Building the digitally powered utility of the future · Building the digitally powered utility of the future An Australian perspective | 2 A changing customer Influenced by digital

Building the digitally powered utility of the futureAn Australian perspective

1 | Building the digitally powered utility of the future An Australian perspective

What might the energy industry look like in the future? Will it be just a more efficient version of today’s model or will radical disruption force energy players to reinvent themselves? How can they create a digitally-powered utility to capture new opportunities and drive productivity?For today’s energy companies, who are facing sweeping industry changes, standing still is not an option. Their traditional industry model is being turned upside down. Electricity and gas companies face a range of new and complex demands forcing a need to rethink their traditional business models.

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2Building the digitally powered utility of the future An Australian perspective |

A changing customer Influenced by digital experiences in other industries, today’s customer is informed, connected and accustomed to high quality, personalised and on-demand service. As a result, customers are demanding a radically new level of experience from their energy providers. The relatively large share of household and business spend for these services is also driving customers to take a more active role in conserving and generating energy. Customers are becoming energy producers and managers, representing a powerful shift that will prompt today’s utilities to re-examine their role if they are to avoid becoming mere infrastructure providers. Meanwhile, consumer behaviours are changing as the millennial generation of digital natives enters its prime spending years. Meeting these new expectations in a digital world will be critical if energy players are to survive and thrive.

A collision of technologies A combination of new digital technologies, such as big data, mobility, the Internet of Things (IoT), smart meters and smart grids, are quickly transforming how assets and operational processes can be managed. In parallel, new energy technologies are enabling commercial adoption of distributed generation that

is disrupting the traditional energy value chain. According to the Australian Energy Council, Australia has the world’s highest rate of household solar panel installation at 15%1 and the deployment of battery storage is expected to rapidly increase as technology matures and costs come down. These technologies are not only completely changing how our energy is generated and managed, but also ushering in a range of new competitors and altering how customers interact with energy suppliers.

Ageing infrastructure and workforce In the face of rising energy prices, today’s utilities are being challenged to increase performance and optimise capital expenditure by safely extending the life of older generation, transmission and distribution assets. This requires a new and more innovative approach to drive asset performance — leveraging data and insights to make real-time optimisation decisions. At the same time, the impact of technology, particularly on customer service and security, is disrupting the skills needed in the workforce of today’s energy company, just as many utilities workers near retirement age. In this new digital world, knowledge needs to be strategically managed and be effectively transferred to the next generation of digitally savvy workers.

Growing stakeholder expectations Utilities need to meet higher demands from better informed stakeholders. Regulatory scrutiny has increased, consumer pressure over rising retail prices is growing, environmental demands are tougher and shareholders expect better performance amid volatile economic conditions. Energy players need to be increasingly commercially-minded if they are to grow new sustainable revenue and fine-tune their business performance.

A new competitive market Energy players of the future will need to respond quickly, not only to disruptions in technology, but also from aggressive new market entrants. Industries such as communications, broadcasting, healthcare, transportation and hospitality have already been turned upside down by companies such as Netflix, Airbnb and Uber who have taken the concept of leveraging under-utilised capacity and new delivery platforms into the mass market. These competitors are also using digital channels to quickly lower costs to serve and enable new product offerings. The emergence of technologies that enable peer-to-peer sharing and the production and storage of distributed energy may see this type of new model rolled out even faster. New digital capabilities and the ability to adapt quickly will be critical to successfully compete in this new distributed market.

1. Source: Renewable energy in Australia — how do we really compare? — Australia Energy Council, June 2016


Utilities must adapt quicklyThese factors have already changed the landscape in which energy utilities operate and grow new revenue. There is limited time for the steady incremental evolution that has defined the energy industry’s regulated history. Market players will be under increasing pressure to adapt quickly by adopting new digital capabilities and a more agile commercial mindset.

The utility of the future will need to be:

• Customer-centric: It’s time to move the focus from managing assets and connecting homes to truly enhancing the energy customer experience.

• Hyper-connected: Utilities will need to build an integrated and secure ecosystem that leverages digital intelligence to integrate information about its workforce, assets and customers and enable “always on” functionality.

• Proactive and predictive: Utilities must take on a new proactive approach enabled by better use of digital technologies and data insights to drive the optimum productivity of assets, operations and customer service.

• Adaptive: Innovation and agility will be critical to the success of the utility of the future. Businesses must be looking ahead to predict unknown disruption and seize business opportunities. They will need new commercial and innovation skills to enable them to react nimbly, make smarter decisions and even be prepared to fail fast.

• Automated: Utilities will need to adopt a production line approach and operate with simplicity, scale and speed to drive productivity and reduce costs. They will need to embrace new technologies such as robotics, IoT and big data to transform the way they deliver services.

• Performance focused: Energy players must align all capabilities and processes around a clear business purpose and prioritise investments with a laser focus on end-to-end, quantified business outcomes.

