IOT forcing utilities into brave new future

The rapid growth in the Internet of Things (IoT) is forcing traditional utilities and industry providers to adapt, or be outmanoeuvred by strong new entrants. Power Engineering International spoke to PwC‘s Director, Digital Transformation, Richard Hepworth about how the technology is impacting the power sector.

2018 is, according to some analysts, set to be the year of ‘IoT everywhere’. US electric utilities alone are expected to indulge in a $1.3trn opportunity to cut operating costs over the next decade by adopting technologies and processes enabled by the technology.
Richard Hepworth of PwC
One estimate indicates why that could be the case, asserting that the industry collects less than 2 per cent of the potential data generated by a typical power plant.

That just applies to the US, so what does that opportunity add up to for the rest of the world and why has it taken this long for understanding of this opportunity to be understood?

The ‘grid edge’ is another phrase set to become common parlance, with Bizztechnology website defining it as the “hardware, software and business innovations that are increasingly enabling smart, connected infrastructure to be installed at or near the ‘edge’ of the electric power grid. The edge means the proximity to end-use customers (at their homes, businesses or at distribution systems very close to both) rather than at power plants or along transmission lines.”

In other words, a direct threat to how our utilities have long operated, and a movement that has gathered apace, and is being led by outsiders.

“It’s taken a long time because we needed a few things to converge at the same time,” says Hepworth, first focusing our conversation on how IoT integrates with the home. “It’s not necessarily a utilities push. You have the obvious outliners like Centrica who built Hive and integrated a whole series of devices for home security systems around it, but the other utility companies have gone a more distribution type route and are selling Nest, who offer competing devices to Hive.”


“I think what is happening is that the adjacent markets are beginning to move into the same space. If look at Google Home, or Apple Home, some of the major communication providers are now offering services to make it easier to connect. With technologies like Alexa beginning to emerge, the question is being asked, do you buy your Alexa first then get your Hive device or is it the other way around?”

“One of the problems has been that the connected home market has been very fragmented and not all the component parts have been present in the marketplace. And if the component parts are in the market place maybe the wrong companies have been promoting it. But when you have the likes of Amazon, and Google and Apple beginning to claim the same space, it begins to take off a lot more.”

Hepworth’s team at PwC did a survey two years ago around the connected home and found barriers to customers engaging with the technology to be twofold.

“One related to cost as they couldn’t understand why they should afford to buy a Nest or Hive device. It’s not a particularly high interest category.”

“The second factor was complexity. The consumer pull for these types of devices hasn’t been present because they weren’t sure whether they should go Nest or Hive and it’s all too complicated.”

What’s happened since is devices being purchased initially for leisure or convenience acting as a type of Trojan Horse, introducing homeowners to other possibilities.

“With products like Alexa and Apple and Google getting involved, that complexity and cost hurdle is coming off a bit.”

“People are purchasing not directly for energy or heating reasons, it may be around home automation or lighting or voice activation controls and other lifestyle choices. These are more prominent in an initial way.”

“That’s why utilities may not be the right place to focus. Other companies are better placed.”

“I don’t know how many Alexas and Google Homes are out there but there’s certainly a lot of momentum and a lot more computer devices around the IoT state in the home and the market is approaching that critical mass.”

So who are the winners and losers in this new look marketplace?

“That’s a question. Do British utilities need to produce their own platforms like Hive or do they need to get access to Google Home or Apple Home in the same way as we had the android or IO debate for mobile phone devices. You may get something similar around IoT connectivity going forward. It’s an exciting time.”

What’s plain is utilities can’t afford to ignore the forces around them, the sector being largely incubated from these kinds of trends in the past. Even adoption of certain technologies in the last decade, that seemed a suitable response to changing circumstance, may end up not as relevant.

“Smart metering is a long running perennial agenda item, taking precedence over some of the other technologies. If they’re not very careful these home hub technologies will overtake that smart platform to a degree as people will be engaging with their energy through more security and lifestyle choices than directly engaging with them.”

“(It will take some analysis to judge) what customer will buy which device, in which sequence and therefore which companies will they go to buy them.”

On a more positive note, there is a huge opportunity for utilities and plant owners in embracing IoT potential. Hepworth sees that potential manifest to a great extent in the supply chain, notably predictive maintenance impact on wires, pipes, meters and pumping stations and so on.

“GE have produced their own IoT platform, Predix, for example. If you get into that automation of devices around the supply chain, it saves millions of pounds and enables people to be much more predictive in theory, extending asset lives, improving designs through clever analytics like digital twins and the like.”

“BoilerIQ is another product of British Gas which enables the boiler to be managed more effectively and prevents breakdowns with conditional services instead of boiler breaks and then sending an engineer out.”

“It enables better scheduling of engineers and better customer service to end user. Every part of the utility supply chain will be affected by IoT in one way, shape or form.”


Back to the business of the challenges involved and the capacity for disruption seems endless. At EU level, there had been much discussion about the extent of grid investment required to facilitate a more effective clean energy revolution. However, IoT may well reduce that bill. It leads to the question of how utilities will reap rewards in the future, when the past was so relatively predictable.

“If you think about the way that they we have broken down the UK market, for example, into the National Grid, local distribution companies and then retail and supply to end users, each one of those elements have different outcomes in mind. It’s interesting that the IoT disrupts all that and that’s where things become a bit tricky for organisations.”

“That’s in terms of making sure they have line of sight to the benefits, whether that’s reduced costs or increasing throughput. IoT disrupts all that and a good example of that is electrical vehicles (EVs). To support EVs in london a company like UK Power Networks needs to radically invest in their distribution network to make sure they can supply the demand across the city.”

“One way of avoiding that investment is to have smart charging points. They can manage the load in terms of when these vehicles are being charged or not being charged and the question then is in whose interest is that to make that investment?”

“Obviously, UK Power Networks wants to invest in that but also the vehicle manufacturers and people trying to invest in electric charging points.”

Much of Hepworth’s work centres around talking to clients about understanding the new value chains and how they monetise those investments, and cope with the challenges involved.

“It is so disruptive in the marketplace that you will have localised smart grid networks instead of the dominance of big national ones, you will have EVs, you will have data risk and analytics. Are we now going to have home hubs getting between the energy suppliers and the retailers? You have all these models emerging and all these companies are having to radically rethink what their main strategy is.”

“I personally think you’ll have a much more fragmented market in the future. Some of our traditional suppliers will remain traditional retail suppliers, some will become very good wholesalers and resell prudence platforms in a different form than they do today.”


Because of the online or Cloud nature of the technology, security, particularly cybersecurity are subjects of immense importance to companies involved in the transformation.

“You lose that, you lose everything,” says Hepworth. “Cybersecurity and data and privacy are the two biggest issues that have to be addressed.”

“Its their number one worry in lots of ways, and goes back five or six years ago, when early IoT adopters with simplistic passwords were attacked and people woke up to it then.”

“Even the best companies are still finding flaws in their software and are concerned with covering any gaps or potential security breaches, along with data and data protection around IOT.”

“Your home hub data is personal to an individual and that all comes under General Data Protection Regulation (GDPR) so companies have to be very mindful about how they use that data. Essentially how they keep their customers in control of their own privacy and own data in lots of ways. I’d put those two on a par.”

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