The battle between utilities and renewable energy newcomers is heating up

The contender who is able to use big data analytics to quickly pave the way to a sustainable, energy efficient future will be the victor

Analytics Community Manager, IBM

In today’s ever-changing technological climate, no business model is immune to upheaval—but the utilities industry may be subject to even more disruption than most, for its business model is under siege by alternative energy competitors. Having thrown down the gauntlet, renewable energy suppliers are gaining ground in the classic battle of the tried-and-true versus the new. But there’s a twist: Both sets of competitors can bring big data and analytics to bear in their race to create the future of energy generation, transmission and distribution. Indeed, the battle between traditional utilities and renewable energy will be decided by those who learn to leverage analytics to swiftly deliver sustainable energy efficiency.

Seizing the renewable energy advantage

The pursuit of energy independence, environmental sustainability and economic development is heightening global reliance on an array of alternative energy sources that see the harnessing of sunlight, wind, waves, tides, rain and geothermal heat, with solar and wind power the most popular of such methods. Indeed, use of renewable energy technologies offers significant advantages, incurring less environmental costs than conventional energy sources do while providing greater long-term energy security.

In the first quarter of 2004, investment in renewable energy stood at $9 billion, but that figure had risen to a whopping $50 billion by the first quarter of 2015, according to Bloomberg New Energy Finance. Indeed, the US Energy Information Administration expects renewable energy to capture market share more quickly than any other power source until at least 2040.

The future of renewable energy lies in battery storage. Indeed, low-cost, efficient electric battery systems that can easily store collected power on location pose perhaps the greatest threat to traditional utilities. However, despite the advent of batteries such as the Tesla Powerwall, modern battery solutions aren’t yet affordable enough to be financially viable, even at scale.

Yet the future of batteries is the future of energy, for utilities also see great promise in battery technology, which offers a way of replacing the peaking power plants that generally sit idle, awaiting times of high energy demand. Thus, with batteries holding great potential for both the spread of renewable energy technology and the strengthening of the power grid, the costs of battery technology are rapidly dropping, auguring what some expect to be a veritable explosion of growth in the battery storage industry.

Although the energy industry has taken an irreversible turn toward renewable energy, no one yet knows whether industry newcomers or established utilities will captain this new field of industry. Even more pressing is the question of how the winner will reach the finish line—but no matter what happens, the renewable energy around which we build our lives will soon be coming to us from batteries.

Making the most of scale and reliability the battle for control of the energy market, established utilities enjoy certain distinct advantages, being already in position to provide energy-saving measures and broadly implement renewable power systems. Moreover, unlike some of their solar power competitors, they can afford to do so without the aid of extensive government tax incentives and hospitable government policies. Perhaps most important, however, utilities share long-lasting trust-based relationships with their customers, and both parties want to create an energy-efficient future powered by renewable sources. For these reasons and more, utilities are in an excellent position to create just such a future.

That said, however, utilities are undeniably threatened on multiple sides by increased regulatory demands, rising costs, rapid technological transformation and infrastructure costs. Yet even as the regulatory landscape poses challenges to utilities, amid such challenges lie a host of opportunities for inventive companies to thrive in this new environment.

The proliferation of the Internet of Things (IoT) and the simultaneous expansion and diversification of communication ushered in by social media particularly affect the expectations of modern consumers, who increasingly expect companies to anticipate their every need. In particular, customers yearn for borderless—anytime, anywhere—and customer-centric interactions such as are possible through deep customer analytics. Moreover, as past generations of workers make room for a new workforce, employees expect to use digital tools to drive operational efficiency.

These and other such challenges can be seen as looming threats to the business model of traditional utilities—or as an unprecedented opportunity to catapult the energy industry into the future. No one doubts that for newcomers and established utilities alike, winning the race to an energy-efficient future depends on finding hidden patterns in data that make possible intelligent, data-driven decisions informed by powerful analytics.

Equipping your analytics armory

The energy and utilities industry, like so many others, finds itself in the middle of a major disruption. Amid such confusion, the first competitor to provide effective and efficient energy solutions will have gained a real advantage. In such a contest, the victor must make use of immense data resources through data analytics, particularly in the following ways:

Disruptive energy insights
Traditional business processes must be transformed by disruptive innovation in the utilities industry that begins with generation and continues through transmission and distribution. To meet expectations of efficiency and sustainability, companies must relentlessly use advanced analytics to monitor and predict issues using all types of data at their disposal. Moreover, they must also bring analytics to bear when researching and developing alternative energy sources. In particular, they must seek data about weather, which incurs as much as half a trillion dollars in economic impact each year in the United States alone. Indeed, because 70 percent of power outages are weather-related, companies can look to weather data to help them forecast disruptions, prevent outages, reduce energy waste and predict asset failures.

The digital customer
Companies that understand and address their customers’ behaviors, interactions and preferences stand to better their competitive position. By monitoring and capturing consumer feedback from multiple sources—such as social media, websites, blogs and transactional systems—companies can begin delivering the right offer to the right person at the right time. Predictive customer intelligence can provide a 360-degree view of consumers that makes each customer engagement relevant and unique. In a world in which 70 percent of consumers have stopped doing business with a brand after having had a poor customer experience, engaging with customers on their own terms is of paramount concern.

The energy integrator
As ever more empowered consumers begin optimizing their energy use, the utility providers that thrive will be those that act as energy integrators, managing the business and technical challenges of intermittency, dispatchability and disintermediation. Take, for example, the deployment of smart meters, which has prompted an explosion of data as customers’ meters are read not once a month but every 15 minutes—a 3,000-fold increase in sampling frequency as well as in volume of data collected. To be competitive in the 21st century, then, energy providers must integrate meter data with all available data sources—such as asset information, consumer use and weather data—to seek ever greater visibility into the power grid, paving the way to an enhanced customer experience.

Those who adapt to change must do so using data. No longer can data remain locked in siloed systems or in unusable unstructured formats—not when advanced analytics can unlock its hidden value. As established utilities find themselves in a battle for survival against those waving the banner of renewable energy, traditional utilities continue to enjoy levels of scalability and reliability—and consumer relationships—of which newcomers to the industry can only dream. But in this race toward the ever brighter future of the energy industry, not everyone will finish first. Will you?

Take this advanced analytics assessment to discover how effectively your energy organization is harnessing the power of big data and advanced analytics—and to find out how IBM can help you become ever more effective at doing so.