Arnaud Philibert - Sales & Marketing development SmartGrid/Utilities

Utilities, consumers and public services all face the same challenge of assuring better energy production and consumption at optimal cost. Information and communication technologies can help.

Energy company margins eroding

As populations continue to expand, we would expect energy revenues to follow a similar curve – provided the ARPU is stable over time – but this is not the case. The kilowatt-hour unit price will become increasingly variable because it is regulated and often rises more slowly than production and transport costs. Further, consumers (or rather "prosumers" as they are known) are encouraged to use less energy by consuming more efficiently.
Fossil-based energy production costs bound to rise
At the moment oil is relatively cheap, but this situation will not last. A barrel at less than $50 will bring temporary benefits for weeks or months, but many factors will inevitably push the price back up: exhaustion of oil reserves, higher extraction costs, environmental regulations, soaring cost of nuclear safety improvements, and rising oil demand as economies start to growth again. Fossil energy production costs are bound to rise along with distribution costs due to the renovation and densification of grids and the installation of smart meters and the networks needed to carry the data traffic they generate.

Business as usual will put profitability at risk

Selling kilowatt-hours is no longer sufficient to maintain energy companies' business models. Operating expenses may not yet be threaten by cost-cutting, but financial controllers will be taking a much closer interest in them. Investments are now concentrated on energies releasing little or no carbon (1) but whose average LCOE (2) is generally higher.
Both transporters and distributors (3) must make provisions for grid modernization (remote control, smart meters, associated ICT infrastructure, cyber-protection) and prepare for drastic changes in supply and demand in their 10-year plans as the top-down supply chain transforms into a circular economy.
For consumers, smart grid initiatives bring a promise of better energy efficiency, eco-friendly consumption, and even the possibility of becoming micro energy suppliers themselves.

Powerful ICT systems are essential

Highly flexible wireline or wireless telecommunication networks and computer systems are needed to cope with massive smart meter deployment, in progress or planned, and the multitude of sensors needed to manage bi-directional energy flows at the end of distribution grids. The scaling of the ICT architecture must include a savvy measure of redundancy (a network whose power supply comes from the grid it is supporting is exposed to breakdowns of the latter) while optimizing capex and opex.
Energy companies can benefit from telcos' experience
Telecoms equipment vendors and operators have unrivaled expertise in the engineering, commissioning and operation of nationwide networks. Who can better guarantee the highest possible level of performance than companies that have proven their ability to innovate unceasingly to adapt and modernize their own core business? The ICT ecosystem now boasts an arsenal of tools to measure performance and quality of service and solutions to combat fraud and cybercrime. Energy utilities need to durably modernize and strengthen their ICT infrastructures, so why not turn to the top experts: integrators and telcos?

A vast portfolio of billing, CRM and data services

Energy utilities formerly in monopolistic situations used to have "users"; now they have "customers", and the reality of churn is acknowledged in their marketing approach. The kilowatt-hour unit price now fluctuates over time and is usage-dependent. Telecoms specialists can assist energy suppliers in their customer prospecting, loyalty building and service personalization. Their long experience of real-time billing and prepaid services could be leveraged to develop new and potentially lucrative business for energy utilities. Telcos could even open their ICT infrastructures and position as billing and CRM providers. Energy utilities will see the advantages of outsourcing these tasks to experts rather going for costly investments and internal training schemes.
Big Data processing is another service that energy companies could delegate to ICT service providers who have data centers and data processing solutions. By choosing such systems, which assure the very best cybernetic protection available today and comply with local regulations, energy companies can demonstrate that they are assuming their new responsibilities.

From analog to digital: a global structural and behavioral transformation

The way in which energy is produced is undergoing irreversible changes. The first and biggest change lies in consumption modes:
– "Smart" technologies facilitate rationalized consumption. Connected objects in the home and even in vehicles enable real-time control of consumption, which will obviously upset energy suppliers' predictive models.
– Innovative technologies and new regulations have spurred the emergence of decentralized production. Micro production units, such as photovoltaic panels on residential rooftops, inject electricity into the electricity grid. Grid balancing must take this technical constraint into account, and powerful IT systems will be needed to manage flows. Such trends shorten the value chain, obliging utilities to optimize their activities and explore alternative growth paths.

Telecom operators as natural partners for utility companies

ICT players appear as natural partners in view of their experience and repeated success in adapting their business models to disruptive changes in their ecosystems and to fast-evolving market needs. Network operators have not only kept pace with technological progress, they have driven the convergence of different services, starting with the traditional telephone and ending with quadruple-play offers. They can provide consulting services, technical and business assistance and master plans and will have no difficulty in answering utility companies' questions such as "How can we best serve our existing market as it radically restructures?" and "How can we penetrate new markets?".

_______________________

(1) GDF-Suez and E-On are both impairing carbon-based generation assets in order to concentrate more on green energies.
(2) LCOE: Levelized Cost Of Energy.
(3) TSO: Transport System Operator, DSO: Distributor System Operator