The hyper-connected utility of the futureAdopting these capabilities will require today’s energy utilities to rethink and re-imagine their ‘future ways of working’.

nearly

6 in 10 smartphone users have more than ten apps on their phone

More than a third of Australians have engaged with companies on social media

A cornerstone of this change will be their ability to leverage digital technology which can help them to:

1. Redefine the customer relationship, understand customers, compete at the right cost and provide innovative products and services that their customers want.

2. Build a more intelligent network that improves operational efficiency, reduces the need to fund additional infrastructure and enables a better customer experience.

3. Engage and empower the workforce to cultivate an entrepreneurial culture, increase digital readiness and improve safety and productivity.

4. Ensure the sustainability of our energy supply through enhanced environmental performance and enable an efficient and flexible distributed energy value chain.

5. Strengthen the security and privacy of customer, network and employee information to mitigate growing risks in a digital world.

38% of Australians prefer to make transactions over the internet than by phone or face-to-face

The EY Digital Australia: State of the Nation 2015-16 research paints a powerful picture of how digital, within just a few years, has made an impact on almost all aspects of Australians’ daily life:


Digital change has startedSome global utilities are already heeding the call from customers and investing in a better digital experience. EY’s Digital Readiness Index sees the power and utilities industry investing in capabilities and in some markets ranking above average in digital maturity, with utility companies in the Asia-Pacific region ranking particularly high in digital readiness.

While this improvement is encouraging, it is clear that energy players have more work to do in leveraging the pervasiveness and power of digital technology if they are to compete and adapt to change. An intelligent and integrated approach to holistically transform business practices will be critical to doing so successfully. Too many organisations on this journey have found out the hard way that this is not about developing a cool app or a new website. Rather, true digital innovation must be embedded with a utility’s overall strategy and DNA if it is to be sustainable and add genuine value both to customers and to the organisation.

Digital intelligence driven by integrated data will be the key competitive differentiator.

So what’s the game changer? Digital integrationMany aspects of today’s digital life, such as social media, the cloud and mobility have been around for some time. However the game changer is the collision of these established digital technologies with a raft of newer technologies, such as Geographic Information Systems (GIS), big data, IoT, augmented reality, robotics and artificial intelligence. This is driving the ability to radically rethink complex challenges in ways unimaginable in the past.

Changing demands on energy players have created a compelling reason to innovate. Utility companies are starting to adopt innovations from adjacent industries such as telecommunications, aviation, oil and gas and defence to become more connected and intelligently manage customers, assets and services. They are also using digitally enabled crowd sourcing of ideas to accelerate innovation.

Utilities will need to master many of these technologies and trends in parallel if they are to achieve real breakthroughs. This means developing new capabilities that will allow them to operate and compete in a digital world.

Let’s imagine a world where successful energy companies are bold, nimble, ambitious and customer-focused. Let’s use digital to help make this vision a reality and build the hyper-connected utility of the future.

“The danger is to think that a new digital world is just about the technology. The real challenge is to identify high value areas to digitally innovate and create breakthrough experiences for customers.”

Stuart Hartley, Asia-Pacific and Digital Power & Utilities Advisory Leader, EY

17% of consumers say that energy companies offer the nation’s least engaging digital experience2

More than half (55%) of those surveyed would consider accessing real-time energy usage information and conservation tips from their energy supplier2

1% of what could be connected in the world actually is…

Digital is also changing Australians’ expectations of their energy providers:

2. EY Digital Australia Omnibus 2015-16, EY, 2016.3. Source: The Internet of Things: How the Next Evolution of the Internet Is Changing Everything, Cisco, April 2011.4. Source: Research Summary: Sneak Peeks From Constellation’s Futurist Framework And 2014 Outlook On Digital Disruption, Constellation Research website,

https://www.constellationr.com/blog-news/research-summary-sneak-peeks-constellations-futurist-framework-and-2014-outlook-digital, 18 February 2014.

52% digital disruption has demolished 52% of the Fortune 500 since 20004

50bn internet connected “things” by 2020* including sensors, RFID chips, etc.3

https://digitalreadiness.ey.com


What will the digitally powered utility of the future look like?

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“There’s a general theme about the ‘prosumer’ — customers who are now absolutely in control of their customer experience and have the channels to be able to tell these larger corporations that they don’t like what they’re doing, they don’t like their customer service, they don’t like their values. And that’s very powerful.”Penny Gray, Group Manager — Product Development and Delivery, Origin Energy

45% of customers said that firms that fail to offer a quality digital experience run the risk of losing them5


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Redefine the customer relationshipImagine if utilities could deepen their engagement with customers to better meet their needs, lower costs and dramatically increase business performance.

The customer is fast becoming more energy conscious, connected and demanding. The digitisation of almost all facets of everyday life has redefined expectations around how people buy, use and control services including energy. They expect fast, accurate and personalised service wherever and however they want and new technologies enable these interactions. Those days of passively waiting for the energy bill to arrive in the letterbox are long over. In fact, more and more consumers are becoming “prosumers” — becoming an integrated participant in the market — by generating their own energy to save money and taking control of their energy management.

