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UWL18 special report #2: Disruptive technologies
Published 27 February 2018
The Utility Week Live 2018 editorial team, in association with media partners Utility Week, Water & Wastewater Treatment Magazine, Network Magazine, and WET News, reveal the 10 technologies disrupting the UK utilities space, as voted for by you.
Embracing the digital world is critical, whether you’re a supplier, an investor or an innovator. New technologies disrupt the utilities industry constantly, and companies must always be ready to adapt strategies, processes and organisational infrastructure to ensure they are not outpaced in the race to keep up with ever increasing customer service and efficiency expectations.
Most utilities have recognised that while this disruptive churn is challenging, it is worth the effort to keep running with it. As a consequence, even companies with stringent efficiency goals and slim margins are increasingly making money available for investments in technologies they see to be closely aligned to their futures.
By and large, this means investment in digital technologies, which will underpin data-enabled smart services and the operation of intelligent infrastructure. Digital disruption of utilities, if embraced effectively, will allow them to meet customer demands, appease regulators, overcome environmental challenges and, in short, remain relevant.
Recognising the significant and fast-paced changes utilities are grappling with on many fronts, Utility Week Live 2018 (22-23 May) has chosen disruption as its headline theme.
Held at the NEC in Birmingham, Utility Week Live 2018 will explore disruption themes in relation to water – retail and wholesale - gas and power networks, energy retail and pan utility operations such as streetworks. We’ll also have technology specific content on offer however, and in the run up to the main event, Utility Week Live got to the heart of which technologies hold most disruptive potential for utilities by surveying its audience, and those of its sister brands Utility Week, WWT, WET News and Network. We asked about the impact disruption is having on their businesses, the technologies they believe will most disrupt utilities in the next five to ten years, and why.
In the second of a five-part series detailing the responses of more than 700 utilities professionals, we reveal the top ten technologies disrupting the sector – and what they will mean for the industry.
What our results told us first and foremost is that the future is local.
As decentralised and digital technologies authority Neil Pennington pits it: “The days of the domination of centralised large-scale assets, systems and processes are numbered. The future is one where autonomous, intelligent devices, operate on a hyper-local basis aggregating up to underpin the whole system in tandem with large scale assets – whether it be solar, hydrogen, IoT, renewables, or EVs.”
But our results also highlighted the significance of underpinning, stepping stone technologies which utilities need to implement on the road to this radically different future. Smart meters, unsurprisingly, got plenty of attention for their scope to disrupt the supplier-customer relationship, and enable smarter network operations.
A common thread running between all our nominated disruptive technologies, is their ability to contribute to decarbonisation and the creation of a more sustainable future.
Arthur Mitchell, manager, Strategy&, part of the PwC network, welcomes this consensus that low-carbon technology investment is the key to growth and business success for the long term.
Far from seeing it as a limiting factor, he says it is opening the doors to “the most disruptive period for the sector since privatisation,” and one which will be full of opportunity for those that align themselves with the new low-carbon and data-driven paradigm.
1. Electric vehicles
What’s the deal: 2011 marked the introduction of commercially-available refined and reliable electric vehicles (EVs) into the UK from mainstream automotive manufacturers. And now they’re here in earnest. The number of models available to consumers has proliferated and government subsidies have incentivised uptake so that, at last count, there were more than 140,000 plug-in vehicles on UK roads, compared with just 3,500 in 2013.
With government now committed to phasing out petrol and diesel vehicles from 2040. There’s now no doubt that the electrification of transport is on the cusp of a radical increase.
Why it matters: An enormous growth in EV uptake means big challenges for power networks, and the for sustaining reductions in the energy sector’s overall contributions to carbon emissions.
A surge in power demand for charging EV’s means additional generation and network capacity will need to be available and reliable, if utilities are to avoid being framed as opponents to green progress and consumer satisfaction.
The UK’s energy networks are more than awake to this challenge with a wide variety of EV innovation projects underway to gather data on EV user behaviours and understand the effects of fast charging and “clustering” on the grid.
