energy. If you can’t provide it, they’ll find someone else who will, or they will generate it themselves. At the same time, you have to be a reliable utility company as you reinvent.
What’s a business to do? Let’s lay out the problems — and the potential solutions.
Meeting the industry demand for clean energy
Utility companies face mounting pressure to lead the way in decarbonizing the global energy system. Energy consumption accounts for more than 70% of greenhouse gas emissions, because much of it is supplied by hydrocarbons such as natural gas, oil, and coal. As of 2022, 38% of electricity was created by decarbonized technologies, such as nuclear, hydro, solar, and wind — and these sources are poised to overtake fossil fuels by 2030, according to the International Energy Agency.
In response, regulatory agencies are calculating the external costs of using carbon to encourage utilities and other industries to understand—and pay—the cost of failing to transition to clean energy.
Utilities are listening. Nearly half of commercial and industrial leaders said they expect more of their electricity to come from on-site generation or battery storage over the next two years, according to the PwC 2023 U.S. Large Energy User Survey. In fact, more than half said they’ve already started, as well as electrifying fleets and replacing outdated equipment with more energy-efficient machinery.
Customer retention
The good news is your customers don’t want to leave you behind. In fact, they’re counting on your help.
More than 90% of survey respondents said they wanted at least some support for these energy-related improvements — and utility companies could be of great service in achieving them. Over three-fourths of those surveyed said they’d consider trusting their existing electricity provider to deliver energy-related innovations. Respondents indicated they’d most strongly consider working with an “established energy-focused company with tried-and-true practices,” followed by an “innovative company new to energy with novel ideas and the latest technology,” as well as companies that offer familiarity with local regulations, permitting and incentives, and excellent customer service.
Utility companies should figure out how to juggle these diverse requirements.
Supply chain issues
At the same time, utilities enhancing their clean energy portfolio face supply chain issues, ranging from a lack of solar cells to difficulty in delivering wind turbines.
Supply chain plays a critical role in the clean energy transition. More than 92% of respondents to PwC’s 2023 Digital Trends in Supply Chain Survey said supply chain strategy and operations were important to executing environmental, social, and governance (ESG) strategies, and that digital investments in this area have also benefited the supply chain (82%).
Regulatory pressures
All of this change is happening against a backdrop of increased industry regulations. More than three-fourths of respondents to the supply chain survey said they are still assessing ESG-related regulatory requirements, which continue to evolve, particularly for U.S. companies and those with operations in Europe. Requirements such as the European Union’s Corporate Sustainability Reporting Directive (CSRD), the U.S. Securities and Exchange Commission (SEC)’s climate-related disclosure rule, and state-level emissions requirements like California’s Climate Corporate Data Accountability Act and Climate-Related Financial Risk Act have made reporting increasingly important.
One obstacle to success in this area involves obtaining substantiated, meaningful data to include in reports. More than three-quarters of industry executives cited their company’s lack of data and digital tools as a challenge to integrating ESG into their supply chains — and utilities are no different. New SEC requirements mean companies need to plan about their processes for ESG data collection, data quality, data transformation, and their overall reporting strategy.
In short, utility companies should be prepared to adapt their business model to energy as a service, providing new services and solutions for improving energy consumption, and outsourcing energy supply or demand based on company or portfolio needs. Companies that can’t do that may find themselves no longer controlling their own destiny.
So, what’s the solution?
Adaptability and agility
Traditionally, utility companies haven’t usually thought of themselves as agile. Their most important requirements were reliability and safety. It’s tough, for example, to balance the intermittency of renewables with the need for reliability.
But according to the 2022 PwC Pulse survey: Executive views on business, 64% of energy and utility leaders named increasing agility to better operate in a turbulent environment as one of the most important factors for future growth.
Using technology
One way to become more agile is by improving the supply chain, such as by embedding it earlier in the planning process to increase visibility through the project life cycle. Technology such as cloud-based Supplier Relationship Management (SRM) solutions help by driving change and reducing emissions without sacrificing availability and reliability.
Other emerging technologies have the potential to improve forecasting, respond to shifts in demand or weather events, automate repetitive tasks, and improve overall cost-effectiveness by making sure the right materials are on hand.
Making better use of data
This all boils down to making better use of data to make informed decisions, improve the performance and health of physical assets, and track progress toward carbon reduction targets.
Improved technology and cloud-based solutions can help. Cloud, for example, has already helped 48% of energy and utilities executives surveyed achieve measurable value in their efforts to connect stakeholders in new and more efficient ways, according to PwC’s 2023 Cloud Business Survey.
The problem is that, in too many cases, utility companies try to leverage these new opportunities using conventional tools and processes. Legacy tools don’t deliver the agility, reliability, and cost-effectiveness that utilities need to address the clean energy challenge. Utilities need data models to support clean energy construction, as well as supply chain operations that take advantage of the data that utility companies already have.
With new tools, utilities can continue to provide energy to their customers — now in new, sustainable forms — and help the planet at the same time.
This article was brought to you by PwC. ASUG develops and publishes insights regularly in partnership with its members and customers. For more information on ASUG sponsored content, contact editorial@asug.com.