“The future will be here faster than we expect. Digital innovation is already allowing us to re-imagine how to respond to these types of challenges in many other industries — and we believe that it’s about to change the energy industry as well.”

Jenny Young, Oceania Customer Leader, EY

Customers have made it clear that, while they are increasingly cost-conscious — and better informed of the best deals — winning their business requires far more than just offering the lowest price. In fact, energy customers are willing to pay more to get the right services delivered in the right way, with the right advice about usage, disruptions and service.

Attracting and retaining these domestic and business customers presents a more complex proposition. The implication for utilities is that forming a better relationship with customers and understanding their “moments that matter” must become a core underlying capability. That relationship needs to be built on applying understanding and insight to generate value to the customer so that the customer is encouraged to engage — otherwise it is just a transaction.

And a key element of building that relationship will be the ability to deliver a high quality, interactive and agile digital experience. Almost half (45%)5 of those customers we surveyed said that firms that fail to offer quality digital experience run the risk of losing them as a customer. As more and more digitally savvy competitors enter the energy market, this is a clarion call to utilities.

5. EY Digital Australia: State of the Nation Report 2015-2016, EY, 2016.

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Digital can help deliver a better customer experienceDigital will unlock a two-way flow of customer insights that, if harnessed, can create a virtuous circle of value for energy providers. Whilst it’s true that our digitised world has created new customer service challenges, it has also opened opportunities to improve upon those moments that matter to customers, such as billing, moving and migrating to new services. Building this customer-focused culture, with the help of the right technology, will be essential if energy providers are to give customers the experience they expect:

• Seamless integration of traditional and digital channels that allow a customer to engage when and how they want.

• Self-service opportunities that are customised and low cost.

• Information that is easy to access, understand and act on.

• Personalised and targeted product and service offers that are relevant and appealing.

Many of these options will also allow utilities to gather and predict customer behaviours that can help optimise business costs by improving service levels, asset planning and driving operational efficiencies.

But the real benefit in offering customers a convenient and appealing experience is its ability to help redefine the utility-customer relationship. Digital gives energy providers the tools they need to interact with customers in a different way. This allows the relationship to move beyond satisfaction to enhanced engagement that is a springboard to offering differentiated products and services in an increasingly competitive market. This will be critical to ongoing success as the industry faces less growth prospects for traditional grid-supplied electricity as energy efficiency improves and customers find it increasingly feasible to adopt new ”off-grid” distributed energy solutions. Some areas where digital will help transform the customer experience:

• Support value-based pricing and innovative energy aggregation offerings.

• Seamlessly facilitate customer service including moves, billing and credit management.

• Provide information and create dialogue about new personalised energy offerings.

• Enable contestable metering services and energy solutions that help customers manage their demand.

• Develop new behind-the-meter products and services that transform the home.

• Enable new breakthrough services such as off-grid storage, solar generation services and new electric vehicle charging services.

• Better predict and meet the urgent needs of “at-risk” customers.

• Provide customer and usage insights that can be used to sustain competitive prices and drive down the cost to manage assets and serve customers.

• Support peer-to-peer trading.

While some utilities have begun building elements of a better digitally-enabled customer experience, too many are yet to execute digital in a strategic and integrated way that differentiates them from competitors.

almost half (44%) of respondents surveyed would consider using their utility for trade services while nearly one-third would consider buying home internet services from their utility6

In Australia

“Utilities such as Enel in Italy, Engie in France and Centrica in the UK are capturing value in competitive markets by aggressively expanding new behind-the-meter services such as home energy management and connected homes.”Matt Rennie, Global Power & Utilities Transactions Advisory Services Leader and Oceania Power & Utilities Leader, EY

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6. EY Digital Australia Omnibus 2015-16, EY, 2016

Build a more intelligent networkImagine if utilities could intelligently manage their network and assets for improved reliability and efficiency.The increased emergence of advanced digital technologies, such as smart metering, smart grid solutions, network monitoring and advanced battery technology, is transforming energy networks. The next generation of grid and enabling technologies can now facilitate the dynamic two-way flow of energy. They can enable both energy players and consumers to participate in the energy market.

This intelligent network and the data it produces can help utilities optimise the way energy is delivered. For example:

1. Respond to outages more quickly. Remote asset monitoring, telemetry, smart sensors and predictive analytics can track network conditions and facilitate an outage response in real time. Advanced network systems can dynamically reroute electricity (“self-healing”), while GIS tools can help better direct field workers to fix the problem.

2. Reduce losses. Smart meters and network sensors can detect theft and leakage while advanced

processing software platforms can make real-time remedial measures to avoid technical losses.

3. Enhance productivity. Real-time information about the status of assets, field work and customer requirements can enable the accurate trade-off between different network spend decisions and lower infrastructure and operating costs.

4. Balance the grid. Digitally enabled demand-side management solutions such as reflective pricing tariffs, energy storage and home energy management solutions can help balance the grid and reduce long term infrastructure investment.