SSEN’s My Electric Avenue project was a landmark project in understanding the impact of clustering and led to the creation of a potentially game changing smart charging technology. But as EV and charging technologies themselves continue to evolve, so network projects too need to keep up their implications. The biggest live EV project underway in the UK today is Western Power Distribution’s Electric Nation scheme, which promises to engage at least 700 EV users.
But EV’s aren’t just high impact for energy networks. They are hugely important for energy suppliers too and in 2017, a number of retailers, large and small showed that they are ready and eager to offer special tariffs and services to EV owners.
In a future with generally declining energy consumption and an emphasis on low-carbon energy efficiency, being able to offer these bundles and services will be core to retailer survival. Services will undoubtedly include vehicle to grid demand response, leveraging EVs as mobile energy storage units and opening up a new world of value for both suppliers and consumers to enjoy.
Say what?: Jonathan Marshall, energy analyst, Energy & Climate Intelligence Unit: “On top of revolutionising transport, EVs have the potential to upend electricity systems around the world. Parking a large battery outside millions of homes will allow people to take back control of their energy use, making money from buying and selling power to and from the grid, while balancing the output from renewables at increasingly low cost. The electrification of transport will also likely change how consumers interact with utilities, with many in the industry talking to a shift away from unit pricing towards a tariff system, mirroring the past decade in telecommunications. This will require a radical shake up of the current system, with many small and nimble companies waiting to see whether the current big players fail to keep up with the pace of technological change.”
2. Energy storage
What’s the deal: Storage emerged as the most disruptive technology cited in the survey by a country mile, with battery storage gleaning the most airtime.
While lithium ion batteries remain the technology of choice for most battery storage applications, other options including flow batteries and compressed air, are fighting to prove their worth too. To help sort the wheat from the chaff in terms of the technologies with the most potential for high value applications, government is pouring in money, with £42m committed in 2017 to the Faraday Institution to support battery storage research and development.
Why it matters: Energy storage is starting to play a broader role in energy markets, moving from niche applications to mainstream interaction with crucial grid balancing mechanisms and enabling higher reliance on renewable generation, whose intermittency would otherwise necessitate continued reliance on more carbon intensive power sources.
The technology is making its presence felt at every level in the energy market, with uptake steadily growing among consumers, industrial and commercial users and on the grid. And sensing the potential for value creation, investors are now crowding in to grab a slice of the battery storage pie, where just a few short years ago they watched tentatively from the side-lines while technology maturity languished.
Energy networks are arguably leading the way from a utilities perspective, in terms of supporting large scale trials of various battery storage technologies, to test their viability for smoothing supply and demand imbalances. But recent capacity auctions have also showed the battery operators see a future for themselves in ensuring long terms security of supply too – and at a competitive cost to the consumer.
Say what?: Richard Catlow, foreign secretary of the Royal Society and professor at University College London (UCL): “Using more electricity will be key in reducing greenhouse gas emissions. Last year the European Academies Science Advisory Council found that advances in large-scale electricity storage is a priority to manage our increasing dependence on renewable energies.”
Battery firm BESS co-founder Nicholas Beatty: “The pace of transition to a low-carbon power system brings with it challenges for the National Grid in balancing the network and ensuring supply and demand is matched on a second-by-second basis. Such balancing of supply and demand is only made possible by the introduction of new technologies like battery storage.”
3. Artificial Intelligence (AI)
What’s the deal: After decades in the realms of science fiction, real life applications for artificial intelligence have sped to market in the last couple of years. Consumer-focussed AI applications have manifested in chat bots and voice-controlled smart home assistants like Amazon’s Echo (with Alexa) and the Google Assistant. But commercial technology providers have also busily enhanced their enterprise and operational solutions with AI capability. Some network control systems, for instance, now use AI to deliver autonomous network optimisation. And recruitment and workforce development professionals are increasingly eyeing its potential to plug a looming skills gaps, by powering digital training and support services to staff in the office and in the field.
Why it matters: AI could open up a wealth of opportunities for utilities to standardise customer services, optimise use of resources and realise operational efficiencies.
