By Patty Roze, Verizon Communications
What’s Keeping Utilities From Embracing the Internet of Things?
The Internet of Things (IoT) was at the core of digital transformation in 2017, and will continue to gain steam in the years ahead. Gartner predicted 2017 would see 8.4 billion connected things by the close of the year and Louis Columbus, a contributing editor to Forbes wrote that B2B spending on IoT is set to reach $267 billion by 2020. One industry where the potential benefits of the IoT are particularly clear is energy and utilities. Indeed, this sector is increasingly warming to the opportunities it affords, showing a willingness to pilot and adopt solutions driven by the IoT.
According to a recent Verizon’s 2017 “State of the IoT” report, the carrier saw a 41 percent boost in its IoT network connections within the energy and utilities industry between 2016 and 2017. This rise in adoption spans electric, gas, water and other energy and utility providers, and it’s easy to see why the technology is enjoying such a rise in adoption. The industry is tapping sensors and integrated IoT energy platforms for everything from improving water management to boosting network security to flagging and addressing compliance issues to delivering new and enhanced customer services.
Despite the clear opportunity, however, the implementation rate for utilities is actually behind schedule. This is due to some challenges unique to the sector that are proving to be significant barriers to adoption.
Barriers to Adoption
By far the most pressing issue preventing energy and utilities organizations from realizing the full potential of the IoT is aging U.S. energy infrastructure. In total, 70 percent of the power transformers in the country are more than 25 years old. Meanwhile, power plants, on average, are more than 30 years old. Though retrofitting has been a successful means for implementing IoT-enabled smart grids and meters to a certain degree, in some cases a complete re-engineering of technical infrastructure is required. Such cost-prohibitive implementations have been a major sticking point for energy and utility companies looking to digitize operations and deploy IoT solutions.
Another issue is the complexity of system-wide rollouts. Often, utilities are connected, meaning all pieces of the system need to communicate in order to record and transmit data effectively. This often results in slower rehabilitation of aging systems, and therefore a significant reduction in adoption time.
Recently, a third major challenge has arisen, one that has oddly come about because of the potential gains offered by IoT solutions. There is increasingly confusion over the available solutions, which is slowing decision-makers at energy and utility companies from pulling the trigger on adoption. From a developer perspective, the IoT field is getting crowded, with a perplexing number of device and network options available. Though this is a positive for companies looking to adopt, as it provides cost-effective, competitive offers, for the most part it is delaying adoption as chief information officers and executives deliberate over the best-fit solution.
Where the Opportunities Lie
Despite these challenges, 55 percent of business decision-makers interviewed for International Data Corp.’s “2016 Global IoT Decision Maker Survey” revealed they see the IoT as strategic to their business. It’s likely an even greater proportion will be exploring its potential to transform business operations. Fortunately for these leaders, the basis for widespread change already exists.
In the energy sector, what began in 2007 as a nationwide effort to monitor energy consumption under the Energy Independence and Security Act has evolved into an installed base of hundreds of millions of digital meters supported by remote reading capabilities and other smart grid apps. These IoT-driven solutions increase efficiency and control costs for providers, creating an indisputable business opportunity as consumers become more keyed in to smart energy. The latest Smart Energy Consumer Collaborative “Consumer Pulse and Market Segmentation Survey” found that around 70 percent of consumers had familiarity with both smart meters and the smart grid, with 40 percent expressing interest in smart grid-enabled offerings. This gives companies investing in IoT solutions a major advantage in the eyes of increasingly eco-and cost-conscious customers.
Beyond the obvious benefits for customers, adopting IoT solutions has tangible benefits for businesses that include better managed operating costs. Condition-based maintenance is just one major boon delivered by IoT devices. Sensors and smart meters also can record and analyze data in near real-time, alerting companies of maintenance issues before they arise. This can be a major cost efficiency, as it helps reduce the need for regular site visits and equipment checks. Those same devices can provide meter readings, turning the historical model of unnecessary site visits, manual meter reads or rereads and manual billing estimates on its head. Utilities that adopt smart devices have a clear view of exactly how their systems are functioning and where resources are being distributed.
Such technologies also open the door for near real-time visibility into outages and quality of supply, something that has continued to be an issue during increasingly intense storms and heatwaves. The visibility that these smart meters bring allow companies to more accurately route resources, helping energy companies avoid overpowering critical infrastructure during times of distress. This also enables utilities to better monitor consumption, manage remote disconnections and detect outages more quickly, driving shorter service restoration times and increased customer satisfaction.
Ultimately, modernizing energy grids and utilities by tapping into the inherent, built-in capabilities of IoT solutions will help drive incremental revenue, control operating costs, increase efficiency and improve customer service for this industry. Financially, the advantages for companies that successfully install smart energy grids could total $157 billion, according to a Business Intelligence report titled “IoT For Utilities: Smart Water, Gas & Electric Utilities Coming Soon” released in late 2016.
While the challenges to embracing the IoT are significant, for incumbent organizations facing pressurized margins, market disruption and new digital-first entrants, the need to overcome the issues and realize these benefits are becoming almost impossible to ignore. | PGI