Last Updated on April 10, 2023 by Ashish
Civilization nowadays heavily relies on energy such as electricity. We use electricity in our daily lives at home, work, transportation, and more. The power and utility sector is a specialized sector that focuses on extracting and distributing energy to consumers. In this post, we will take a quick look into the power and utility sector and then into the application of cloud technology in this sector.
The utility sector consists of companies that provide basic facilities such as natural gas, electricity, and water, to end users.
There are six main facilities that companies in the utility sector provide:
- Electric power
- Natural gas
- Sewage removal
- Renewable energy
The power sector is involved in producing, exploring, refining, and transporting consumable fuels such as coal, oil, and gas. These companies usually have activities in constructing or providing drilling equipment or oil rigs.
Some examples of energy sources are:
- Natural gas
- Renewable energy
The difference between the utilities and the power sector is the focal tasks they perform. The utility sector is focused on producing and distributing utility services to customers. The power sector is focused on exploring, managing, and producing resources such as water, oil, and electricity.
Types Of Power and Utility Sector Services
The power sector consists of companies that produce sources in two categories:
- Petroleum products
- Wind power
In 2021, petroleum was the most consumed energy source in the United States at 36%, followed by natural gas at 32%, renewable energy at 12%, coal at 11%, and nuclear electricity at 8%.
Public utilities are private companies that are regulated by public commissions at different jurisdictional levels. These commissions are overseen by the National Association of Regulatory Utility Commissioners (NARUC). This organization ensures reliable utility service at reasonable rates. In 2022, three companies in the U.S have strong interest from investors:
- NRG Energy – Power company that generates electricity, provides energy solutions, and natural gas to customers
- OGE Energy Corp – A holding company that invests in energy and energy service providers that offer physical delivery for electricity in Oklahoma and western Arkansas.
- PG&E – A holding company that provides electricity and natural gas sales and delivery through subsidiaries in California.
Challenges Faced By The Power And Utility Industry
This sector is very large, with complex interconnections between extraction, production, and distribution. To manage these complex networks, digital transformation is needed. AI-powered technologies can assist in predicting and supporting consumer demands, offer better protection from cybercrime, and more. The recent trend of decentralized grids requires intelligent solutions to monitor and manage fluctuating demand.
Fluctuating Consumer Demand
A company from this sector usually caters to an incredibly large consumer pool with differing consumer needs and demands. Additionally, these demands are not constant through time. At different periods of time, consumers can demand more energy and utility or demand much lesser than normal. Companies must use sophisticated solutions to understand, predict, and manage consumer demands.
Global Shift To Electricity And Hydrogen
Global energy usage is projected to flatten in the decades to come, despite the rapid global economy and population growth. Electrification is one factor as it comes with a step-change in efficiency. In the final consumption mix, the role of electricity is projected to grow from 20% to 40% by 2050. This consumption will offset fossil-fuel consumption which could be more than 40% lower in 2050 versus 2020.
Boosting Clean Technology
Globally scaled clean energy manufacturing has offered steep declines in clean energy technology costs which advances the transition to a low-carbon energy system. Although there are cost reductions for wide adoption, there are still technology gaps in certain areas. Targeted research, development, and deployment can help in overcoming these gaps. Cleantech innovations such as integrated commercialization ecosystems provided by institutions can help address these barriers.
Making Emissions Visible
The data available in this sector falls short of what is needed to meet the issues of climate challenges. Decision-makers must rely on outdated government emissions data reports to make decisions. New systems and visualizations of emissions can radically improve the usefulness of energy data and the timeliness of preventive actions taken.
Opportunities In The Power And Utility Industry
Decarbonization is the transition to a carbon-free world by using renewable energy as an alternative. Using electricity is one way to decarbonize but it is still dependent on fossil fuels to create electricity. In order for electricity to be carbon-free, more effort must be put into renewable energy sources such as wind and solar. Other than the usual renewable energy sources that we have heard of, the European Commission has a strategy to develop green hydrogen. Another interesting alternative is magma power.