In Utility Week Live’s market research, chatbots in particular appeared to have captured the imagination of customer-facing utilities for their potential to boost customer engagement via a channel which is always on, delivers standardised messages and creates headroom for human customer advisors to deal with more complex and emotive issues raised by individual consumers.
But while chatbots hogged the limelight in AI-related survey responses, other utilities application of AI are also growing. As assets become more intelligent and connected, the scope to overlay AI-enabled control systems which support machine learning and autonomous network optimisation increase.
Recently, water company United Utilities revealed it will employ “software robots” which use AI to help anticipate disruptions to supply. And Last year National Grid made national headlines when it revealed it is working with Google Deepmind, perhaps the most advanced AI programme to date, to explore how it could manage elements of system balancing in the future. It also emerged that National Grid is exploring whether Deepmind could capture knowledge from outgoing staff and act as a virtual tutor to newer recruits.
As demand for a more dynamic energy system grows, AI will to play a key role in linking prosumers, distributed generation and national energy security interests.
Say what?: Dr Rafik Salama, lead data scientist, Energy Systems Catapult: “AI in the energy domain is no longer advancing incrementally. Customer satisfaction, real time settlement, adaptive tariffs are all competing elements in the energy market, and AI features at the heart of those services.”
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4. Smart meters
What’s the deal: The rollout of smart meters to every UK household and businesses kicked off in 2012 following an edict from Brussels that the technology would spread out across the EU.
To date, almost 9 million smart meters have been deployed in home sand small businesses across the UK, just fraction of the total rollout challenge, which still has a deadline of 2020 for supplier to have displayed “all reasonable measures” to offer customers installation.
Why it matters: The main smart meter value proposition for consumers is greater visibility of energy use – and therefore greater control over energy costs. But the lion’s share of the benefits of smart meters will fall to suppliers, who can expect reduced metering and billing costs over the long term and for whom the technology opens up real scope for tariff innovation.
But the smart meter rollout isn’t all upside for utilities. The rollout is a costly and hyper-sensitive public issue. Already the victim of technical setbacks, it is at risk of becoming major PR headache – jeopardising the very customer engagement it should positively transform.
Under pressure to meet rollout targets, suppliers are also still hampered by hold ups to the deployment of SMETS 2 smart meters, which can really deliver the whole smart metering package for consumers and start making use of the centralised data communications system set up by the DCC.
In the meantime, less smart SMETS 1 meters are still being installed, totalling 8.6 million at least count and creating a growing DCC integration challenge and risking consumer experience when smart functionality is lost during a supplier switch.
The longer the rollout goes on and the longer SMETS 1 meters persist, the more expensive the programme is becoming to suppliers, putting astrain on businesses with already slim margins and “first breath notification” will also help networks reduce customer minutes lost due to supply interruptions, thereby creating increased reliability more outperformance opportunities.
Say what?: “There’s an immense amount you can do with smart meter data that I don’t think a lot of people understand,” Chris Houghton, managing director energy retail, Ovo Energy
“DNOs ignore smart meters them at their peril. The top performers recognise that they will help them manage interruptions better and are starting to look at pilots for how they might use the “last-gasp” and “first-breath” functionality to do that. But there’s a lot of other data that smart meters will collect too…All DNOs need to start thinking seriously about the opportunities and challenges to avoid being caught out,” Maxine Frerk, director, Grid Edge Policy.
5. Data analytics
What’s the deal: Utilities are sitting on a goldmine of opportunity in the form of data analytics. With more information than ever before ﬂowing from smart meters and other sensors alongside traditional sources of data about their operations, the information is there for the taking.
Why it matters: The importance of analytics isn’t news for most, who see the potential to mine data for invaluable insights. Analytics can help large utilities increase capital productivity and save millions in operations and maintenance expenditures by helping them improve operations, optimise capital deployment and understand their procurement better.
They can also help boost reliability by preventing outages through more accurate predictions about when to replace failing equipment, or improve outage response through situational awareness and better management of performance.
In short utilities can understand customers and their energy and water use better through data analytics – knowledge they can use to design new products and services, such as demand-side management programs that reduce electricity use at peak times. The possibilities are endless – but if our research is to be heeded, utilities have a long way to go in realising the full potential data has to offer.
