The Future of Energy and Utilities: An IBM Point of View

Overview

This 12-page white paper, issued by IBM in November 2014 and circulated under a 2015 title, lays out the company’s view of where the electric utility business is heading over the following ten years. Rather than forecasting prices or load, it asks a structural question: when customers can generate, store, and manage their own power, what is a utility for? The answer comes in three parts: a description of the changing landscape, a list of technologies accelerating the change, and three strategic imperatives IBM believes incumbents must adopt to stay relevant.

Key Findings

• The paper groups the coming decade’s changes into three categories: a new customer environment built on smart appliances, energy-management systems, and automated demand response; a new grid that absorbs wind, solar, batteries, and microgrids; and new regulatory constructs that let both incumbents and new entrants try different business models.
• Ten trend icons summarize the shift, including consumer-owned generation, consumers selling surplus energy back, affordable electric vehicles, grid- and home-scale battery storage, and customers interacting with their utility through smartphones.
• Five technology developments are singled out as accelerators: the Internet of Things (which the paper argues utilities helped create through decades of telemetry), the convergence of IT and operational technology into flat, real-time networks, popularized situational awareness, big data, and cloud computing.
• Imperative one: as photovoltaics reach grid parity and demand response can substitute for supply, successful utilities must become energy integrators, taking responsibility for delivering power from every source, on both sides of the meter.
• Imperative two: per-capita energy demand is rising, but energy intensity per dollar of economic output is falling, so revenue per customer will shrink. Combined with the rise of prosumers, that means utilities must offer a 360-degree, “customer-of-one” retail experience rather than a monthly bill and a call center.
• Imperative three: because customers still expect safe, reliable, affordable, and sustainable power, utilities must reinvent their processes through analytics, for example by forecasting storm damage profiles to pre-position repair crews or predicting wind and solar output to cut reserve costs.
• The closing pages describe IBM Insights Foundation for Energy as a common analytics platform for asset failure reduction and outage management.

Why It Matters for Daylighting

IBM’s central observation, that the same lighting or heating outcome now costs less energy every year, is a direct description of what daylighting does inside a building. A warehouse or plant that harvests daylight through prismatic skylights and dims its electric fixtures in response is trimming its peak daytime load at precisely the hours when the paper says the grid will be most stressed by air conditioning and solar intermittency. In the language of this report, that building is a demand-side resource that requires no dispatch signal, and no utility program to deliver its savings.

The prosumer trend cuts the same way. Owners who add rooftop solar or battery storage to a distribution center are still better off reducing the lighting load first, because every kilowatt-hour that daylight displaces is one the array does not have to generate or the battery does not have to carry through a cloudy afternoon. Energy codes are moving in this direction too: the toplighting and daylight-responsive control requirements in ASHRAE 90.1 and the IECC treat skylights as the least-cost first step toward the lower-intensity buildings IBM expects utilities to be serving.

About the Source

IBM is one of the world’s largest information-technology and consulting companies, and its utility practice has published industry viewpoints for decades through units including the IBM Institute for Business Value. This paper carries an IBM Software imprint, no named author, a November 2014 production date, and document number ZZW03321-USEN-02; it runs 12 pages including a figure-based summary of the three imperatives. IBM has retired the original download page, so the full text is best obtained from IBM’s energy and utilities research library or by requesting the document number directly from IBM.