In our Energy Transition Talks podcast series, CGI experts explore key challenges and opportunities in the evolving energy value chain. In our first episode, Kristy Ortiz and Steve Ridley discuss the impact of grid modernization on the energy distribution system — from policy and market changes to technology advances. This article provides a summary of the discussion.
Not long ago, traditional utilities focused on generating electricity and transmitting and distributing it to end customers. Now, with increasing distributed energy generation such as renewables, the role of traditional transmission and distribution utilities is changing. Additionally, energy consumers, who now are producers of their own electricity (or prosumers), are interacting directly with the grid.
“I’ve never seen change at this velocity before within the utilities industry,” says Steve Ridley. He likens the shift to what happened in the movie and television industry when its distribution channels evolved from theatres and cable TV channels to today’s plethora of streaming services. “Look at platforms like YouTube or Tik Tok where consumers are now pushing their own content out on the Internet,” he says, drawing a parallel to consumers generating their own power from solar panels and feeding it back to the grid.
Articulating grid modernization goals
According to Steve, while there are many definitions of grid modernization, what’s critical is to articulate the expected outcomes of modernization plans. Providing a safe, reliable and highly resilient energy supply and meeting customer expectations are key focus areas. Another is deriving as much value as possible from the assets operating on the grid.
“As we move more toward this distributed energy model, we need to gain greater insight into traditional assets that are operating on the grid, but also the grid-edge assets or customer-owned assets, and how they impact market operation and settlement.” However, he notes that grid models are constantly evolving, as will the desired outcomes of grid modernization.
Treating data as an asset to support transformation
According to the 2021 CGI Voice of Our Clients, while most energy and utilities organizations have a digital strategy in place, Steve says the pace of achieving results from these strategies is less than 1 in 5. In speaking with clients, some reasons for this include:
- Transformation roadmaps not aligned with business objectives
- Data and organizational silos
- Challenges around providing information and services through joint offerings with partners
Transformation requires gaining greater insight across all the different functions to support automation and data sharing internally and with customers, partners and other market participants, it really comes down to providing greater information and insight, “and a lot of that comes down also to treating data or information as an asset.”
Steve notes that the growing “data tsunami” requires a strategy that prevents data starvation to facilitate decision making and enable automation of the grid operations that will grow significantly in importance.
3 pillars to accelerate modernization and transformation
Based on Steve’s work with clients, some of the key challenges to transformation are the speed at which business models are changing, new technology dynamics, and rising customer needs. Additional factors include pressures from regulators and rising decarbonization expectations. At the same time, safely operating the grid while transformation is underway will remain paramount.
Steve shares three pillars for energy and utilities organizations to accelerate their initiatives:
- Establish a data strategy to support relevant grid modernization initiatives.
- Focus on data governance and data quality to enable technology solution deployments.
- Develop a technology roadmap aligned with your business objectives and ensure the business, IT and other functions review it regularly.
Read the podcast transcript by chapter:
- Chapter 1: Introductions
Hello, and welcome to this podcast on energy distribution. My name is Kristy Ortiz and I am a director with CGI, focused on energy and utilities. I've spent nearly 20 years working with different energy and utility companies across a wide variety of areas including project development, corporate and regulatory strategy, and more recently IT and digital transformation. I'm joined today by my colleague Steve Ridley, a director of consulting services at CGI. Steve, can you share a little bit more about your background with us?
Yes, thanks, Kristy. My name is Steve Ridley and I have worked with CGI since around 1997 on various project implementations for UK and U.S. utilities. So, during my 24 years of experience of working in the utility industry I’ve developed many solutions with a focus on asset optimization, work process execution, field operations, and I'm really focused now around digital transformation and developing solutions with a focus on grid modernization and the energy transition.
Well today, we're here to talk about energy distribution, so that seems to fit right in line with your background and your experience. As a segment of the overall energy value chain, and some of the challenges and opportunities that you're seeing and we are seeing in that area broadly, and just to note that this is the first podcast in a series to cover each part of the energy value chain, so we hope that everyone will join us for additional episodes as we move forward.
- Chapter 2: Energy distribution’s place in the energy value chain
So, with that Steve, let's get started. Given your background and your experiences, how do you think energy distribution fits into the overall energy value chain?