Say what?: “Utility leaders are using the data and tools they already have in hand to begin improving the ways they work.”
“From rising capital costs to increased global competition and more stringent regulation and compliance requirements, power and utilities firms are leveraging data and analytics to stay ahead.” - Survey respondents
6. Internet of things (IoT)
What’s the deal: The IoT has far-reaching implications for the whole utilities industry. The proliferation of embedded intelligence within everyday devices and assets – and their ability to interact via the internet – is driving a revolution in business models, service opportunities and asset management approaches.
Why it matters: The IoT is the foundation upon which utilities can build smart home and smart network propositions. By enabling consumer and industrial assets to communicate over the internet, it has already enabled concepts like smart metering to become a reality and introduced some step changes to the way industrial assets are monitored and maintained.
As the number of connected devices grows however, opportunities for new customer services and operational efficiencies related to the IoT are also likely to emerge.
In the home, smart thermostats and water monitors, connected directly to utilities IT systems, could be widely leveraged for new consumption monitoring, safety and leakage alerts and efficiency advice services.
Out in the field, many utilities have only scratched the surface of opportunities to embrace IoT-enabled predictive asset management, which can reduce costs associated with deploying engineers on the road and increase the overall life of expensive assets. In the shadow of major price reviews for both water and energy networks, the scope for linking IoT information more proactively with investment planning should not be overlooked.
Say what?: “The IoT network will make it increasingly easy for utilities to connect devices in the smart home and in their own operations beyond the smart grid.”
“Utilities assets and the IoT are a match made in heaven.” - Survey respondents
7. Renewable energy advances
What’s the deal: Last September the government awarded contracts worth £176m to 11 low-carbon electricity schemes, with offshore wind the big winner. This meant those schemes will generate nearly 3 per cent of the UK electricity demand – a huge step forward for renewables.
The two offshore wind schemes that won contracts became among the cheapest new sources of electricity generation in the UK as a result, joining onshore wind and solar, with all three cheaper than new gas. These auction results shifted the conversation from renewables being desireable but high cost generation options, toward being economically sensible investments and made to concept of 100 per cent renewable power reliance seem more than just a daydream.
What’s more, over half of the electricity generated in the UK in 2017 came from low-carbon sources for the first time ever, according to the Carbon Brief website, and Bloomberg New Energy Finance says wind and solar are expected so supply a third of global power by 2040.
In short, the time when renewables will provide the majority of our electric energy supply – potentially supporting electrified transport and heat demand too – is fast approaching.
Why it matters: The plunging cost of renewables and the increasingly positive load factors being achieved by large scale installations are obviously big news for generators and their investors.
Old world oil giants like Shell and BP have recognised the significance of this trend to their future relevance and are investing heavily in low carbon and renewable business until. Dong Energy – now known as Orsted, has almost completed a total divestment of its fossil-fuel reliant portfolio, and reimagined itself as an offshore wind company, first and foremost.
But beyond generation, the rise of renewables also has big implications for other utilities. Networks need to understand what an increasingly intermittent and distributed power input is going to mean for system balancing and load. Meanwhile, energy suppliers, many of who already have green tariffs may need to be ready to answer increasingly searching questions about the origin of the the energy they sell.
And it’s not just energy utilities that are being disrupted by renewables. Water company investments in renewables, especially solar farms, have burgeoned as costs have fallen and the opportunity to reduce the very high energy costs associated with their operations has become more accessible. Many water companies now have ambitious targets for energy self-sufficiency and as their renewable investments grow, there are also realising opportunities to benefit from revenue streams associated with ownership of generation, including via the provision of balancing services to the grid. These unregulated revenues look particularly tempting in the shadow of a tough price revue with downward pressure on companies’ regulated returns.
Say what?: “Renewable energy, especially solar and wind power, is quickly becoming the dominant locus of new electricity generation investment.”
