Building a competitive power and utility industry in Europe and establishing self-reliance have been found as core drivers behind investments across the region, states a new report from US-based Information Services Group (ISG).
According to the Group’s 2023 ISG Provider Lens Power and Utilities – Services and Solutions report for Europe, European governments are seeking to blunt the impact of unprecedented energy inflation and utilities are stepping up investments in upgrading infrastructure.
“Utilities are under constant pressure to reduce operating costs and improve customer service,” said Ola Chowning, ISG partner, North Europe. “That is why many of them are turning to providers that offer digitally managed intelligent solutions.”
The growing shift toward clean energy is fundamentally changing the dynamics of the European power and utilities sector, ISG says, and in addition to pursuing self-reliance, the goals of achieving net-zero and decarbonisation are now driving investments in the sector.
Specifically, states ISG’s report, the following trends are impacting Europe’s power and utility industry and its quest for self reliance:
The need for sustainable energy sources and net-zero targets has started to blur the distinction between oil and gas or power and utilities industries. Oil and gas and power generation companies have begun moving toward becoming new energy companies through green and sustainable efforts like renewable and hydrogen projects.
‘Brown industries’ have started to invest in clean tech as utilities are moving away from being ‘only’ transmission and distribution companies or retailers. They are starting to invest in sustainable technologies like e-mobility or its related infrastructure needs, with decarbonisation a critical factor. Such industry convergence has led to unlocking newer revenue streams for these companies.
Aging infrastructure and rising costs
Many nuclear and thermal power generation units are nearing the end of their lifetime and require upgrading or replacement with new-age units. Compared to initial asset installation, the demand has also increased multi-fold, resulting in the maximizing the lifecycles of these assets and infrastructure.
Even first-generation sustainable power generation equipment such as wind and hydro turbines have almost reached the end of their lifecycle to be decommissioned. The current transmission and distribution infrastructure and its supporting grid infrastructure also face the challenge of needing an upgrade or replacement.
Given the current energy needs in the region, power generation companies and utilities are compelled to run the assets at maximum output, resulting in faster wear and tear of the infrastructure. The cost of replacing the entire asset at once is next to impossible, therefore power generation companies are incurring increased costs.
Asset resilience and rising operating costs
As noted, power generation companies and utilities are becoming more concerned about asset resilience.
Due to the age of these assets, there are increased possibilities of unplanned outages. The average load uncertainty due to volatility in hourly demand also creates possibilities for unplanned outages and sub-optimal asset performance.
This results in increased operational costs and an inability to meet the demand; therefore, asset resiliency services are much sought after so providers can maintain their current generation and distribution output.
Energy consumerism and customer expectations
The choice of selecting an energy supplier rests with the end customer. This has led to market reforms, linking the retail and the wholesale markets closer as consumers are provided access to information, especially on the costs and the source of energy generated, which is reaching the end customer.
The open market policy in Europe has brought competition onto the wholesale market to keep a check on pricing levels. Given environmental concerns, some customers prefer energy supply from a sustainable source, and some have even installed greener energy sources (solar PV) in their individual properties.
This trend has increased consumer expectations for an enhanced experience from the initial touchpoint.
Self-reliance for the future utility
Digital has been the buzzword for the future of the utility.
To address the above-observed trends and other business challenges, power and utility companies have started their digital transformation journeys by adapting new-age and next-generation technologies.
Digital transformation in the power and utilities sector would enable the move toward sustainable sources, increase asset performance and improve customer experiences while also meeting regulatory requirements.