Public utilities
Delivering reliable, affordable, and sustainable services vital for daily life, from safe drinking water to the power that fuels our homes and businesses
Navigating the ‘energy trilemma’ during an evolving regulatory landscape.
The global landscape of publicly owned and investor owned utilities (IOUs) continues to face significant change and disruption, from the assets that generate energy to the devices that consume energy and the systems that control them. These changes are pressuring utilities to reevaluate how they balance three critical priorities: security (capacity to meet demand reliably), sustainability (decarbonization and avoiding environmental harm), and affordability (providing accessible energy). Utilities must navigate this trilemma, while also operating within a changing regulatory landscape and pressures to maintain profitability.
Disruption and change aren’t new for utilities; neither are the opportunities to adapt and innovate. Utilities can turn these disruptions into opportunities to cultivate stronger, trusted relationships with customers by providing better personalization and control over their usage levels.
How utilities respond to these five trends will shape the services vital to our daily lives, from safe drinking water to the power that fuels our homes and businesses:
Integrated and resilient: Upgrading aging water infrastructure and the electrical grid
Decarbonization and clean energy: Grow with it instead of against it
The intermittency challenge: Balancing reliability with changing consumer consumption patterns
Incentives and impacts: The evolving regulatory environment
The win-win feedback loop: Engage and empower your customers while improving reliability
1. Integrated and resilient: Upgrading aging water infrastructure and the electrical grid
Utilities face urgent needs to upgrade our aging electrical, water, and wastewater infrastructure. To underscore the severity of the situation, there’s a water main break every two minutes, and an estimated six billion gallons of treated water are lost each day in the United States, according to the American Society of Civil Engineers.
Over the last few years, our mission-critical sectors, including energy, water resources, and broadband, have benefitted from significant investments flowing into states from federal infrastructure and economic stimulus packages. As these investments are used to modernize all three major components of our electric grid (generation, transmission, and distribution), energy providers are taking proactive steps to build resilience to growing threats from extreme weather, wildfires, and cyber attacks. We’re seeing resources channeled toward weather-resistant infrastructure, smart grids, integration of distributed energy resources, and advanced energy storage solutions.
A growing trend by utilities is the use of digital twins to provide spatially accurate virtual representations of a physical system’s state and simulate the impact of solutions before they’re implemented. Water utilities, particularly, can benefit from digital twin technologies, as operators can better visualize systemic issues related to water loss or inefficient pumping apparatuses and simulate plausible futures for maintenance and upgrades. Digital twins enable our essential service providers with scenario planning and simulation capabilities that facilitate operational resiliency through coordinated and interoperable systems.
Rapidly evolving advancements in connected infrastructure, spatial intelligence (e.g., satellite, fixed wing, and ground-based imagery), and immersive front-end applications, to name a few, present transformative opportunities as utilities continue infrastructure upgrades and modernization efforts. Utilities will need to address integrating instrumentation techniques to ensure higher fidelity live measurements and renewable energy resources. Once the appropriate instrumentation is incorporated, new monitoring and simulation paradigms, such as digital twins, can enhance an operator’s perspective on maintenance needs and even enable more efficient training.
Actions and models to consider:
As utilities upgrade aging infrastructure, field service mobile applications and AI algorithms can be used to analyze data from sensors attached to equipment like transformers, turbines, and pipelines and predict potential failures before they occur. Early signs of asset failure can be quickly identified so utilities can prioritize scheduled maintenance activities based on actual need.
Use digital twins to model the impact of network expansions or water flow to identify and fix leaks or predict plausible pipe breaks in high-risk areas. Use of digital twins to allows utilities to accurately represent the current state of a water treatment facility and train new operator staff in a safe environment without impacting physical systems. Take California Water Service’s use of digital twins and augmented reality to explore potential investments in 5G network connectivity services and provide immersive training to their workforce as an example.
2. Decarbonization and clean energy: Grow with it instead of against it
Globally, we’re facing a pivotal moment in the use of clean energy, with 2022 being a record year for renewables (solar, wind, hydro, geothermal energy) as a share of the total energy supply. The European Union has set ambitious clean energy targets and carbon pricing mechanisms, pushing utilities to invest heavily in the integration of renewable energy and the adoption of Distributed Energy Resources (DERs). In the U.S., natural gas, coal, and refined crude products (like heating oil) still fuel most power plants. But the share has fallen to about 60%, with nuclear, hydro, and increasingly, solar and wind sources accounting for about 40% of total electricity generation.
There are four key drivers behind the growth in use of renewable energy: falling costs for solar and wind energy, increasing public demand for clean energy, supportive government policies and incentives, and technological advancements in renewables and grid integration. In the U.S., at least 30 states have renewable or clean electricity standards requiring that a percentage of electricity sold by utilities come from renewable sources. Utilities seeking to grow with clean energy and water will need to balance reliability and affordability with the costs of integrating renewable energy sources and storage solutions into their portfolios. Utilities can use this opportunity to evolve from their traditional role as the providers of water, electricity, and gas to become catalysts for change.
Utilities can use digital twins to simulate the integration of renewable energy sources, storage, and transmission under various load scenarios and the rollout of more intelligent metering. For example, a high fidelity, geospatially accurate model of a target environment can provide a relevant sandbox for testing alternative energy generation sources and the infrastructure needed to support new production and distribution paradigms.