“The challenge is that a growing reliance on wind and solar energy can cause electrical grids to become unstable, hence the need for disruptive advances.” - Survey respondents
What’s the deal: Long associated with cryptocurrencies like Bitcoin, blockchain is a distributed ledger technology which allows for fast and super-secure transactions between multiple parties in a network. Held on multiple computers as a huge distributed database, a blockchain ledger is both secure and immutable: falsification is impossible, because of the impossibility of changing every distributed record and its hash-encoding at the same time.
Why it matters: The potential for blockchain to disrupt the utilities industry is enormous. It is the ultimate accompaniment to the rise of distributed energy resources, offering to enable peer to peer trading of energy between prosumers.
But while rapid and distributed energy trading is perhaps the most talked about utilities application for blockchin. Other uses for the technology are also being explored in the industry today.
UK blockchain leader Electron, where former Npower chief executive Paul Massara is a director, has developed a blockchain enabled switching service, for example, which could allow consumers to flip their supplier in a matter of seconds. Such a revolution makes the industry’s slow progress towards 24hr switching seem archaic.
Then too, there is the potential for blockchain to play a major role in tacking rising problems for utilities around fair treatment of vulnerable customers. Pilot schemes are underway to see if the technology platform could enable rapid and secure information sharing between government systems, banks and service providers which would infallibly offer a complete and current vulnerability identity for an individual. Such an application might overcome existing problems experienced by both energy and water utilities in identifying and tracking vulnerability, which can be transient. It could also provide a workaround to increasing restrictions and regulation regarding data sharing.
The Energy Web Foundation, a European not for profit group established to support the adoption of blockchain for a distributed and low carbon energy future, has identified 184 possible application for the technology, with seven initial “domains” considered as priority areas in terms of impact and closeness to market. In addition to areas like grid operations, DSR and electric vehicle charging, these domains include supply chain tracking and certificates of origin for energy.
The Energy Web Foundation is backed by an impressive array of large and small energy players, including: Shell, Engie, Eon, Innogy, Centirca and Elexon among others.
Say what?: Neil Pennington: “Blockchain is the nervous system that will enable the interactions and value exchange for all of the technologies listed as well as large scale assets. Currently there are a number of companies involved in demonstration projects and POCs using private, permissioned chains designed for small consortia. Whilst this is great in demonstrating the potential products and business models going forward, true transformation and scaling comes with an open-sourced, international, highly collaborative approach to the blockchain that enables the technologies mentioned in the report to truly achieve their potential.”
9. Water re-use technologies
What’s the deal: Despite the commonly-held misconception that the water we drink has already been through several people’s bodies, direct water re-use is in fact a relative rarity in the UK. However, the advent of compact, inexpensive treatment technologies together with growing water scarcity could make re-use an increasingly appealing proposition, whether it be greywater systems which re-use partially treated water for flushing toilets, or more comprehensive localised treatment systems which, in combination with rainwater harvesting, could take individual sites entirely ‘off-grid’.
Why it matters: Water re-use boosts water resilience at a local level and could be the key to easing pressure on the country’s overstretched water resources, while also helping to reduce the burden on urban sewerage systems. However, if deployed widely it could disrupt the centralised business model of the water utilities, calling into question the traditional boundaries of responsibility for water supply, water quality and public health. Nevertheless, recognising the potential sustainability benefits, some water companies have used the changes in connection charging regime to incentivise the installation of rainwater harvesting and water-reuse in new housing developments.
Say what?: “Water re-use and treatment could change the balance between water supply and sewerage services.”
“It’s easy to imagine local grids emerging, which use rainwater run-off for secondary water services.” - Survey respondents
What’s the deal: Hydrogen is gaining increasing popularity as a potential answer to the ongoing challenge of decarbonising heat. This is because when burned, hydrogen is zero carbon at the point of use, with only two by-products – heat and water – making it the ultimate clean fuel.
There have been a series of reports investigating the feasibility of converting the gas network to carry hydrogen. Recently, Ofgem awarded £9 million of innovation funding to Northern Gas Networks’ hydrogen project, H21 to further explore this potential. A further £1.3 million of support for the project will be contributed by the UK GDNs.
