Powering the future with data: a smarter, greener utilities sector

The headlines have been brutal for the UK’s utilities sector over the past year. From the cost-of-living crisis to sewage-strewn rivers, the industry has been in the firing line of public ire. Yet behind the headlines, these regulated companies are striving to build a smarter, more secure and sustainable future for us all. For a deep dive into these issues, Cognizant and Informatica joined forces with Future of Utilities to discuss how leveraging
data and digitalisation will reinforce resilience and sustainability.

A lively roundtable discussion began with a presentation from Marzia Zafar, Deputy Director of Digitalisation and Decentralisation at Ofgem, who drew on the lessons from California in the early noughties, where deregulation, the Enron crisis, extreme weather and supply disruption saw many years of turbulence. Cognizant’s UKI Head of Manufacturing, Logistics, Energy and Utilities, Niraj Seth and Informatica’s Global ESG Sustainability Chief Strategist, Levent Ergin, were among the attendees. Participants included a cross-section of utility executives.

As the topic of industry challenges got underway, addressing the customer was top of mind. One participant noted, “We de-regulated and left it completely to the market, and then re-regulated and tried to use smart meters to fix everything but these extremes create situations you don’t want. In the UK, there’s a drive to decentralise and digitise everything but, ultimately, it all depends on the customer.” And it was further added that right now, the customer is preoccupied with the cost-of-living crisis rather than worrying too much about the mechanics of the energy market.

“Who owns the customer journey? Without answering that question, we are going to make the same mistakes again”

One participant queried who owns the customer journey. “Without answering that question, we are going to make the same mistakes again. Is extreme decentralisation and extreme localisation of planning and generation what we want or is it what is happening? How does that benefit the customer?”

Customer journeys: Who controls what?

One challenge for utilities companies is that they must serve all customers, from those eager to engage on issues such as electric vehicle (EV) charging and time-of-use tariffs to those who struggle to even supply meter readings.

This particular industry concern was a theme highlighted by Niraj Seth, UKI Head of Manufacturing, Logistics, Energy and Utilities at Cognizant, during the conference itself.

“Utilities are unique in that they can’t pick and choose their customers. They have to serve the whole of the market”
Niraj Seth Cognizant

Niraj continued that utilities are unique in that they can’t pick and choose their customers. To do that, he said, “They have to serve the whole of the market in a way that’s both regulated and provides the customer experience that people want.”

These customer experience issues surfaced other concerns by participants. The challenge of serving all customers is compounded not only by the diversity of the customer base but also by the increasing fragmentation of the industry itself, with the arrival of electric vehicles, solar panels, heat pumps and batteries – who owns these journeys, and how are they managed?

One participant commented that they worried that “EV manufacturers will come in with their own platforms to create their own little microgrid but they don’t own the tariffs so they can’t stitch it all together. How will this work?”

“It’s incredibly complex. I don’t understand it and I work in the industry”

Another agreed, “It’s incredibly complex. I don’t understand it and I work in the industry. The supplier owns the relationship and has a responsibility to stitch the journey together. Otherwise it will be chaos, with too many apps and too much complexity.” A comparison was drawn against the banking sector, where, through the Open Banking initiative, it’s now possible to manage multiple bank accounts from multiple providers through a single app. This empowers the customer to make smarter decisions about their financial well-being. No such capability currently exists for householders to manage their energy consumption and emissions footprint.

Robust debate in a time of revolution

Participants in the roundtable agreed that these questions about ownership of the customer journey need urgent attention – and that the clock is ticking on finding answers.

“If you look at the timeline for electricity, then we are on the cusp of a revolution. This is not an evolutionary step.”

One participant noted that “we are on the cusp of a revolution with electrification and not an evolutionary step.” They expanded, saying “At a macro level, to displace gas and replace it with electricity, we need four times as much electricity as we are currently producing. But we do not want it produced in the same way, so we need to be clever.”

This is a challenge, participants agreed, for an industry that has a conservative culture, is typically risk averse, operates in fiefdoms and is still wedded to waterfall adoption. These mindsets need to change before the industry runs out of time.

Those working in the water industry lamented the fact that water was so cheap that there was no incentive for householders to reduce usage. One water company executive noted that another lever is required for water, which can be as cheap as £1 per day. He continued, “And that lever is the environment. We have found that customers really engage with that.”

“We are all paying a massive price for the pollution caused by the mismanagement of water in this country”

This prompted a discussion about the true “cost” of water when billions of litres of raw sewage are dumped into the UK’s waterways each year, concluding that “we are all paying a massive price for the pollution caused by the mismanagement of water in this country. It’s just not good enough. Saying we only pay a pound a day isn’t the whole story when you look at the impact on society as a whole.”

