Digital investments to top $33.42 billion by 2030

Digital investments in power distribution and retail companies will top $33.42 billion by 2030, according to a Frost & Sullivan report.

By incorporating cloud computing, big data, analytics, and Internet of Things (IoT) solutions, utilities and retailers are transforming their businesses beyond commodity selling.

Frost & Sullivan finds that digital investments are directed toward three main areas: enhancing customer service, optimising grid operations, and developing connected businesses.

"Power grids are the backbone of the energy transition because they are a fundamental enabler of demand electrification and decentralised renewable energy integration. Hence, the digital transformation of power distribution companies and energy suppliers is a major trend that represents a considerable business opportunity," said Maria Benintende, Energy & Environment Research Analyst at Frost & Sullivan.

"While digital investment has been traditionally aimed at the digitisation of internal processes to reduce workloads and save costs, it is now increasingly being aimed at reinventing business models and creating new streams of income through connected businesses."

Benintende added: "Cloud computing is becoming the foundation for digital transformation. Its core value for power distributors and retailers is that it makes automation and integration between various services simpler, scalable, and less expensive."

Shaped by market shifts and the proliferation of a series of technologies, including smart appliances, electric mobility, and distributed solar and storage, new business models are becoming available. Some opportunities for market participants to capitalise on are:

• Educate utilities on the benefits of metering data: To fully leverage data acquired from advanced metering infrastructure (AMI), vendors should develop smart mobile device management (MDM) platforms that are easier to deploy, scale and maintain.
   
• Expand software as a service (SaaS) offerings to everything as a service (XaaS) value propositions: Digital transformation demands competencies from utilities that are hard to develop in-house. They create business opportunities for aaS propositions.
   
• Strengthen cloud computing capabilities to streamline digital transformation: By opting for cloud platforms to develop, test, and drive their DER and smart home product propositions, utilities will optimise resource efficiency and be able to offer bundled services.
   
• Opt for microservices architectures: Software vendors and developers can consider microservice architecture for software upgrades to deliver enhanced value to their customers with flexible and modular options.

Mckinsey notes energy companies have failed to achieve substantial business value from digital because their approaches do not account for the unique challenges of being an energy company, which create extraordinary inertia.

"Breaking that inertia will require far bolder action than energy companies have been comfortable taking to date. They must commit to transformation," it states.

For now, digital transformations in energy will largely focus on operations. That scope is hard enough and has plenty that needs to be addressed, the report adds.

"But in successfully reimagining operations - and building digital capabilities along the way - energy companies will open the next horizon of digital opportunity: truly disruptive business models. We are only at the beginning of the journey."