The utilities sector is in the grips of a shifting reality, writes Pedro Guerreiro, head of sales: energy and natural resources at SAP Africa.
The energy business model is under immense pressure: as Gartner reflected recently, energy is moving from a century-old model of centralised generation and unlimited demand, to distributive models and growing requirements to secure supply.
To be disrupted in such a manner is not unusual. If anything, it is the hallmark of just about every industry functioning today, thanks to the overwhelming influence of technology. Old business models, in particular, are under pressure to reinvent or be discarded by new mavericks. Examples of this trend abound: AirBNB, Uber, even the now-ubiquitous MP3 are in the process of, or have already, laid waste to their predecessors. Anyone considering themselves immune of this trend risks being the naked emperor, with a start-up soon to heckle their anaemic wardrobe.
Yet, to put it bluntly, energy is not a start-up service business. Energy does not shift in weeks, months or years; it shifts in decades. Energy infrastructure is expensive, colossal and monolithic. Even as alternative sources and decentralised models appear, these are not changes that will happen overnight. In the new reality, data, audit and compliance go together to secure new revenue for utilities.
To the casual observer, this may mean the energy sector has time on its side, but quite the opposite is true. Giants turn slowly and, in an environment where every cent matters, that complicates things. Waste is never an option and efficiency is paramount. This does not even touch on the rise of an engaged consumer class that demands certain interactions, all while piling on more personal technology, further straining infrastructure.
Now we get to the pitch, one that many energy executives have heard before, yet it still remains a fact: big data systems and the smart grid are the new paradigm, or should we say salvation, for the energy business model. The numbers back this; utilities that have adopted smart grid concepts through SAP, on average, reported 61% higher returns by reducing breakdowns and improving the effectiveness of their equipment. Health, environmental and safety audit costs have halved, while billing errors dropped by 28%.
Those are meaningful figures, demonstrating the potency of a data culture. Why are utilities seeing such solid results? It’s not by chance. SAP has a pedigree that places it at the top of data solutions and to blow our own horn is tempting, but the truth is that the energy business is inefficient and stuck in the past. There are many bolts that can be tightened and laces strapped down. Leaks, time wasted on processes that could be automated, staff-draining customer disputes… Indeed, the very idea of a one-size-fits-all delivery model once had a place, but it’s now showing serious shortfalls. To reach for a buzzword, utilities need to become smart about their business and start running simple.
This is not meant to sound condescending. As mentioned earlier, energy is not some light-footed service model that can pivot like a ballerina. It needs time, planning and careful execution. Big data delivers that, particularly once combined with the machine-to-machine world of sensors and automation.
To do that requires the right platforms and partners that create a wholesale impact across all business divisions. Naturally, I’d propose SAP with its class-leading solutions and the fact that the company is commemorating its tenth year leading Gartner reports in the CIS space, but that is not the message here. Instead, it is paramount that utilities and their value chain all embrace big data and smart grid concepts. These will encourage efficiency, enable automation, build protection against uncertainty, and soon create an energy business model that is proactive, engaging and responsive.
Those are the characteristics that the old guard lacked, leaving them open to disruption. The energy sector is not quite in the same boat. An upstart won’t suddenly dislodge something as critical as an energy supplier; that only adds to the responsibility for change. Energy is one of the cogs turning our modern world, and just because something is insurmountable, doesn’t mean it cannot crash. When a roof structure collapses, you need new shelter. When a mountain crashes, it takes the village with it