The energy sector around the world is facing unprecedented challenges from rapidly changing market demands. To survive the pressure, they must adapt to technological advances such as intermittent renewable power generation, rooftop solar panels, behind the meter storage, as well as an increase in customer expectations. This new market context is unpredictable, and embracing it requires an overhaul of utilities’ operating and business models. Furthermore, new technologies ranging from smart meters to rooftop solar and energy storage —and the problems they bring— have the potential to disrupt the utilities sector. After remaining relatively unchanged for the last century, the grid is facing a host of new challenges that are evolving the business models in the utilities sector, changing consumer expectations and causing regulatory models to adapt. Here are some key challenges that we feel will impact the energy sector this year:
Government policy and regulation
There is a great deal of uncertainty when it comes to regulations in the energy sector. It is generally difficult at an institutional level to set regulations that provide visibility over several decades. At the same time, the stability and predictability of market regulations over long periods depend in large part on how costs to society are kept in check. If these costs are more efficiently managed, the risk of reversals in public policy increases considerably.
One of the most significant challenges facing the energy sector today is the aging workforce coupled with a decline in available talent. As per estimates, 50% of the workforce in the utilities sector in the US will retire in the next 10 years. Many utilities require additional support to work on new capital projects, and those projects are increasingly complex. This need is particularly acute with engineering and design, where the talent supply is greatly diminished. At the present rate, the gap in finding appropriate replacements is expected to increase in the coming years.
Modernizing grid infrastructure
As far as the utilities sector is concerned, a modernized grid means better security, reduced peak loads, increased integration of renewables, and lower operational costs. The goal is to use technologies, equipment, and controls that communicate and work together to deliver electricity more reliably and efficiently. Consumers will also benefit from the reduction in the frequency and duration of power outages, reduced impact from storms and have service restored more quickly when outages occur. In addition, with easy access to their usage data, consumers can better manage their own energy consumption and costs. Though the ‘smart-meter’ is expected to make it big in the years to the come, companies in the energy sector will face stiff competition from Amazon Alexa, Google and others. This should serve as a wake-up call for utilities to be agile, flexible, and operationally sound.
Digital disruptions are undoubtedly creating new opportunities in the energy sector. However, they also come with their fair share of threats. On one hand, technology is instrumental in realizing intelligent grids and interconnected assets; on the other hand, it introduces new threats such as the possibility of cyber attacks. The developing interconnectivity and proximity of energy systems mean that conflicts can have ripple effects on energy markets and prices. New technologies, such as batteries and grid-embedded generation, are making the cybersecurity of grid systems more vulnerable. With most companies being highly inexperienced in handling large-scale cyber attacks, there are higher chances of future wars and attacks to have a larger cyber component.