I thought you meant to be starting with an easy one. [laugh]
Our traditional utilities really were focused, not many years ago on simply generating electricity and transmitting and distributing that to end-customers. I think if you look at the change in operations, you see a lot more renewables, distributed generation around at the grid, and that role of a traditional “T&D” utility is now shifting.
And if we look at our operations around the globe, look at Europe, Australasia and those types of utilities that are operating are more of a distributed system operator model, where utilities are still responsible for operating the T&D infrastructure and generating their own power. But now that utility, that distribution system operator, or DSO, requires them to operate the grid with power that's generated from customers and partners as well.
Wow, so that's a big change from that traditional vertically integrated utility that we're so used to dealing with into more of that distributed, each focused on a different role. That's interesting.
- Chapter 3: Pace of change
So many say that the utility industry is transforming at a speed and a pace that we've never seen before. What do you think about that? Do you agree with that? Do you disagree?
As we talked about, I’ve worked in the industry for well over 20 years, and I've never seen change at this velocity before within the utility industry. So, directly answering your question: Have we seen this transformation pace in the utility industry before? I'd say no. But in terms of you know, maybe some other industries I'd say absolutely. And the one I like to think about as a good analogy to the utility industry is what we've seen within the TV and movie industry.
Probably as little as 10 years ago, if you think about it, it's not too different. We had (with TV and movie companies) a very small set of suppliers that distributed their content over the air, with cable, in movie theaters. And if you think not so long ago, companies called Netflix, Redbox and all of these different companies coming in that enabled streaming, and movies to be delivered to your door. You know that move really came with a disruption that caused companies’ business models to change. If you think about it, Blockbuster* video company here in the U.S., they didn't adapt to that change, and struggled.
Now, when we look at the industry that we have today, think about all of these streaming services providing entertainment. Look at things like YouTube or TikTok where consumers are now pushing their own content out on the on the Internet. It doesn't sound too dissimilar to where we are today with the utility industry.
Well, that's a really interesting comparison to draw TikTok to a utility. But I can see sort of the parallel of you know, with individual customers generating power from their solar panels, just like they would generate or develop their own entertainment using TikTok, and then pushing the power back out to the grid or their entertainment to the to the Internet.
So that's a really interesting sort of parallel there.
*Dish Network bought Blockbuster, a retail video rental chain, in 2011 and closed remaining stores and DVD by mail business by early 2014.
- Chapter 4: Defining grid modernization
As part of this transition that you speak about, in that we're talking about in the energy distribution space, we hear a lot about something called grid modernization. What is it and what does it mean to really have a modernized grid?
It's drawing a parallel with something my daughter asked me the other day. She asked me a question that I struggle to answer. It was, you know, “Dad, what is it you do?”
Grid modernization means different things to different people. There are many definitions depending on your area of focus from within the utility. So, I think the best way of answering some of that is focusing on the outcomes that we all want to see, including the utility, regulators and commercial partners, on what we're looking for around grid modernization. There are multiple ways of actually achieving some of these things. So, one outcome I think we will talk about I'm sure more is delivering better outcomes, and meeting growing expectations for customers. There's a shift in expectations. There's a need and recognition that we have to really focus on the needs of the customer. I think that's an element that is part of grid modernization.
As we've all known throughout my career, providing safe, reliable and highly resilient energy supply has always been a focus of the utility. As we see in the news. Sadly, some of the events that we have now with these major weather events responding quickly to major outages, making sure that we have highly reliant supply, especially during the pandemic.
That's another focus of grid modernization.
Then as we look at this business element, providing as much value as possible from the assets that are operating on the grid. As we move more towards this distributed energy model, gaining greater insight on traditional assets that are operating on the grid, but also those grid edge assets or customer owned assets, and how they impact on the market operation and settlement side of things. It's a hard one to answer. And if you ask me the same question next year, I'm pretty confident I'll probably give you a different answer because grid modernization is evolving all the time, but that’d be my take on that Kristy.
Yeah, it's interesting when you talk about the resiliency of the grid and it's for sure always been a focus of utilities, traditional vertically integrating utilities, but now as you move forward to, people as you talk about the pandemic and people working from home, and other things, the level of business resiliency needed at a residential level seems to be sort of a new expectation that a modern grid and the new utility using to have to meet those expectations.