Data: A rich resource

Another major issue highlighted in the discussion was that the utilities industry’s infrastructure was built in the analogue era, which means it’s not only inefficient but also vulnerable.

Niraj Seth commented that utilities infrastructure was not designed for the world in which we now live, where the users of energy are also providers and can sell a surplus capacity back to the utility companies. This infrastructure “wasn’t designed for the Internet of Things and embedded sensors, which are creating new kinds of data but also introducing new kinds of risks. As the energy and water networks are digitised, however, the data outflows have the potential to generate transformational change. And making the most of these opportunities necessitates that customers be willing to share their data and this requires trust.

Niraj expanded that where there are guard rails around the use of data and a sense of purpose “people are willing to collaborate if they feel it’s doing something positive for the environment and society as a whole.”

Levent Ergin, Global Chief ESG Sustainability Strategist of Informatica agreed, but cautioned this is likely to fall under regulatory purview at some point.

“It’s important to build data security policies around the data and around the different permutations of how it might be used”
Levent Ergin Informatica

He advised that ”it’s important to build data security policies around the data and around the different permutations of how it might be used,” noting that on its own a postcode doesn’t tell you much. But combining this with a National Insurance number and date of birth would enable you to create a digital twin of a person. He concluded that “companies need to understand the data at a granular level and its different permutations, and I would expect a regulator to look into this in the future.”

With AI and machine learning being seen as real game changers, the potential for companies to crunch vast amounts of data and surface insights into water leaks or predict which trees will trouble overhead electricity wires hasn’t passed the industry by.

One participant outlined, “We can use the technology to draw a tighter and tighter circle around where the leaks are, so our technicians are twice as productive and can fix twice as many leaks as before.”

This approach to leveraging technology and data is creating new opportunities to develop smarter solutions to once-intractable problems.

The community agreed that the urgency to meet the environmental challenge is drawing in undergraduates who are seeking a sense of purpose in their working lives, with one commenting “It’s the most exciting time to be part of the sector.”

ESG: More accurate, more impactful

As the topic of modern technologies was addressed, Informatica’s Levent Ergin shared his perspective on how these technologies may impact climate change. He stressed that these technologies will be key to truly understanding the volume of emissions and identifying solutions.

He outlined that breakthroughs like those from Climate Trace¹, a non-profit coalition, bringing together sensor, satellite and geospatial data, and combining with AI, means “we can measure actual emissions, which are typically three times higher than what’s being reported.” This approach can help ensure that what the companies report on is based on accurate data.

This is vital now that, at least in the UK, ESG reporting is no longer voluntary, but mandatory, for all publicly listed companies. While on a global level, the IFRS reporting standard ISSB is looking to standardise reporting rather than rely on the 400 different voluntary reporting frameworks that currently exist. Alongside changing data standards, there’s also a need to change mindsets to move the dial on climate action. This is where some of the newer players in the market have a head start.

“Don’t tell me how much money this will make, tell me how much carbon it will save”

One roundtable participant commented that their company has built climate action into its ethos. They say, “Don’t tell me how much money this will make, tell me how much carbon it will save.” That’s what we need across the industry. We have to change the metrics.

Another participant added that setting higher ambitions is critical. “Don’t ask how do we minimise the damage this infrastructure will have on the environment? Instead ask, How do we use nature-based solutions to improve the ecology of the system? An offshore wind farm, for example, can also create a coral reef to improve the biodiversity of marine life.”

By doing this, it will be increasingly possible to recognise natural capital in the value chain and elucidate the wider societal benefits of nature-based solutions.

Another participant agreed, “If we can show these benefits are tangible and really stack up in the cost/benefit analysis, then we can change the business case for investment.”

It is evident that climate action has become much more tangible in the utilities sector and a perfect storm of datadriven technologies seems set to turn many ambitions into a reality – whether that involves more accurately tracking emissions or implementing greener processes. The electrification revolution is now in progress and organisations with the right data can leverage these technologies to provide greater transparency and a more seamless customer experience.

However, this is only the beginning. Whilst new technologies will further facilitate the electrification transition, leading to a significant reduction in CO2 emissions, this marks one of the biggest shifts that the sector will experience to date. More planning and investment are needed to align with evolving customer expectations – whether that means providing greener energies, being the driver of a unified customer journey or challenging the art of the possible on climate action. Challenges will arise and unification has a long road ahead, but it’s evident that transformative action is front of mind for utilities companies.