5. Maintain physical assets. Artificial intelligence, drones and machine learning can monitor physical asset conditions and optimise proactive maintenance.

6. Support the virtual grid. Technologies such as the IoT and blockchain will support interoperability of network devices and peer-to-peer (P2P) trading of energy. Digital asset monitoring can help create a comprehensive “cradle to grave” maintenance history that better manages risk and optimises asset management.

In this way, a digitally enabled network helps utilities both improve operational efficiencies and enhance the customer experience.

67% of customers surveyed said they would use online portals to report energy leaks or outages7

Using drones to inspect powerlinesRight across the globe, utilities including Duke Energy, National Grid, Southern Company and Transgrid are testing the use of drones to inspect transmission and distribution lines for damage from storms and normal wear and tear and seeing new opportunities for this innovative solution to assist with maintenance throughout their networks.


7. EY Digital Australia Omnibus 2015-16, EY, 20168. Source: Electric power transmission and distribution losses (% of output), The World Bank website, http://data.worldbank.org/indicator/EG.ELC.LOSS.ZS, accessed 6 October 2016.

According to the World Bank, Australia reports electricity transmission and distribution losses of around 6%.8

Making the most of digital gridsThe digital transformation of the grid comes at the same time as other new game changing technologies such as augmented reality, robotics and artificial intelligence are reaching maturity. Together, these innovations are creating both challenges and opportunities to improve grid operations and the customer experience.

Perhaps the biggest challenge may be determining how to best connect elements of new network technology to the legacy systems that support them. Key questions to consider include:

• How can utilities use information from the smart network to give customers better information more quickly about energy usage and outages?

• How can smart appliances (and meters) be configured to make adjustments on energy use in context of other events impacting the network?

• How will improved network data provide better insight into future asset management plans and avoid or defer the need to fund additional infrastructure?

• How can both digital and the network be used to balance demand and supply in the increasing multi-directional flow model?

“Digital is becoming a vital weapon in managing the effectiveness of networks and operations. The insights from smart meter usage data is vital as it allows us to more proactively manage and monitor the network, which means fewer outages for customers and more targeted investment in grid improvements. We are at the start of this critical innovation.”John van Weel, Executive General Manager, Service Delivery, Jemena

Making the most of smart networks will require utilities to commit to investing in the digital grid. This means building appropriate systems to store and process additional data and investing in the capabilities to analyse this data to extract actionable insights and communicating relevant and helpful data to customers via their preferred channel.

Using meter data to digitally map the networkMaintaining up-to-date low voltage (LV) network mapping for a large, complex and constantly changing network is challenging. With large numbers of customers affected by planned outages each year, the level of precision required to avoid breaches is very high and manually checking and fixing LV mapping errors is expensive. It’s thought that many distributors overstate the accuracy of their LV network mapping and affected customer lists, leading to false negatives (breaches) and false positives (low impact).

Getting these figures wrong risks a utility’s reputation, incurs regulatory fines, reduces customer satisfaction and can cause serious safety issues for customers on life support.

Some energy distributors are approaching this challenge by using data within their advanced metering infrastructure (AMI) and network control systems. By mapping the wave patterns from transformers to the wave signals from smart meters, energy utilities can match the “digital fingerprints” of the transformer and ensure the accuracy of their LV network digital mapping. This approach also reconciles the outage notification list against AMI meter ‘power on’ signals to retrospectively learn from any mistakes should they arise.

To support this new technology, some energy players have also deployed new portals that keep customers notified of planned outages, lets them register unplanned outages and ensures that life support status is up to date.

Historically, utilities collected <10 data points per year about usage in each household.

A household smart meter can allow utility companies to collect almost

3500 data points9


Smart grid technology to deliver US$18.8b in cost savings worldwide by 2021 — mostly through reduced energy use and avoided emission costs.10

9. EY Analysis.10. Source: Smart cities – on the faster track to success, Juniper Research, May 2016.

How are utilities embracing geospatial analytics?CenterPoint Energy, Inc. is a domestic energy delivery company headquartered in Houston, Texas. The utility provides electric transmission and distribution, natural gas distribution and energy services operations across six states serving more than 5 million customers. They have embraced geospatial analytics to provide rich digital visualisation of complex data to help with real-time decision making. In addition to having a highly visual overview of the network assets, CenterPoint Energy has used geospatial analytics combined with mobile data solutions to assist with critical activities such as storm vulnerability assessments — helping the utility rapidly respond to severe weather events such as tornados and prioritise resources to address impacts to critical infrastructure such as hospitals.11

What happens when digital takes to the air?A leading Australian energy distributor with customers spread over 1.7 million square kilometres needed to address the condition monitoring of 150,000km of powerlines and almost 1 million power poles. Inspection and clearing of vegetation represented a significant component of their cost of supply. LiDAR imagery and new techniques for detection of powerlines and classification of tree species where developed.