You are spot on. As I spoke to a number of customers this last period of time and how pandemic is impacted on their operation but also the field execution aspects. People are working from home and now starting their days at home, and maybe not able to travel in the same vehicle. So, it is really this concept of modernization impacting on all areas of the utility.
- Chapter 5: Challenges to transformation
So as utilities are starting to transform and really make this transition, what are you seeing as some of the key challenges to achieving this level of transformation and change that utilities want to make.
I think you just said something there right in your question: change.
One of the key areas and issues that we're seeing is that volume velocity of change to the business models, but also the technologies and expectations from customers. The scale, the pace of change is significant. You have external pressures on the utility from regulators. As we always see, but I expect that's going to grow further with some of the decarbonization expectations that governments are going to have.
Then you know things that have always somewhat been a challenge in terms being able to transform requires your technology, your processes, your organizations, to really come together. I think some aspects of that—you removing technology silos, having a common view of the operation and an enterprise and set of business processes, across all different functions of the utility—are all key to enabling those transformations.
The interesting thing, when we look at the utility and see what's going to be in our near futures, or even here today, you're gaining greater insight in control on an asset that's operating on the grid that you may not own—so renewable assets, solar or EV or battery. That's a key challenge for all utilities regardless of where they're based across the globe.
That's a lot of change for, traditionally as we talked about, sort of vertically integrated, but siloed organization that utilities, the structure utilities have had so really is quite a lot of change for them to balance moving forward.
You can't forget that we've still got the pressures of safely operating the grid they have today whilst undergoing this change as well. And we've all got day jobs. And as we know as a critical infrastructure that we all rely on, it is something that we continue to need. And even more so with some of the pandemic when we're all working from home as well.
- Chapter 6: Role of the end customer
Well, let's take one of those specific areas that we have been talking a bit about -- the customer. So, how does the utility end customer sort of fit into to all of this? Why does there seem to such a focus on the customer now?
I'm sort of laughing a little bit. When you ask that question, I remember my first day at work for a UK utility. I had to ask a colleague, rather embarrassingly, what is a service point? I knew it was important at the time, but I didn't have any idea what it was. Of course, that was a customer. You know, I think it's an interesting question because, as you said, there's such a massive focus on customer engagement, customer focus. If you look at the utility industry as a whole, it’s fair to say we’ve probably been a little underspent in getting to know our customers, profiling them, offering personalization of service.
If you compare a utility with maybe an online retailer, the amount of money I'm sure that we spend getting to know our customers is a lot less. I think utilities have recognized that in order to meet this expectation shift that customers have, they need to provide some more focus. I think the other thing that is really sort of interesting (and you and I both were at the same conference where we touched upon some of these things). in terms of the threat maybe that the online retailer may have to a traditional you know utility, or a DSO utility in the future, is that we know that there's a lot of home management already with these types of companies. They have their technology in the house, and it wouldn't be too much of a stretch to recognize that they're probably going to provide some greater threat in the future to the sort of traditional operations of the utility.
So, spending more on the customer is a significant focus. Engaging in a two-way relationship with the customer is a big focus as well. As we start thinking about the customers, or prosumer as we’re called now, we are going to be generating the very same product that the utility is selling. I think it stands the reason that there has to be more focus around engaging with customer.
That makes sense. I think at one of those conferences we also heard folks reference their customer experience compared to some online retailers or other areas—we can track pizzas from oven to door, but we don't have a clue when our utility service person is going to arrive or when things are going to move forward in the process for us with our utility. So, I think there is a different level of expectation that customers have now that utilities are trying to learn how to meet.
I think that's a really a good observation. I mean it's as we say—“Who would you trust to operate the grid?”—was one of the things I remember at that conference, and it is like 100% almost “my utility.” But as you said— “Who would I rather buy power off?” —whether I get a different level of service or a difference of focus. I think that's an area of focus for a lot of companies.
- Chapter 7: Insights from clients on transformation progress
Okay, so let's go to a little bit of your background and your experiences directly with customers and things. What are you hearing directly from your clients in the industry on their own digital transformation focus and how that's going?
