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MANAGEMENT CONTROLS BLOG

Wired for Change? Why the Utility Industry Needs Digital Tech

Utility_Grid_Control_Room

The utility sector is navigating a storm of challenges. Surging demand is colliding with escalating concerns over grid reliability. Meanwhile, others are calling for enhanced efficiency and environmental stewardship. 

Meeting these challenges is tough. The power industry is grappling with a complex array of obstacles, including rising costs, limited capacity, and workforce shortages. Amidst these challenges, digital technology emerges as the most promising path forward. Yet, the power sector's full embrace of digital innovation remains on the horizon. 

Navigating Demand and Sustainability Targets   

Most people don't think about the utility industry—unless there is an issue with reliability and resiliency.   

But providing regular service is becoming more challenging. Countries around the world are encouraging their citizens to buy electric cars and businesses to use electric equipment. The global electric fleet is expected to reach 77 million in 2025, up from 20 million in 2022, according to Statista.  

Electric use changes are also challenging the grid. “And the grid is only getting more complex to operate as distributed energy resources introduce an influx of new information and variables into the system,” says McKinsey.  

Not surprising. The grid is being relied on and tested in ways it has never been before. The answer to the issue would be to update the grid. This is a massive undertaking.  

“In order to achieve climate goals set by global governments, more than 80 million kilometers (49.7 million miles) of electric grids have to be added or refurbished by 2040, which is the equivalent of the entire existing global grid, according to the Oct. 17 IEA report,” and reported on byBusiness Insider.  

The article went on to cite a report from the Institute of Electrical and Electronics Engineers that estimated it would cost over $2.5 trillion by 2035 to update the grid in the U.S.  

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Tight Budgets and an Aging Workforce 

Finding the budget to make the changes necessary to the grid on a global scale would be difficult in the best of financial times. Government budgets are typically stretched, and politicians specialize in kicking the can down the road. Making the necessary budget decisions to meet the tremendous costs of updating the grid is unlikely.  

Soon, finding the funds to invest in the grid will probably be more difficult, based on a report from the World Bank. According to aWorld Bank press release, “… between 2022 and 2030 average global potential GDP growth is expected to decline by roughly a third from the rate that prevailed in the first decade of this century—to 2.2% a year. For developing economies, the decline will be … from 6% a year between 2000 and 2010 to 4% a year over the remainder of this decade.”  

But if updating the grid is a priority, other challenges persist. One is manufacturing. Since the pandemic, supply chain issues have plagued the world. Supply chain issues have moderated in 2023, though some challenges remain.  

Manufacturing electric transformers, essential for the grid, remains a significant issue. David Blackmon, an energy-related public policy analyst,  said “…we have a crisis in [the] supply of electric transformers for our power grid. Transformers are an integral part of every electricity project in America—around the world, really—and they're in very short supply. It's taking up to four years to source new supplies of these transformers.”   

Then, there’s the labor issue. Like many industries which require employees to do hands-on work, the utility industry is facing workforce challenges. In addition, the industry relies heavily on older workers. Up to 55% of the electric and natural gas public utility workforce may retire by 2030. This type of turnover would strain the labor force beyond its current tight levels.  

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The Growing Value of Data and Analytics 

Utility companies that lean into digital platforms perform better.  

McKinsey did a deep dive into utilities and digital tools. They note that “the utility industry barely takes advantage of digital,” and “… digital has not yet fully infiltrated the utility industries…”  

Some utilities have adopted digital technology and have experienced improvements in key outcomes. McKinsey cites the following use cases as evidence: 

  • 25% to 30% field productivity improvement from Artificial Intelligence (AI)-powered scheduling  
  • Up to an 80% capital reallocation based on machine learning (ML) insights in asset health  
  • 30%+ improvement in customer satisfaction in select journeys  
  • 2%-5% increase in heat rate or yield for fossil as well as renewable generation assets  
  • 30%+ improvement in reliability and resiliency outcomes within existing spend levels

Nearly every major utility is incorporating digital, data, and analytics to some degree, notes McKinsey. But without a comprehensive strategy, they are doing it piecemeal. Operating in this matter limits the benefits of applying technology.  

 

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Relying on Vendors and Contractors   

In a 2021global survey by EY of power and utility executives, 89% said “… having too few workers with the right skills as a challenge to digital technology adoption.” Yet, 60% of those executives at large utility companies intend to invest a great deal in digital technology. The survey also shows companies recognize the need to upskill their employees.  

They cite other strategies to address the skills/labor shortage:  

  • Redeploying staff  
  • Hiring new staff with relevant skills  
  • Hire temp staff and freelancers  
  • Outsourcing some business functions 

Even the most up-to-date equipment and technology won’t solve every problem. Consider a study by NASA and the U.S. Navy. Itfoundthat 82% of electrical asset failures were random, and 18% were due to aged equipment.  

Whether for routine maintenance or to aid in the transition to digital systems, utility companies rely on contract labor. Based on the EY survey, the need for contract labor will grow. Over 70% of respondents “reported meeting their organization’s workforce needs will require them to rely more on vendors and contractors than in the past.”  

How myTrack Helps the Utility Sector 

Utility companies using the myTrack Platform can simplify the management of contract labor and optimize their workforce. The platform empowers companies with a far more efficient way to track the costs of labor, equipment, and materials. Customers in the utility sector can save millions in contractor labor, equipment, and material spend.  

They also increase labor efficiency. Utility companies must get the most out of their staff to make up for shortages and knowledge gaps.  

Meeting public and governmental demands related to efficiency in a time of labor and financial challenges is a huge burden on utility companies. Those who incorporate digital technology have seen meaningful benefits. Clearly, the utility industry will continue to lean on contract labor to optimize current and future systems.  

Minimize the cost of contract labor and increase its efficiency with themyTrack Platform.  

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