The current power distribution system is very centralized and managed by monopolistic energy providers. Decentralization aims to build distributed energy production systems using localized microgrids for consumers to generate their own electricity for their own usage.
Digitization is using machines, devices, and advanced technology to optimize power and utility production, distribution, and use. This trend works alongside the vision of decentralization and zero-carbon because with those methods, the energy network will be more complex. Decentralized grids need intelligent solutions to monitor and manage fluctuating demand.
Examples of these tools are:
- Artificial intelligence and predictive analytics – Provide datasets to AI for analysis and demand prediction. Based on these predictions, providers can adjust where the power is taken from on the distributed grid.
- Internet of Things – People can be connected to their home’s electricity and local power supply. With the connection through the Internet, users have full control over the production, usage, and flow of produced energy. Users can also keep track of their energy production and usage.
- Modeling and simulation – Create a virtual copy of the power plant or grid for the provider to model different scenarios and predict the outcomes.
Effects Of Covid-19 On The Industry
After Covid-19 has somewhat subdued, it showed the power and utility industry the importance of safeguarding and stabilizing operations, people, supply chains, and markets. They must start strategizing preventive and adaptive measures to take on future pandemics.
Covid-19 disrupted the supply chain and it even came to a halt for some time, which created a halt in supply and demand. Fuel and electricity demand decreased significantly during periods of extreme lockdowns and movement restrictions. Although Covid-19 is slowing down and the market is operating as normal, companies cannot hope for a quick return. The recovery will be slow and a recession must be expected. Hence, companies must anticipate these shortcomings and plan for a new normal. Below are some effects of Covid-19 on the power and utility industry.
Effects On Stock Prices
The energy sector was impacted by restrictions on travel, reduced production, and work mobility which directly reduced the demand for fuels. In the US, there was a 50% reduction in demand for aviation fuel and a 30% reduction in aviation gas. Additionally, the energy and utility sector prices were affected by uncertainty and negative sentiments relating to future pandemics. If vaccines can continuously hinder more Covid-19-related outbreaks, then power prices will return to pre-Covid levels with continued investments in the sector. However, if there is another outbreak or vaccines no longer work, power demand and investments will drop.
Unemployment Continued To Grow
Due to prolonged restrictions and lockdowns, some companies had to close and shut down, leaving thousands of workers unemployed. The clean energy industry removed 447200 jobs in the US. Among the states, Hawaii had the highest unemployment rate in March 2022. Without policy countermeasures, the BW Research Partnership estimated a loss of 850,000 jobs in the clean energy sector in the US by 2020.
Impacts of the COVID-19 pandemic on the energy sector* Hong-fang LU†1,2, Xin MA3 , Min-da MA
Be Prepared For More Risks
Although most people are vaccinated and there are significantly fewer detrimental Covid-19 cases and deaths, it is unwise to be complacent and not prepare for future outbreaks or Covid-19 mutations. Companies must prepare and create plans that are highly flexible and resilient for short, medium, and long-term plans. The company plants must strategize ways to adjust operations up and down swiftly, manage human resources more effectively, and track the entire supply chain for much quicker action.
Implement an Automated and Digitized Environment
Covid-19 accelerated the usage of technology, automation, and digitalization in managing human resources, workflows, production, and distribution. Investments in these areas will prepare companies to maintain business continuity in their supply chains, human resources, and operations. Companies must strive to implement a connected and whole system for tracking and monitoring each point of power and utility distribution along the entire supply chain. A more visible supply chain can provide companies with almost real-time insight and if there are issues, they can instantly deploy corrective measures to recover from it quickly.