Advanced analytics were used to extract management clearances from the vast amount of data captured and eliminated significant labour costs associated with manual inspection and processing.

New route optimisation techniques for aerial powerline inspection, based upon biologically-inspired meta-heuristics, delivered inspection routes with 20% shorter flight times.12


11. Source: CenterPoint embraces GIS, (video – runtime 1:25 minutes), Esri website, http://www.esri.com/industries/electric, accessed 7 October 2016.12. Source: Zhengrong Li, Rodney Walker, Ross Hayward, Luis Mejias, Advances in vegetation management for power line corridor monitoring using aerial remote sensing techniques, www.eprints.qut.edu.au/39272/1/CARPI_2010.pdf, October 2010.

The collision of technologies is driving true innovation


Nearly 60%of the global utility workforce is aged over 40 years13

Case studyA leading UK infrastructure operator was under increasing pressure to improve operational efficiency and safety, realise financial savings and increase the capacity available to its customers on its network. The company determined the need to increase its enterprise-wide view on network and asset information leveraging visualisation, analytics and mobile.

EY worked with the client to structure the major IT and business transformation programme, setting out a clear vision and roadmap. A strong focus was establishing upfront and ongoing engagement with the workforce. Through agile and accelerated delivery, the programme has delivered a detailed and multi-layered visualisation of the network, with decision support tools realising millions of pounds in savings. The company now has a mobile-enabled workforce. Using tablet computers, regularly released apps and augmented reality, engineers can visualise infrastructure and diagnose faults remotely, saving time, reducing operations and maintenance costs and improving safety.

But the success of these initiatives is not due solely to the technology but the fact that these digital solutions were implemented with a focus on the people using them, who played a key role in the development of these apps and tools.

Engage and empower the workforce via digitalImagine if a field worker could be guided by an expert in another region through augmented reality technology.Just as utilities tackle the challenges of an ageing workforce, they face an urgent need to acquire digital-savvy employees with the skills and capabilities needed to build a digitally enabled, customer-centric utility.

The battle to attract talent with the right technological and customer skills, as well as an entrepreneurial mindset, pits utilities against almost every other global industry, many of which are far more advanced than they are when positioning themselves as employers of choice.

Energy companies will need to drive a culture of ambition, boldness and agility if they are to attract staff with the right skills and then make the most of this potential to help become a utility of the future. They will also need to be mindful of bringing current long-term employees on the journey into this future as well, ensuring that their experience and knowledge is respected and transferred to the next generation of workers.

In the future, digital tools and insights will improve the productivity and job satisfaction of a utility’s workforce and, crucially, enhance the customer experience. For example:

• Analytics can predict potential customer issues and proactive options for workforce responses.

• Real-time data and digital channels can allow quicker resolution of customer issues — fixed first time with closed loop real-time feedback.

In many industries, digital technology is already making field work safer, more efficient and with less environmental impact.

For some utilities, gaining innovative skills quickly may be best achieved through partnerships while others may consider spinning off separate “innovation hubs”. These may better give employees the room to collaborate on projects in entrepreneurial environments that allow the freedom to innovate quickly, fail quickly and learn fast.

• Fieldworkers can be better directed to where they are needed and access real-time information to enable faster response to problems.

• Service delivery personnel can use apps and other mobility tools to directly engage with end consumers and improve both the customer and employee experience.

• Building a “digital twin” of the network that is continually refreshed with data from LiDAR and other sources can ensure that field crews are working proactively and minimise disruptive “false alarms”.

• Smart wearables could ensure safer working in high risk situations.

“A company that embeds an ‘intrapreneurial’ spirit is able to encourage innovation and therefore raise productivity and efficiency. An added benefit is that it curbs high levels of employee turnover and will help in the long-term with attracting new talent.”Nancy Altobello, EY Global Vice Chair, Talent

“Innovative utilities across Europe are embracing digital to enhance grid intelligence, optimise work processes and improve efficiency across the value chain.”Benoit Laclau, Global Power & Utilities Leader, EY

13. Source: EnergyCentral, energybiz website, www.energybiz.com/event/webcast/aging-utility-workforce-business-impacts-and-strategies.

Rethinking ways to sustain our energy supplyImagine if customers could be empowered and motivated to work in partnership with utilities to reduce carbon emissions? As utilities face increasing pressure to reduce emissions, digital technology can help drive positive changes to energy supply practices while encouraging customers to do the same. Research shows that customers are keen to be more energy efficient – 57% of those we surveyed were considering installing solar panels on their home14 – but they don’t want it to be expensive or difficult.

Could your freezer free up the grid? In the UK, National Grid is exploring how an “internet of energy” could see household appliances like fridges and dishwashers balance the grid. In the future, imagine if sensors could turn on a dishwasher when wind power is plentiful or turn off a freezer for a few minutes to help ease demand at peak times. National Grid believes that this technology could reduce electricity grid fluctuations by 30-50%.16

Used in the right way, digital can help make energy efficiency an easy option for consumers while also helping change processes and operations to reduce their environmental impact. For example:

• Smart appliances and meters can help customers manage energy usage and improve energy efficiency.

