Utilities companies should be used to the occasional existential threat. It happened when monolithic phone companies had to adapt globally to the arrival of the internet, smartphones and competition from digital-first competitors.
By Claudia Johnston, sales director at IFS Africa
Today, electric utilities worldwide are facing an Amazon moment with the arrival of a vast array of digital newcomers and increased complexity, from blockchain-enabled electricity trading platforms to smart neighbourhoods.
Across the board, utilities are facing de-commoditisation and shifts in the way electricity is generated, supplied and consumed, which requires them to fight to remain relevant to their customers.
This is particularly relevant in South Africa’s unique reality, which faces challenges that impact electricity supply and continue to constrain the economy. South Africa’s electricity generation is currently dependent on coal, but efforts are ongoing through the country’s Integrated Resource Plan (IRP) to diversify the energy mix and move to renewable energy. This includes solar, wind, and natural gas – but also retains electricity generated by burning coal.
According to a study carried out by RES4Africa around navigating this energy transition, the National Development Plan 2030 aims to decommission 35 gigawatts (GW) – out of current generation of 42GW – of coal-fired power capacity. The supply of at least 20GW of the additional electricity needed by 2030 will come from renewables and natural gas: 6GW of new solar photovoltaic (PV) capacity and 14W of new wind power capacity.
Against this backdrop of South Africa’s electricity landscape, which is currently dominated by state-owned utility Eskom – generating approximately 95% of the electricity consumed in the country – there is a growing push towards making licensed independent power producers (IPPs) a greater part of the energy mix.
We are already seeing progress in this area: research by the Council for Scientific and Industrial Research (CSIR) showed that the contribution from variable renewable energy technologies – solar PV, wind and Concentrating Solar Power (CSP) – surpassed the contribution from nuclear energy for the first time in 2020.
On 10 June, President Cyril Ramaphosa also announced a new threshold, allowing companies to produce up to 100MW of their own electricity without a licence, and paving the way for further reform through embedded generation.
Eskom has an important role to play in the transition to renewable energy, however, with a report by the International Institute for Sustainable Development (IISD) indicating that the utility can help to create scale through public private partnerships and drive sustainability and cost effectiveness.
Power companies like Eskom need to maintain reliable service even as distributed generation impacts the supply and demand dynamics that drive their capital investments. This means power utilities must figure out transparent ways to communicate to rate payers about what they generate and sell back, what external power they consume during times of high demand and what they pay for that peak-hour consumption. Other consumers may want to purchase green energy or shift consumption to times when it can be more easily met by renewables.
How should utilities providers respond? Part of the answer may come through tapping into innovation to provide digital services that are able to offer deep insights on usage, bundled in with the monthly bill. This requires heavy investments in omnichannel communication, however.
A data-driven future
As things stand today, utilities providers mostly still own the customer relationship. And they have the financial muscle – sometimes backed by the ability to rate base investments – to invest in new technology platforms and recruit skilled IT professionals. What kinds of technology platforms should be considered? This will depend on the specific requirements of the organisation and what it already has in place.
But some pointers might include:
* Prioritising data collection and technician/service portals. Data on what customers and rate payers consume can be used to create net new value by capturing data from the Internet of Things (IoT) and making it visible to end users in usable formats. And this data should be available to field service techs and the call centre so they can use it to deliver successful moments of service.
* Making sure your enterprise software makes the most of your human resources. Renewable energy has the potential to create much-needed jobs in South Africa, with research indicating that scaling up renewables can increase employment by an additional 40 % in the next 10 years. This makes it critical to ensure that enterprise software optimises and streamlines talent management.
* Improving project and asset management. Utilities will always be dependent on long-lived, expensive assets, but consumption patterns are changing multiple times over the lifecycle of each asset, which means more lifecycle extensions and refits that must be managed profitably and with minimal disruption to service.
* Creating an airtight customer experience. All utilities will need to get serious about omnichannel communication that unites communications across text, email, phone and in-person settings while harnessing artificial intelligence to get more out of contact centre employees. Utilities companies will need to standardise on a single digital backbone from customer engagement to asset management to field service.
Omnichannel communication systems that share data with operational technologies, and the enterprise project management and asset management systems used on the capital equipment that delivers value, will enable a utility to leverage highly granular knowledge of customer habits and needs. They will also provide transparency about usage, impending stoppages and pending new capabilities.
The new enterprise software platforms adopted by utilities – most likely in the cloud – should pave the way for a new utility model. In this model, utilities companies will no longer just provide basic services such as power or water. Instead, they will be able to offer a range of service packages, potentially spanning areas as diverse as carbon trading and urban mobility services.
Electric utilities are at the cusp of a new phase of evolution, where only the fittest will survive – and the fittest are those providing a centralised suite of services relevant to customer needs.