In our day-to-day work supporting innovation in utilities’ transmission and distribution operations around the world, there’s a situation we see all too often:
A utility develops an innovative idea and then—after regulatory approval—sets up a proof of concept. The pilot test results are promising, indicating the innovation could deliver value if adopted at scale.
Then a key challenge arises: how to roll out the new concept without disrupting operations. This is where progress often stalls, and the innovation ends up in a bottom drawer instead of delivering value to the business.
So, what’s needed to make innovation happen? In my experience, innovation flourishes best when part of wider transformation aimed at resolving tangible business challenges such as:
The challenge could be the result of the unexpected success of regulatory policies and incentives, such as the rapid growth of embedded generation in the US and Europe: 58 percent of distribution business executives surveyed in Accenture’s Digitally Enabled Grid research program anticipate revenue reduction as distributed generation rises.
Or, the issue might be the grid’s lack of readiness for deployment of electric vehicles (EVs): as the IEA chief economist recently stated, “’1970s power grids need an urgent rethink” to avoid unmanaged EV integration.
Overstretched business targets driven by competition or regulation also can create challenges. Our Accenture’s Digitally Enabled Grid research indicates that distribution businesses anticipate a wide range of regulatory changes in the next 10 years, with new pricing models topping the list.
Addressing such challenges tends to generate stronger senior sponsorship of utilities’ efforts to innovate. The water industry provides a good illustration of these dynamics. A good example occurred a few years ago in the United Kingdom, when the water industry regulator mounted a push to get water utilities to reduce both their operating costs and CO2 emissions. The companies’ immediate response was it couldn’t be done: bearing down on emissions would require them to invest, which would push up costs. But the regulator wouldn’t take no for an answer and told them to think again. They did, and came up with new ways to build and run assets that reduced both costs and CO2 emissions—in many cases exceeding regulatory targets.
While European countries such as the UK continue to focus on driving innovation in utilities, other regions are also making great strides in new business and revenue models. A case in point is the development and integration of peer-to-peer grid capabilities that enable, for example, a customer with embedded generation (such as solar panels) to share excess power with neighbors. If scaled up, it has the potential to deliver major benefits for customers and the environment, while also providing utilities with new revenue streams.
Overall, the message is clear: Innovation programs are all very well but, when setting up and running them, it’s vital to keep sight of how the advances being sought can be embedded in the business. To help accomplish this objective, here are three steps I believe transmission and distribution utilities could take today:
View innovation in general not as something that’s “cool” and eye-catching but as a way to transform and improve business performance.
Seek opportunities to use innovation to create new business models or market roles, and highlight potential benefits for customers to influence regulatory support for implementation.
Embed innovation in the day-to-day processes, thereby enabling faster innovation and with greater business impact, and freeing the entire organization to be more agile and responsive.