• Advanced grid technology and software can accelerate adoption of renewable energy, including distributed generation.

• New business models around ownership and charging are lowering the barriers to electric vehicle ownership.

• Better use of technology can reduce travel for field workers, improve their interactions with customers and limit the impact of field work on the environment.

• Advanced customer engagement can lead to incentivising and gamifying good environmental practices.

• Smart cities can enable improved monitoring of air conditions, traffic flow and energy usage. Advanced analytics can enable real-time assessment of trade-offs for action with respect to cost, risk, performance and environmental impact.

More than half of those surveyed (55%) would consider accessing real time energy usage information and conservation tips from their energy supplier15


14. EY Digital Australia Omnibus 2015-16, EY, 2016. 15. EY Digital Australia Omnibus 2015-16, EY, 2016. 16. Source: Smart energy revolution ‘could help to avoid UK blackouts, BBC News website, http://www.bbc.com/news/business-37220703, 31 August 2016.

“Tomorrow’s utility customer will be better informed and better engaged, active as part of the energy ecosystem as user and generator. As such we need to build those relationships today through customer experience and innovative products and marketing.”

Kim Clarke, Chief Customer Officer, EnergyAustralia

Strengthen the security and privacy of customer, network and employee information Imagine if utilities could become trusted custodians of customer and employee information whilst securing critical infrastructure.The opportunities of advanced technology and connection of devices via IP addresses bring new challenges, including the increased risk of cybersecurity threats. The complexity and rapid pace of change of digital technology is exposing utilities to more sophisticated and frequent cyber attacks which have the potential to breach customer and employee privacy, incur regulatory action or even bring down generators and grids.

Cyber attacks are now a matter of “when, not if” — the ability to prevent an attack needs to be supplemented with abilities to detect and respond to the inevitable attacks.

“The Internet of Things offers consumers convenience, and provides businesses with vast amounts of data on customer habits. However, this also presents a greater threat.Security and privacy must be a forethought not an afterthought.” Charlie Offer, Oceania Power & Utilities Cyber Security Leader, EY

The convergence of operational technology (OT) and information technology (IT) increases the already significant cybersecurity risks facing the utilities industry. As critical infrastructure providers, all utilities are an attractive target for hackers and cyber-extortion.

IT and OT convergence exposes control systems to cyber threats. Energy utilities must now recognise and manage these threats as a genuine and significant business risk as well as for the safety of citizens.

Watch our video https://www.youtube.com/watch?v=4fczkoO_-VQ

OT and process control systems can no longer be managed in silo, separate to corporate IT and risk management.

On the plus side, advanced digital technologies are also enabling increased security capability, including advanced security monitoring and analytics. The next generation of security operations centres are using big data algorithms to analyse patterns of traffic on both corporate IT and OT networks to identify possible indicators

of compromise. This allows an enhanced capability to respond to a cyber attack in real-time.

Security and privacy concerns should not be seen as a blocker to innovation but as a way to enable trust as a differentiator. Embedding risk management within innovation will ensure privacy and security risks are considered “by design.”

55% of customers surveyed said their biggest concern relating to data security and their utility provider was the privacy of personal details18


A hacktivist group infiltrated a water utility’s control system and changed the levels of chemicals being used to treat water.17

In December 2015, hackers brought down Ukraine’s electricity system, resulting in outages to 225,000 customers.

17. Source: Hackers hijacking water treatment plant controls shows how easily civilians could be poisoned, International Business Times website, http://www.ibtimes.co.uk/hackers-hijacked-chemical-controls-water-treatment-plant-utility-company-was-using-1988-server-1551266, 23 March 2016.18. EY Digital Australia Omnibus 2015-16, EY, 2016.


Imagining a digital driven energy market in 2020What could the future look like for those utilities that act now to embrace the opportunities of digital?

A fully integrated digital solution automatically updates stakeholders on supply interruptions in real-time

Drones provide 3D imagery on network assets to enable engineers to remotely diagnose the cause and point of failure

Cyber resilience built into all aspects of the IT landscape will protect against threats to consumers and the network

Artificial Intelligence customer service proactively engages and responds to consumers, driving down OpEx costs and improving broad measure of customer satisfaction (BMoCS)

Augmented reality headsets provide instant information and visuals to improve operational performance

A sharing economy built on a secure and self-verifying blockchain platform, monetising the network as consumers buy and sell energy peer-to-peer

Artificial Intelligence computers employ machine learning algorithms to predict and identify at-risk sites and assets to prevent outages across the network

IoT sensors such as simple accelerometers producing large volumes of data on the condition of assets

Some of the disruptive technologies will become the norm by 2020. The leading organisations are already exploring how these could be adopted in their business.