I'm going to focus a little on what we've seen from some of the surveys initially that we've done as a company with our strategic clients, and I think you know those. We have a something called Voice of Our Clients and it provides strategic client feedback on strategy trends and concerns. I think it's a good place to start because what we see is that there are many companies, particularly the utility companies that have a [digital transformation] strategy. You know something? It might be 90% in the U.S. But in terms of driving results from that transformation strategy, it tends to be a little on the lower side in the outcomes that have been generated successfully from those strategies. Some in the U.S. are as low as maybe 10%. So, I think it's important to think about why that's the case. And I think to answer your question, a lot of the transformation focus is on driving greater insight across all of the different functions so that we can automate some of the operations of the grid, to focus on not just the customer but also on the partner side of things, to provide the information, the customers are looking for, our partners are looking for, our network operations group and sales function.
It really comes to providing greater information and insight, and a lot of that comes down also to treating data or information as an asset, that you have to make available and care and feed for to provide the information and insight that we just talked about.
That's really interesting. Utilities are used to focusing on hard physical assets in the distribution side. To transition their thinking to the data being just as important an asset is sort of a big shift and a big change to help facilitate the transformation they're looking to make.
- Chapter 8: What utilities can do to accelerate grid modernization and transformation
So, from your perspective, given what you've heard from clients in these surveys and things, what do you think are the key steps that utilities can take to accelerate their grid modernization and their transformation initiatives?
Well, when we talk with customers, a lot of the things that we hear in terms of why we haven't driven results would be around “our roadmap may not align with our objectives,” and “we may be struggling in terms of some of the data silos,” and even organizational silos and then generally around providing information and services through joint offerings with our partners.
So, what I probably suggest is really three pillars that support the utilities grid modernization strategies:
The [U.S.] Department of Energy put something out a few years ago about really focusing on establishing a relevant roadmap strategy and to support grid mod.
The first pillar I suggest is around establishing what is your data strategy to support some of the grid modernization initiatives.
I’ll give an example. I spoke to many customers over this last 24 months where they've rushed into a technology implementation such as an ADMS [Advanced Distribution Management System] and it hasn't delivered on the benefits they expected. And when we trace it back as to why, we find that it’s not really been able to deliver benefit because it doesn't always have the data and the quality of the data that's required to support some of the automation. We advocate focusing on what data, what information you need, to support your network operations, to provide insight and information to your partners, and then to drive greater expectations for more personalized service and protect your position as the energy advisor in the customer's eyes. Having a strategy to do and provide that information is something that's key
The second part is, “Do you have the data within the operation to support some of your technology solution deployment?” “Is it available on the timely fashion that you need?” And, you know that ADMS example I touched on earlier, some of those implementations were starved of data. It wasn't necessarily a project issue or technology issue, it’s just that they didn't have the information to be able to support some of the more advanced FLISR and Volt-VAR optimization that clients were looking for.
And, so, looking at data governance, looking at data quality, and how you address those things is important.
The last pillar I’d suggest is around having a relevant technology roadmap that's phased to deliver value in bite-sized chunks, is achievable, but you recognize you have to tie that technology roadmap back to your business objectives.
So, I think those 3 pillars, if people focused around those things, and then moving to the deployment of the technology it would drive a greater chance of success.
That's great. I know that data has been a real key topic for lot of the transformation. You talk of data-starved initiatives or implementations and it is an interesting example. You know we talk about data lakes versus a data swamp, and some other things in the successful implementation of data and data governance. So, it sounds that that's a key part—that utilities have focused a lot on the technology, but not necessarily the data to support those technologies.
I think that’s exactly it, as you said. Let's think about this—we’re not going to add on a whole bunch of assets to the grid that the utility doesn't know. And, so the data volumes are going to increase. But the complexity to get that insight is also going to increase as well as the difficulty in actually operating those assets. Well, it's an interesting time and I think it's going to be really interesting on how we address some of that data need.
- Chapter 9: How CGI is evolving to help utilities address key challenges
That's great. So, from you personally, and the work that you do at CGI, how do you see some of these transformation challenges, translating or showing up in the in the type of work that that you all are doing?
We're known in the industry for being able to provide the types of IT services, software solution, industry knowledge to deliver on the types of things we touched upon in terms of these challenges.
