DER-Grid Edge, Executive Insight, Smart Grid

IoT Revenue Opportunities for the Utility Industry

The rules that govern the way we conduct business change quickly. New companies are taking over incumbents or creating disruptive changes, like Airbnb in the hotel industry, Uber in the transportation industry and Tesla in the automotive industry. Technology growth creates new opportunities for new entrants in every industry and a lower barrier to entry for competition. Cisco CEO John Chambers predicted that, “40 percent of businesses… will not exist in a meaningful way in 10 years.”

Technology progress is everywhere, from faster computers and larger storage to quicker networks and smaller devices. Advances in technology increase exponentially. As Moore’s law states, processors double in computing power every 18 months. A similar trend is happening in every aspect of technology, with storage, networking, machine intelligence and more. Changes in business models are following, with staff on demand, crowdsourcing and algorithms instead of human decisions.

No company is immune to this change. Every company needs to react and change the way they do business if they want to survive these changes. The utility sector is no different. It is facing a significant transformation with disruptive technologies, an aging workforce, emerging market trends and shifting consumer expectations. According to the 2016 Itron Resourcefulness Index, 74 percent of utility executives view the changing business model as an urgent or growing concern.  

The Move to IoT

Historically, utilities have deployed closed, proprietary networks to serve a specific need of the utility, such as enabling the meter-to-cash process. These networks feature two-way communications down to the meter and enable utilities to measure, collect and analyze energy and water usage, but do not have the flexibility or intelligence to support third party devices, edge computing or future applications.

That’s all changing. With new technologies, the utility industry is maturing to become more advanced, expansive and interoperable. Today, a typical system enables utilities to monitor electricity consumption using interoperable and standardized products, including meters, sensors and other edge devices. Intelligent devices communicate and collaborate directly with each other and make decisions in real time. Utilities can access information that allows them to interpret consumption patterns, quickly identify problems and solutions, and more efficiently allocate resources from the beginning. Electric meters can also connect to consumer electronic devices using in-home wireless interoperable standards, giving consumers visibility into their electricity usage.

These new networks are IoT networks and are standards-based, supporting multi-application and multi-tenant capabilities. Utility networks are more like the Internet than like a SCADA system; they can support different applications and different types of traffic at the same time.

The Opportunity

An IoT network can create great value by itself, improving operational efficiencies by connecting all sorts of sensors to the network, extracting insights from the data and from the correlation of different sources of data. These networks present a unique opportunity for the utility industry to create new sources of revenue and innovative business models by opening up network access to different service providers, such as neighboring utilities or municipal governments.

The emergence of smart cities creates a real opportunity. More than 50 percent of the world’s population lives in cities today, and that percentage continues to grow. Cities are striving for greater efficiencies, livability and sustainability. The IoT network can help make this possible.

IoT networks create the foundation for smarter cities. They are the backbone for all city connections, enabling data to be shared, creating more efficient operations and more engaged citizens. Intelligent devices and sensors communicate using IoT networks to improve communities. For example, smart streetlights, smart transportation and environmental monitoring make communities more livable and safe. Measuring and monitoring water usage enables greater conservation, while monitoring natural gas delivers greater safety.

With interoperability comes the opportunity to share these ubiquitous networks. Cities and utilities can utilize the same IoT network, creating new business models. The network owner can generate new revenue streams by allowing others to operate on the network. The user would simply pay for their data to be transferred through the network, much like cellphone users do. The utility or city that owns the IoT network would operate the network much like a cellphone network operator does.

A very large opportunity exists with this model because of the size of a utility service territory. Take, for example, a mid-size utility that covers a territory of 3,000 square miles. Its network has incredible coverage to support multiple applications. It is reasonable to envision thousands of IoT sensors and devices per square mile that would share the same network.

While questions remain about shared networks, utilities are realizing their value in enabling technologies, optimizing assets and creating new revenue streams.

About the Author: Roberto Aiello is the managing director of the Itron Idea Labs and responsible for new business innovation at Itron, including Internet of Things. His previous experience includes managing wireless research at Interval Research, Paul Allen’s technology incubator and technology transfer at Disney Research. He is an advisor to Google Advanced Technology and Projects (ATAP) and is a Lean Startup expert who serves as a mentor at the Cleantech Open and Startup Weekend. Dr. Aiello also founded two venture-funded, wireless semiconductor companies and one web/mobile startup. Dr. Aiello worked as a physicist at Stanford Linear Accelerator Center and Superconducting Super Collider.