A smart meter will automatically provide consumption data in real-time

In the future, the IoT and digital technologies will improve operations and stakeholders’ satisfaction.They can support a truly distributed energy world and create an unprecedented multi-way flow of information, for example —


Customer’s perspective

Asset o

perator’s perspectiveManager’s perspective

• Controls all energy needs, their car (which they can charge anywhere), wireless internet, and telco services from a single digital account.

• Generates and stores own energy using solar panels and batteries and sells excess to other customers or the grid.

• Lets utilities control some appliances such as air conditioners to access cheaper tariffs.

• Controls their own home and appliances, depending on complex rules. I.e. The customer can allow their washing machine to search for the cheapest power in the next 24 hours and turn on when electricity is at its lowest.

• Sells energy stored in electric vehicle when energy prices reach a particular threshold.

• Controls their home’s lighting and temperature using wearable sensor devices.

• Switches retailers automatically and in real-time to find the cheapest source of energy and services.

• Is educated about energy use to improve behaviours and protect the environment.

• Brings together innovative products and services beyond energy to solve holistically customer lifestyle and business needs.

• Proactively suggest innovative tailored solutions which change experience and lower costs.

• Allows customers to manage their own transactions using self-service tools.

• Solves customer queries proactively and communicates in a way customers choose (through any channel).

• Predicts service disruptions ahead of time and informs the customer around next best action.

• Initiates transactions with no input from a physical person and routes these into existing service delivery channels.

• Knows intimately a customer’s history, financial state and challenges and can respond in personalised ways to individual needs.

• Knows in real-time competitor behaviours and can respond quickly with counter value propositions, including special situations like hardship.

• Delivers on corporate responsibility priorities and customers’ values.

How might my future energy world change?


Asset o

perator’s perspective F

ield worker’s perspective

• Can see an integrated view of information at the centre around the status of assets, work and customer needs – to make proactive decisions to optimise productivity.

• Uses real-time geographic views of the network to see all incidents currently impacting its operation.

• Lets the network self-adjust and self-heal in response to conditions.

• Reviews the history of network events in real-time, to identify weak points and deploy field trucks.

• Predicts network failure in response to projected weather events, and prepositions limited assets as quickly as possible.

• Communicates with customers about planned or unplanned network events using automatic digital channels.

• Dynamically finds new sources of energy to supplement the network in times of high-load stress.

• Actively monitors risks to both the network and customers — proactively deploys defences to protect against threats.

• Manages a digitally connected grid that is standardised and operates at the lowest possible cost for customers.

• Uses mobile devices to get real-time information about a particular residence’s customer, their prior complaints and other important data.

• Engages with the customer, or a selection of multiple customers, in a geographic region with a click of a button to access information about works in that area.

• Receives real-time updates from a customer regarding enquiries or complaints associated with current works.

• Reviews schematic plans and photographs of particular assets in the field before commencing jobs with notes from previous jobs attached.

• Sees asset performance and maintenance history, with intelligence-driven repair and maintenance activities identified.

• Monitors physical conditions to ensure safer working.

• Uses smart-glass enabled safety goggles to view relevant information in the peripheral whilst using both hands to work. The operation can be recorded for OH&S purposes and continuous improvement.


Imagine a utility of the future that is bold, agile and customer-centricFor utilities to really make the most of digital, they must first accept that doing so goes far beyond IT. Instead, digitally-enabled changes must be part of a greater strategy that is underpinned by a commitment to shift from a traditionally risk-averse mindset towards a more agile and innovative culture. Doing so requires utilities to move through several, inter-connected steps.

The utility of the future will be:• customer centric• hyper-connected• proactive and predictive• adaptive• automated• performance focused

It will be driven by a clear business purpose.

Unless these foundations are laid, any attempts to use technology to build new customer relationships or address other industry and external trends will be superficial and more likely to fail.

Imagine a utility that makes strategic and intelligent use of digital to become more efficient, more customer-centric and more able to adapt to the many trends reshaping the energy world. It’s a vision that is possible. Energy companies hold the assets, network data and customer bases they need to succeed in a digital world but they need to quickly rethink their ways of working to successfully leverage these inherent advantages. They can do this by making significant changes to business models and rethinking investment priorities, utilities can seize the promise of digital to support their transition to the utility of the future.

Digital innovation isn’t just about the technology

Ready the base technologies: With so many technological advances and options, it is critical that utilities understand what’s available and identify those that map to their own business goals. They must master strategic digital capabilities aligned to their strategy.

Frame the strategy: Digital impacts everything — becoming a digital utility may require a complete rethink of business models. Utilities will need to determine a long-term purpose, based around current strengths; develop customer-focused goals; and then take a value-based approach to determining how digital can enable these goals.

Mobilise digital ready people: Technology is only as powerful as the people who use it. For utilities, shifting the organisational culture from a largely engineering mindset to an entrepreneurial one is essential but not easy. Utilities will need to be proficient in change management and developing new talent with the right skillsets. They need to look to more digitally mature industries, such as telecommunications and financial services, to extract leading practices.