I think more directly answering the question is we’re heavily focused on what part we can play in the larger ecosystem of technology and consultancy services, IT services, and that we can provide as part of the new landscape that the utility is looking for.
What I mean by that is we touched upon silos and organizational silos as well as technology silos. We're certainly reaching out to the industry. We're focused on enlarging our ecosystem of partners so that we can provide broader solutions that we believe are going to be required for the industry as a whole. So, developing a larger ecosystem of partners and focusing on the key challenges that the utilities are already facing.
I know that we'll touch upon this a little bit more, but developing solutions that are helping utilities manage DERs or your renewable assets behind the meter, and supporting the integration and control and the market operations that are going to be significantly impacted by that change. It is an area that myself and many of our colleagues across the globe are already focused on.
- Chapter 10: Key issues for utilities moving forward
Let's shift gears just a little bit and move forward to the future. So, let's talk about what you see and what you think, and sort of pull out your crystal ball here and think a little bit about the future and what is on your mind related to utilities and a key issue, a key area that are really focused on moving forward.
What's on my mind is I'm really looking forward to what I believe is going to be a significant change to the industry and it's a really enjoyable time to be working in the industry with this level of change that's been going on and expect to continue.
So, I think as we look at the sort of trends that we’re seeing, the one that's probably on my mind the most is around DERs, distributed energy resources. I know, we're going to have more podcasts and information that we will be talking about the implications of DERs and how that's going to change the industry. But, from my point of view, it's a real game changer.
If you look at maybe just here in the U.S. initially is that through new mandates such as the FERC [U.S. Federal Energy Regulatory Commission] 2222 which is removing barriers to entry for new market participants. What that's going to see is a significant influx of entities coming in and selling power across the grid. What that's going to drive is a significant insight requirement on those assets that are providing power. But, also from a network operations point of view, the utility really has to look at and take advantage of those assets by being able to forecast and predict the power that they're going to be providing back to the grid, so we can take advantage of those assets and maybe offer even higher levels of resiliency to what we do today. I think that's an area where we have looked at it in a lot of detail and I know a lot of companies are looking at those areas.
I think the other area that's interesting is around actually operating the grid and being able to balance and optimize the power that you get from traditional utility assets, but also balancing that with the power so that we're not causing infrastructure issues, we're not wasting that power. I think that's an area that's going to be kind of a thing that will progress over several years.
The other thing is we all put these renewables on our houses, and now we want to see the benefits of that you can imagine. Now my expectation as a prosumer is I'm going to want to see what that means to my bill almost immediately. So, as I'm returning power, I want to be able to see how that impacts things, but also, I fully expect the utility is going to be providing you new services that allow a consumer, prosumer, to take different time-of-use rates, in return for maybe controlling some of those assets behind the meter. That's why I think it's a lot there that's on my mind, but as I said it's really interesting. I just literally can't wait to see how things unfold.
- Chapter 11: Key takeaways
Yeah, it's really an interesting time moving forward—the role of the utility and the prosumer, all the grid-edge technologies that are coming online, and balancing all of that. Really interesting.
So, let's sort of turn to wrap up here and leave a few key takeaways from our discussion here. Why don't you share with us a few of those key takeaways and things for folks to keep in mind as they move forward from this podcast?
I'll keep it short.
I think we spoke a lot about some of these things, Kristy, but probably the next “Blockbuster video” is one I'd start with. You know, transformation is coming at a pace and scale. It is a little daunting but, at the end of the day, I think we recognize that we do need to transform across all of the operations of the utility.
Ensure you have a roadmap that's aligned with your business objectives and is regularly reviewed across the business and IT groups and other functions.
And then, you know, as we see this data tsunami growing. I fully recognize this can be overwhelming; but, you can't afford not to have a strategy that prevents data starvation because if you don't take advantage of that resource that you have, it makes decision making more difficult and it's going to reduce your ability to automate some of the grid operations that are going to grow significantly in importance.
Well, that's great. We really appreciate all of your feedback and your experience here, and sharing some of the key challenges and opportunities in energy distribution as part of our energy value chain podcast series here. So, I want to thank you for your time, and we look forward to some of our next episodes. Thank you.
Thanks so much Kristy. Appreciate it.