Power And Utility Management System
A management system for power and utility is a framework for power consumers to manage their energy usage. It provides companies with information to identify opportunities to plan, adapt, and improve energy-saving technologies. According to the ISO, the system involves developing and implementing a policy with achievable targets for energy use and designing action plans to reach and measure. This can include implementing more energy-efficient methods, reducing energy waste, or improving current energy usage to cut energy-related costs. https://www.unido.org/stories/what-energy-management-system
Power management systems involve three components which are sensors to measure energy usage, a control system to send commands to the management system interface, and actual control devices such as the office’s air-conditioner. An example of the device is a thermostat that has an interface to set the aircon schedule, a sensor that measures room temperature, a controller that tells the thermostat to turn on or off, and the actual cooling element.
Below are the benefits of having an intelligent power management system.
- Reduced power consumption: Once the provider and user have complete insight into power usage, they can identify areas for improvement or areas where usage can be reduced at certain times of the day. Controlling power consumption will reduce the provider and user’s carbon footprint and cost.
- Decrease operating costs: As the user uses less energy and to reduces waste, the cost of operation will also decrease. The user will enjoy a smaller bill amount and reduce wear and tear on the power devices. This way, users will spend less on maintenance costs, and energy provider companies can decrease downtime due to maintenance.
- Return-on-Investment: Most of the systems have built-in cost-saving features. For example, emitting lower power during peak times, offering revenue-generation programs as well as detecting and alerting energy leaks.
Cloud In Power And Utility Industry
The power and utility sector are shifting towards renewable energy, more digitization, and customer involvement in energy generation. However, 82% of power and utility companies worldwide are not ready for market transformation. To stay competitive in this market, energy providers must adopt advanced methods of digitization. The core of this digitization is cloud computing.
In one report, it mentioned that 99% of companies found significant benefits after adopting the cloud, 77% of companies are actually the using cloud, 81% of companies said they were able to innovate more quickly using cloud rather than on-premise methods, and 64% said they felt more secure using cloud than on-premise methods.
Below is a list of ways the cloud can help boost performance and application in the power and utility industry.
- Improve customer experience – Cloud can offer customers real-time insights into their current and predicted energy usage, suggest saving ideas based on their usage pattern, or improve the calling customer service experience. Traditional call centers have their limitations.
Companies can deploy cloud-hosted contact centers such as Amazon Connect to improve customer support services. Contino used Amazon Connect for customer support and it allowed agents to work from home, enhance agent productivity, and integrate with other cloud products to leverage machine learning technology to improve scripts.
- Predictive maintenance – Cloud management systems and machine learning algorithms can be used to identify trends, determine optimal maintenance schedules to reduce downtime, and manage inventory. All these processes can be automated. The cloud allows real-time monitoring of operations, ensuring transparency.
As an example, AWS’s predictive health stack can be used to learn new patterns and failures for increasingly accurate predictions.
- Predict customer churn – Customer churn gives an indication if the company is doing something wrong or if another company is performing better than you. To reduce customer churn, companies must predict these events and retain their customers before they bring their business somewhere else. For example, if a customer does not submit their meter reading, they are likely to get a shock when getting the next bill which causes dissatisfaction to the customer. To avoid this companies can use automated billing notifications on customers’ personal phones to avoid this shock.
- Increased resilience and efficiency – After Covid-19, we can see that more work is done in non-traditional workplaces such as at home, cafe, or on-site. This trend is very apparent in the power and utility sector since this sector is highly distributed and spread across sites and not in offices. Using the cloud, companies can adopt an agile method that supports innovation. With agility, companies can become more responsive to sudden issues, reduce downtime, avoid major accidents, and increase business resilience.
- Real-time data analytics – To be agile and make quick decisions, data must be analyzed quickly. Real-time data analytics solutions are able to provide real-time insights on any issues and successes. This industry cannot rely on end-of-quarter reports from data analysts but must use real-time information to make decisions.
For example, when there is a power outage, a cloud-connected IoT technology monitoring system can instantly alert power providers about it and quickly deploy maintenance. This will keep the customer satisfied as they are aware and updated on the maintenance status.