Develop a digital innovation program: The rapid pace of change requires utilities to keep up with digital innovation. Investing in continual innovation will represent a shift in how utilities allocate resources — it’s time to shift towards to a technology and information based business.

Build necessary security capabilities: New technology = new risks. Utilities will be vulnerable to cyber attacks unless necessary safeguards are put in place. This starts with identifying all potential sources and types of threats to a utility’s infrastructure, designing a cybersecurity strategy to address these and then investing in the appropriate infrastructure.

Focus on design: The success of digital within a utility will be determined by how widely it is adopted. A focus on intuitive, user-friendly and appealing design when implementing technology will encourage take up. This design must be aligned to strategic priorities and virtually integrated.

Align to your customer: Utilities need to envision the digitally-enabled customer journey and then build the infrastructure to support that. This design needs to encapsulate outside-in thinking and focus on those “moments that matter”. This means listening to what customers want before making any technology changes. Don’t waste time and resources developing an app no-one will use.

Structure for success: Companies will need to set up different processes and teams to deliver various digital capabilities. For example, separate innovation clusters will need to be set up to manage customer service, grid analytics, mobility and digital readiness and innovation. Utilities will also need to develop a digital framework to govern the interactions of these various clusters.

Strategic “get rights” include:

Is your business strategy ready for digital?There’s no point beginning any digital initiatives without first understanding the capabilities of your business now. EY’s Digital Readiness Assessment can give you a clear vision of your starting point and a roadmap to help you reach your goals, using digital tools.

This online, interactive, assessment and benchmarking tool supports you to benchmark digital maturity across seven focus areas:

• Strategy, Innovation & Growth

• Customer Experience

• Supply Chain & Operations

• Technology

• Risk & Cyber Security

• Finance, Legal & Tax

• People & Organisation


Digital innovation isn’t just about the technology

Watch our video https://youtu.be/EB_fvRH2BOw?list=PL975E56F131561576

https://digitalreadiness.ey.com

EY: Building confidence in a digital world In a digitally disrupted world, EY provides confidence to our clients and stakeholders through every digital element of business transformation (tax, legal, people, regulatory, compliance, technology, innovation, capital investment strategy). The higher quality results help grow and protect their business and build a better working world.

Through our professional insight and judgement, firm grasp of technology and innovation, and human intuition, EY helps the boardroom seize the upside of disruption. As EY builds confidence in the capital markets, so we will build confidence in the digital world.

We help our clients re-think their business strategy and operating model for a digital age.

Enterprise strategy

We establish an end to end innovation capability to incubate new ideas and business models.

Incubation and innovation

We align, enhance and automate operations and supply chain to deliver on the promise of digital.

Operations

We scan the digital risk horizon and help our clients build agility to respond to digital risks.

Trust

We analyse the world of the customer, then design and implement new experiences.

Experience transformation

EY’s core digital offerings


Contact usFor more information, please contact:

Stuart Hartley EY Asia-Pacific and Digital Power & Utilities Advisory Leader [email protected] LinkedIn

Jenny Young EY Oceania Customer Leader [email protected] LinkedIn

Charlie Offer EY Oceania Power & Utilities Cyber Security Leader [email protected] LinkedIn

Matt Rennie EY Global Power & Utilities Transactions Advisory Services Leader and Oceania Power & Utilities Leader [email protected] LinkedIn

Russell Curtin EY Oceania Energy Leader [email protected] LinkedIn

Nick Cardno EY Oceania Energy Transactions Advisory Services Leader [email protected] LinkedIn

Ryan Fisk EY Oceania Energy Assurance Leader [email protected] LinkedIn

Paul Laxon EY Oceania Energy Tax Leader [email protected] LinkedIn


https://www.linkedin.com/in/stuartbhartley

https://www.linkedin.com/in/jenny-young-faicd-2144b35

https://www.linkedin.com/in/charlieoffer

https://www.linkedin.com/in/mattrennieey

https://www.linkedin.com/in/russell-curtin-13158536

https://www.linkedin.com/in/nick-cardno-a037b5

https://www.linkedin.com/in/fiskryan

https://www.linkedin.com/in/plaxon

EY | Assurance | Tax | Transactions | Advisory

About EY

EY is a global leader in assurance, tax, transaction and advisoryservices. The insights and quality services we deliver help build trust andconfidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

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© 2016 Ernst & Young, Australia.All Rights Reserved.SCORE no. AUNZ00000674ED NONE. S1629785

This communication provides general information which is current at the time of production. The information contained in this communication does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Ernst & Young disclaims all responsibility and liability (including, without limitation, for any direct or indirect or consequential costs, loss or damage or loss of profits) arising from anything done or omitted to be done by any party in reliance, whether wholly or partially, on any of the information. Any party that relies on the information does so at its own risk. The views expressed in this article are the views of the author, not Ernst & Young. Liability limited by a scheme approved under Professional Standards Legislation.

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Building the digitally powered utility of the future · Building the digitally powered utility of the future An Australian perspective | 2 A changing customer Influenced by digital