The utility sector has done a good job of keeping the lights on, and credit goes to the workers and managers on the front lines. That being said, utility leadership is worried about the loss of revenue both due to the reduction in energy demand (5-10% on average) and the non-payment of bills by low and medium-income customers. The silver lining for utilities is they can monetize trends of local manufacturing, affordability, and resiliency and climate concerns through new business and operating models, as long as they pay attention to key trends such as the following:

Impacts of Coronavirus and Utility Opportunities

5 global megatrends have a positive impact on the utility sector in the post COVID world

1. Globalization—Retreat of globalization will result in the realignment of the supply chain and a boom in local manufacturing. Cross-border trade and human migration between countries will reduce, and urbanization may be paused. Before the COVID-19 outbreak, 25% of the manufacturing could be brought back to the United States cost-effectively. Post-COVID-19, driven by concerns of supply security manufacturing in critical industries like pharma, telecom, consumer goods are likely to come back to each country. Rise in industrial load will impact the utilities’ bottom-line positively. Overall, COVID-19’s impact on globalization will be positive for the utilities if they have a strategy to attract industries in their territory.
2. Social—Social trends will accelerate with less person to person interaction/travel, accelerated online transactions, online deliveries, and virtual reality. While this will reduce the need for hotels, convention centers, and big offices, but it will increase the need for warehouses, storage, and bigger residential spaces. For utilities, this social trend will be neutral but will shift load patterns and usage.
3. Business Models—Business model changes will be deeper and will impact regulated businesses too. This will include all aspects of business, including economic, financial, operational, market, and service aspects responsible for new revenues and growth. The economic impact and inability of customers to pay for electricity will continue for the long term. In this context, business models focused on accelerating industrialization and service models driven by the concept of zero down financing to drive greater operational flexibility will become prominent.
4. Climate Change—The health impact of COVID-19 will prompt the need for local resiliency, renewal of operating models, and focus on actions to reverse climate change. COVID-19 has brought realization to many that denying the risks of pandemics and climate change can take lives and wipe out businesses in no time. This will prompt the need to make infrastructures resilient and well distributed. This will also prompt the review of operating practices, need for cross training, and use of technology to maintain business continuity during climate and pandemic events.
5. Technology Disruption—Cloud-based solutions will become mainstream with real use of technology and AI in manufacturing and operations. In the utility industry, the need for automation in operations, including the use of robots will gain momentum. Remote operations and the ability to coordinate work remotely will prompt major changes in operations. Utilities will realize that they can improve productivity through staff reduction or by being more flexible with staff for reducing the costs. The need for reliable and secure communication, in addition to access to remote areas, will provide opportunities for utilities to diversify.

Key actions for successful utilities

In the context of these trends, utility leadership must think outside the box and focus on the opportunities in the post COVID world.

Promote industrialization: An expected 30-40% of industrial production will shift back to host countries driven by national security needs. Utilities should develop strategies while working with local governments on how to attract industries in their service territories. What incentives outreach can they do on their own and where do they need policy and regulatory action? Furthermore, utilities should proactively review areas where they have infrastructure or can provide facilities for the industries to set up operations.

Enhance local resiliency with DERs: The need for resiliency will explode both by residential, and industrial customers. Utilities need to develop a proactive approach for providing that resiliency by going behind the meter and proactively seeking regulatory changes to meet customer needs. The ability to optimize behind the meter resources for the grid is a unique capability of a utility. Use of solar, storage, and other distributed technologies will be pronounced by social and climate change concerns.

Link affordability to flexibility: The ability to pay for electricity will be severely impacted for low and medium-income customers. Utilities need to design new business models which will not rely on revenue, but flexibility of resources in lieu of the ability to pay. Many models of zero down financing strive to monetize the value of assets through alternative markets, and they will become key for utilities to solve revenue loss challenges.

Automate operations: All business and operating processes need a review. If a utility can operate from remote areas that may not have the ability to interact in person, then they need fewer handoffs and cross-training of the staff so that multiple people can take on the job in case of a pandemic disabling a part of the workforce. Furthermore, utilities will have to rely on electronic information if managers are making decisions remotely. Most utilities do not have the basic network model correct. This makes it impossible to rely on Geographical maps (GIS) and distribution management systems for operational decisions. Utilities need to get their network model right in order to implement remote operations.

About Vrinda

Vrinda Inc. is a New York based business and technology firm. Vrinda Inc. creates success for your business through a focus on value creation by providing trusted, actionable advice and practical solutions. We provide business and technology consulting services to the Energy, Utility and Transportation sectors. For more information – www.vrindainc.com