Now, let’s understand how power and utility companies can use cloud-based solutions to improve their business.
Google Cloud -Energyworx
Energyworx is a company that provides businesses with relevant data. It enables behavioral science and allows businesses to aggregate data. Energyworx provides a SaaS platform that allows businesses to process, manage, and mine energy data for analysis to reduce costs, meet demand, and create smarter business models. By finding value in these data, their customers can optimize their grid and reduce loss during transmission. Automation is also possible using Energyworx.
Initially, Energyworx developed its software on-premise at customer sites but managing them at a massive scale became expensive. Then, they migrated to an unknown cloud platform but that platform had too much downtime and did not offer sophisticated data processing and querying capabilities. Hence, Energywox opted to use Google Cloud Platform to host its own platform and help them evolve to a serverless architecture.
Energyworx used App Engine to run its API. It allowed Energyworx to instantly scale to meet demand and charge its customers only for the time they spent on the API. Cloud Pub/Sub and Cloud Dataflow energy data taken from customers were sent to Cloud Bigtable and BigQuery. With Google Cloud, they were able to give their customers the tools needed to gain valuable insights from energy data.
AWS – Origin Energy
Origin Energy Ltd is an Australian company that leads in integrating energy companies. Its business activities include exploration, production, power generation, and retailing. Their goal is to make energy easier, smarter, more sustainable, and more affordable for their customers
Power generation is more decentralized now as consumers become their own producers through solar at home. So, power stations are being phased out and at the same time, consumers that are digitally empowered expect more and want control over when and how they use energy.
The data collected would be critical for them to continually use and to provide value back to their customers. Much of Origin’s success is due to its support in growing customer self-service. Previously, customer management had been handled using the on-premise SAP platform. However, Origins wants to plan for a data-driven future based on its Cloud 2022 strategy. So, Origin decided to carry out its strategies using AWS Cloud.
Since the company executes transactions worth millions of dollars, it required a system that is responsible and reliable. An automatic load balancing was selected to even out traffic flows. Additionally, a private AWS network to the cloud was selected for high-speed data throughput. Since the platform contains sensitive financial and personal data, security is of utmost importance. So, Origin adopted AWS cloud security to protect its accounts.
Microsoft Azure – BP
Bp’s purpose is to commit to sustainability goals including transitioning to net zero carbon by 2050 or sooner. bp understands that to achieve net zero, technology innovation is needed. One key step is to create digital twins of bp’s complex global assets to identify places for optimization and carbon reduction.
The scalability and security of Microsoft Azure is perfect for a digital twin project. The IoT Hub receives over 250 billion data a month from bp’s operations. For long-term implementation, security and scalability is paramount.
David Boyd, Facilities Process Engineer at bp said that rolling out the digital twin across bp assets can reduce emissions by around 500,000 tones of CO2 equivalent every year.
Oracle – FirstEnergy
FirstEnergy is a utility company that wants to provide power to happy customers while improving the environment. This company oversees the distribution, transmission, and generation of electricity in the Midwest and Mid-Atlantic regions of the US. The company is constantly trying to improve management and deliver projects. The company chose Oracle’s Primavera Portfolio Management and Primavera Unifier to manage its project planning, operations, and delivery.
FirstEnergy understood the importance of an open integrated system to ensure data integrity and eliminate time-consuming double-entry errors. So, they upgraded their existing Oracle Primavera P6 Enterprise Project Portfolio Management and implemented Oracle Primavera Portfolio Management and Unifier.
The power and utility industry needs to plan toward the common goal of zero carbon by 2050 and the trend of digitization. These goals require the implementation of advanced technology such as cloud computing. Cloud providers have a plethora of services that can cater to the power and utility industry’s needs and goals. Hence, to stay competitive while fulfilling obligations to customers and the well-being of our planet, power and utility companies should adopt advanced cloud computing methods.