Why it matters: Four words…The Climate Change Act. This Act lays down the challenge of achieving an 80 per cent reduction in 1990 carbon levels by the year 2050. And while major carbon emission reduction have already been achieved in relation to power generation, heat remains something of a blank slate.
Converting the gas distribution network to hydrogen would undoubtedly deliver a huge reduction to heat-related carbon emissions, and preserve a role for the UK’s regulated gas networks long into the future – something which has been cast into doubt by advocates for the electrification of heat.
There’s also the potential for a hydrogen-based gas network, with enormous storage capacity, to increasingly interact with the power grid for intersessional demand management and the support of a highly electrified transport network– by converting excess renewable energy into hydrogen via electrolysis and releasing this energy back to the power grid at need.
The economics and technical challenges involved in a 100% hydrogen grid conversion however are still poorly understood. Ofgem recently warned that repurposing the gas distribution network to carry hydrogen poses “significant” technical challenges and costs, so the outcomes of projects like H21 are now critical to gas network strategies.
In reality, it’s unlikely we’ll see a UK wide conversion to hydrogen gas networks for heating our homes. It’s more likely our heat future will be a blended one, making use of bio-gas sources, heat pumps, geothermal energy and hydrogen where appropriate.
Projects like H21 need to firmly and swiftly establish how big a role hydrogen can viably and economically play alongside these other options – and make clear any interdependencies with the development of supporting technologies, such as Carbon Capture and Storage. It’s a case of watch this space.
Say what?: Dr Keith MacLean OBE, chair of the UK Energy Research Centre Advisory Board: “Hydrogen, almost uniquely, has the potential to provide technically and economically viable decarbonisation solutions in all three energy sectors - heat, transport and electricity. This potential could be the ultimate disruptor to the current approaches to the three sectors that are all still significantly reliant on fossil fuels.
“In the UK especially, being able to repurpose the existing gas infrastructure for hydrogen, offers the potential for a manageable transition to low carbon heat, which also makes best use of the historic investment of consumers' money in the networks which reach into 85 per cent of homes.”
Arthur Mitchell, manager, Strategy&, part of the PwC network:
“This top ten provides a window into the considerable upheaval approaching the utilities sectors. The timing of each change, and the extent to which they are realised by these specific technologies, is unclear, but I expect we will see:
- Continued adoption of low-carbon technologies at pace
- A shift towards data-driven business models
- Long term technology-driven systemic changes across the utilities industry
The most common disruptive technology trend voted for was expected advancements in existing technologies that support decarbonisation targets. We have already seen rapid deployment of some of these technologies, such as residential solar panels through feed-in tariffs, and the sudden growth of battery storage in recent capacity market auctions, but there is definite scope for more.
Trying to accurately predict which of the technologies on the list will be the most disruptive is a guaranteed way to make yourself look silly. That said, I am very confident that we are entering the most disruptive period for the sector since privatisation. This will be driven by continued low-carbon technology advancement and a shift towards data-driven business models. Whether or not we achieve large-scale deployment of AI or blockchain remains to be seen but, given the speed at which they are developing, I wouldn’t want to bet against them.”
Neil Pennington, thought leader in innovation through decentralised technology:
“What these disruptive technologies have in common is a recognition that the future is much more local and decentralised than ever before and the days of the domination of centralised large-scale assets, systems and processes are numbered. The future is one where autonomous, intelligent devices, operate on a hyper-local basis aggregating up to underpin the whole system in tandem with large scale assets – whether it be solar, hydrogen, IoT, renewables, or EVs.
This is driven by a shift in society. In our world people are interconnected, identifying with communities never previously imagined; individualisation and a demand for fair treatment is paramount; control of personal identity, personal data and the ability to transact with others on a one-to-one basis without complex systems of brokerage and trust are essential; this is profound social change that will not be reversed.
With such a seismic shift in the individual and community, the incumbent technologies, IT systems and business models that exist today are increasingly unfit for purpose.”
Attend Utility Week Live 2018 to understand how these disruptive technologies can be best utilised in your business, and meet the organisations and innovators developing the next generation of tech and product solutions:
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