The Internet of Things (IoT) connects objects such as buildings, cars and machines online, turning them into intelligent assets that can communicate with users, applications and one another. One of the leading markets in this space is the energy and utilities industry. Indeed, in a report released this month -- the IoT Barometer, it was noted that in the last year 93 percent of energy and utilities companies polled had increased the number of IoT projects they were involved in. Additionally, the data showed that public sector and energy and utilities organizations were the most likely to be working on new connected product and service initiatives -– more than 50 per cent reported that they plan to launch those initiatives within two years. The report also noted that companies in the energy and utilities sector are most advanced in their use of mobile devices for accessing IoT data. Ultimately, the energy industry is a healthy and in some areas, market leading IoT environment.
Why there is so much activity in Energy and Utilities
Over the past ten years, smart grid technology combined with the proliferation of connected home devices and the growth of distributed energy resources have caused a surge in the market across the industry. Indeed, since 2009 there has been significant investment in sensors, networking technology and software, partly due to the Smart Grid Investment Grant (SGIG), where the DOE and the electricity industry have jointly invested $8 billion in 99 cost-shared projects involving more than 200 participating electric utilities and other organizations to modernize the electric grid in the US. By 2009 venture capitalists had invested over $1 billion in new smart grid technologies and as such over the past six plus years’ utilities began working with new technologies and vendors. More globally since then, billions of more dollars have flowed into utility technology and we expect to see the smart grid market to cumulatively surpass $400 billion worldwide by 2020. This investment and the complexity of these implementations make the energy industry a prime case study for the IoT market. Other industries that are seeing a surge in IoT investments, such as healthcare, manufacturing and transportation would all benefit from examining the lessons learned in the energy industry.
IoT Lessons Learned from Energy and Utilities
Over the past decade, the successes relating to the deployment of smart grid infrastructure has been mixed across the industry. While some utilities have seen a rise in customer engagement, lower operational costs and the launch of new products and services, others have struggled to prove out original business cases and functional requirements. One of the leading reasons for this is an under-investment in the development of customer and business led use cases. When a market becomes technology led, and predominantly driven by stakeholders other than the end user (in the case of the smart grid end users are both customers and utilities) it loses sight of design thinking and primarily focuses on technical builds. For utilities, lessons learned in this space range from leveraging vendor business cases too heavily in their analysis, failing to quantify unique utility and customer characteristics and inadequate post-implementation strategies. The vast majority of lessons learned for industry however, are rooted in the inadequate development of use cases early on the design process. Broadly, some examples of what other industries can learn from the initial deployments of IoT in energy include:
- Users First. Focus on the customer and end users to build the strongest business cases. Over the past decade, the best smart grid business cases and deployment successes included detailed information on how customers will be able to use the technology e.g. obtain daily usage information, leverage bring your own device (BYOD) programs etc. These deployments were also able to evolve quickly as technology develops and leverage flexible infrastructure to adapt to changing customer and operational needs.
- Design Oriented Partners. Partner with technology companies who can work cross functionally and who understand design thinking. The minimum requirement for an IoT vendor is one who understands the technology stack, however, those vendors which are market leading in the energy space also understand how to engage the sectors functional teams of engineers, operators and customer facing staff. Going further, they also understand end-to-end solutions and the business vision.
- Tackle Complexity. Employ both a business and technology architecture backed by robust governance to deploy use cases. As demand for custom applications development spiraled during smart grid deployments, so did complexity. Standards can run into the hundreds, business requirements into the thousands and the idea of a plug and play grid becomes even harder to achieve.
- Clear Context Assessment. Clearly understand the context and what the solution is trying to solve. For those utilities enjoying the most beneficial implementations, they ensured to define uses cases across categories such as grid, reliability, voltage, customer, work management, mobility and load, with clearly defined actors, triggers, benefits and functional requirements detailed early on.
Within the industry we are seeing much more maturity around use cases and system design than we did a decade ago. Some utilities who built the customer more into their smart grid designs from day one, and who tracked use cases either due to regulatory requirements or strategic vision are seeing the benefits. For example, ComEd, who have a clear customer focus in their smart grid plans, experienced a 2.8 percent rise in J.D. Power's 2016 survey, over their 2015 score. More broadly speaking however, just as smart grid / grid modernization investments drove a wave of IoT activity in the energy sector, as we now see increased investments in communications, sensors and software in other industries and across a range of B2B and B2C platforms, companies would do well to leverage the energy industries’ lessons learned. Ensuring holistic use case design first and technology implementation second should be the very first step in that regard.