3: The intermittency challenge: Balancing reliability with changing consumer consumption patterns
As clean energy becomes more prevalent, utilities face the challenge of intermittency—how to ensure a reliable and affordable energy supply when the power generated by mother nature is subject to variability. Traditional electric grids weren’t designed for the intermittent nature of renewables. Peak demand times are shifting due to growing populations that place more demand on the grid. Another cause of shifting demand times is the increasing use of electric vehicles, home energy management systems, and distributed energy resources, like rooftop solar. From the perspective of the utility, the prospect of balancing a regional grid that has thousands—or perhaps hundreds of thousands—of microgrids “on the edge” is daunting.
The need to solve the intermittency challenge is accelerating as the use of renewables expands. As utilities solve for this challenge, they can increase supply, use emerging energy storage solutions (flow batteries, gas turbines, and hydrogen fuel cells), or apply demand-side management approaches. This also creates opportunities for utilities to provide consumers with more choices and control over their energy use.
Actions and Models to Consider:
Consider use of advanced data analytics, AI, and ML to identify patterns in energy consumption data and develop predictive models. This information can be used to improve grid planning, resource allocation, and customer service. For example, EDF, the largest producer of low-carbon electricity in the United Kingdom, built a robust data strategy and is using big data processing to get more value from its data and provide its customers with a better, more seamless, and personalized experience.
Better manage peak demand times by encouraging customers to shift energy and water use through customized pricing plans (time-of-use pricing, smart meters), load deferring arrangements (demand response programs), energy efficiency grants, or smart grid technologies.
4. Incentives and impacts: The evolving regulatory environment
As regulatory oversight of Environmental, Social, and Governance (ESG) policies tighten in the European Union and the United Kingdom with disclosure and reporting requirements, the U.S. landscape is becoming increasingly fractured, with states moving in opposite directions. If you work for a multinational company in 2024, how your company reports its ESG credentials depends on which side of the Atlantic you’re on.
In the U.S., at least 16 states have enacted legislation establishing greenhouse gas emission (GHG) reduction or reporting requirements on agencies or on the power and transportation sector. Several states are also implementing market-based carbon pricing policies or cap-and-trade programs through multistate agreements. In contrast, at least 13 states have passed regulatory actions prohibiting or discouraging public entities from considering ESG investments in government procurement processes.
Within each state, Public Utility Commissions (PUCs) play a crucial role in incentivizing and regulating the use of ESG policies and the evolving transition to clean energy. Some PUCs have a stronger focus on decarbonization due to ambitious state climate goals. In contrast, others may prioritize water infrastructure upgrades to address immediate concerns about aging systems and water security. As PUCs continue to regulate utilities' services, there are also opportunities to streamline and expedite the regulatory filing process for both parties.
Public Utility Commissions (PUCs) can apply uses of AI/ML to review rate case submissions more efficiently and identify commonalities across rate submissions. One example is Slalom’s Digital Regulatory Intelligent Filing Tool (DRIFT), powered by AI, which seamlessly adapts to evolving regulatory requirements, enhances accuracy, and expedites the regulatory filing submission process for both the PUC and the utility.
As jurisdictions start to trace impacts or incentivize use of ESG policies, consider use of public-facing dashboards that share datasets across measures such as emissions, energy, and water consumption. See the City & County of Denver's Office of Climate Action, Sustainability and Resiliency (CASR) dashboards as an example: (GHG) Impact Dashboard and Green Denver Program Impact Dashboard.
5. The Win-Win Feedback Loop: Engage and Empower Your Customers While Improving Reliability
The traditional one-way flow of energy from utility to customer is evolving into a two-way flow of both energy and information. Utilities can improve reliability, efficiency, and sustainability while providing customers with more choices and control over their energy use. Utilities are starting to provide proactive energy or water management and demand response programs that incentivize customers to reduce or shift their consumption to off-peak hours, such as time-of-use (TOU) pricing or smart meters that allow customers to analyze and manage their own usage in real-time, such as Advanced Metering Infrastructure (AMI). This data can be used to improve billing accuracy, identify energy savings opportunities, and manage peak demand.
Offering personalized, empowering, relevant, and targeted customer service can be a game-changer for utilities. By using modern data management and omnichannel approaches, customer relationship management (CRM) platforms, and proactive customer engagement, utilities can provide personalized service and pricing that’s specific to an individual address, transform customer interactions, and create a win-win situation for the utility and its customers.
As you explore use of omnichannel strategies to engage with consumers and create customer 360 feedback loops, start with a foundational data model and identify use cases for ways to connect with customers, such as through call center optimization or demand-use programs.
Explore use of consumer smartphone apps that keep customers informed before, during, and after an outage. For example, utilities can provide customized apps—available for use by business, residential, and first responders—that provide personalized demand-response programs, or be used during wildfires to keep people informed.
We're seeing more and more publicly owned and investor owned apply omnichannel strategies to engage customers through 360 degree feedback loops. As you mature your foundational data model, think about which omnichannel strategies and use cases are best suited for the choices and control you give customers over their personalized energy or water use. Explore other emerging trends on Slalom's Industry sites for Resources and Government.
Slalom contributors: Thomas Gros, Tim Stafford
