Utilities
Overview
One Minute Read
We are at an energy inflection point and the 2020s will continue the huge transformation of the energy industry. For decades, companies and policymakers have struggled to balance the three goals of ensuring a secure and reliable energy supply, at an affordable cost, with minimal environmental impact. Now with climate change a compelling priority utilites will need to manage the twin objectives of decarbonizing supply and supporting demand growth, especially with continuing regulatory focus on price controls. Companies need to move quickly to rethink strategy, build new capabilities, and transform their businesses to the meet the wider opportunity of energy transition. Digital technologies such as IoT, AI and the Cloud will be crucial in creating a sustainable and profitable industry.
Industry Description
The Power Utilities industry is responsible for generation, transmission, distribution and sale of energy to the general public and industry. The two main energy types are electric and gas. There are four main parts of the value chain and any particular energy company may operate in one or more parts.
- Generation. Electricity is generated in a power plant using primary energy sources such as fossil fuels, nuclear, and renewables. Power generators must adjust the demand and supply of power to meet current demand. Gas production is part of the Oil & Gas industry.
- Transmission & Distribution. Once produced, electricity and gas flows over long distances through the transmission & distribution networks. For electricity, transmission is the long-distance high voltage grid, and distribution is the final phase of the electricity supply chain which facilitates the power transfer from the grid to the end user’s meter at reduced, usable voltage levels. Transmission operators may sell transmission access to Distribution or Retail service providers.
- Retail is the marketing and sale of the energy services to consumers and businesses.
The global utility industry was worth $4534 billion in 2021 and is expected to grow to $5997 billion by 2025 at a CAGR of 7%. The rapid growth in investments in renewable power generation capacities is expected to drive the utilities market during the forecast period [1].
The UK energy industry employs around 738,000 people to deliver power and energy to 28 million homes and businesses [2].
The energy industry is vulnerable to several supply chain threats, including extreme weather, cyberattacks, trade disputes, workforce instability and surges in supply or demand.
Drivers
Shaped by the global megatrends and now the pandemic, the industry is being defined by five major drivers:
Demand - Globally power consumption is expected to triple by 2050 as electrification and living standards grow [1]. The electrification of transportation is a key growth area.
Sustainability - Power, consisting of electricity and heat generation, is responsible for around 30% of global GHG emissions today [2]. Decarbonisation of power generation is one of the key pathways to net-zero emissions.
Security - The fallout from Russia’s invasion of Ukraine is only the latest example of how
concerns over energy security alter the direction of government policy, with impacts on Energy supply
and demand.
Regulation - Regulation plays a significant role in pricing, investment, retruns and safety and this will continue bolstered by growing ESG regulations.
Profitability - Managing the triple objectives of decarbonizing supply, increasing energy security and supporting demand growth poses a significant challenge to profitability, especially with continuing regulatory focus on price controls.
Transformation
The industry will transform rapidly over the next decade as it seeks to meet the demands of energy transition and net-zero targets.
Transformations shaping the New Energy Ecosystem are:
Clean Power Generation,
Smart Grid,
Distributed Energy Resources,
Digital Retail, and
New Energy Services.
These changes will impact into other industries such as Transportation, Construction and the wider Energy & Resources market
Digital Technology
There are four distinct areas underpinning a utility’s digital transformation . The first sets the foundation, making the best use of existing data and creating a data architecture that supports the evolving needs of the energy transition. The second extends core operational visibility and control, particularly targeting grid-connected DG and the solutions required to effectively integrate it. The third greatly expands the scope of data through the deployment of IoT devices. The fourth improves distributed intelligence and control, enabled by cloud, edge computing, 5G, digital twins and platforms.
Security, Compliance & Data Privacy is vital for critical infrastructure and regulation scrutiny. IT Governance & Management will be essential to manage the change and ensure value for money.