From Tried and True to Something New – the Energy and Utilities Industry Wrestles With Disruptive Innovation

Tyler Chase, Managing Director Energy and Utilities Industry Leader

“Disruption” and “utility” are two words that were never meant to go together. The always-on, 24/7/365 nature of water and power is the industry’s defining characteristic. It’s not surprising then that executives and board members in the energy and utilities industry group would find disruptive innovation, and its related effects on people, processes and culture, to be a “significant impact” risk for 2018.

Although regulatory change and scrutiny remains the top risk concern for this highly regulated industry group, the speed of disruptive innovation and new technologies ranks a close second in a recent survey, Executive Perspectives on Top Risks for 2018, from Protiviti and North Carolina State University’s ERM Initiative. The remaining three concerns, all ranked as “significant impact,” are: resistance to change, talent, and risk culture. All risks, except for regulatory concerns, mark an increase this year over last.

As I wrote in October, utilities today are collecting exponentially more information than just a couple of years ago. Sensor data is pouring in from smart meters and other connected supervisory control and data acquisition (SCADA) systems, and utilities are spending billions of dollars a year on analytics and integration to make better decisions that benefit both their customers and shareholders.

Much of that investment is going toward dashboards, modeling tools and other visualization technologies that collect, streamline and integrate information for a real-time, minute-by-minute picture of the grid and other systems. Accurate and timely information can lead to better predictions about peak usage periods, possible transmission and distribution bottlenecks or interruptions, and even when particular customers are likely to have problems paying.

Additionally, emerging technologies, such as microgrids and blockchain, have made it possible for communities – from local governments to consumer groups – to create their own energy co-operatives. And advances in battery storage are likely to make rooftop solar an increasingly viable alternative to traditional utilities – though the impact of the recently announced tariffs on solar panels is yet to be seen.

In the oil and gas sector, advances in data analytics are driving efficiencies in drilling, creating competitive advantages for early adopters of 3D seismic imaging and precision targeting. At the same time, back-office automation is helping to create more efficient and error-free royalty payments and billing, and mobile dashboards are helping executives in the field keep tabs on complex operations at a glance.

The adoption of these technologies is quickly becoming a differentiating feature in the energy and utilities sector, with companies that are able to adopt them quickly and harness their efficiencies reaping the benefits of greater productivity and increased bottom lines.

Yet the general feeling among energy executives remains one of concern. That’s not surprising, given that the industry acknowledges its own resistance to change and the challenges in attracting and retaining top talent (two top-5 risks that also grew this year over last). Many organizations have been doing things the same way for decades and are having trouble evolving from their long-held “tried and true” mentality to a more agile and adaptive culture that leverages technological advancements for increased efficiency and effectiveness.

To be able to invest in these new advancements, energy and utilities organizations need access to talent that is adept at new technologies – however, those same skill sets are in demand by all industries, creating a fierce competition for qualified people. This only magnifies the concern for organizations that are already struggling with keeping or finding industry expertise.

Technological disruptions will continue to evolve the risk landscape for the energy and utility industry for the foreseeable future. Organizational cultures need to adapt to meet these challenges while the industry continues to strengthen its attractiveness to a new generation of engineers, data analysts and automation specialists who are looking for rewarding and challenging work in their newly popular fields. The fact that there is sharp awareness of these risks and challenges among top executives is encouraging and hopefully will result in more meaningful discussions and changes within the industry.

For a more in-depth analysis of these and other top risks, you can download the energy and utilities industry findings of our Top Risks Survey here. For the complete report inclusive of all industries, also free, visit our website.

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