A key consideration for the Energy and Utilities sector is how to support the UK’s plan for energy independence. The chief executive of Octopus Energy has said the UK could eliminate its reliance on Russian gas imports within two years by increasing the number of local onshore wind farms.
A landmark commitment to decarbonise the UK’s electricity system by 2035, was confirmed October 2021 by Prime Minister Boris Johnson and Business and Energy Secretary Kwasi Kwarteng, to help boost the country’s efforts in achieving its net-zero ambitions.
The transition to renewable energy is central to achieving the UK’s net-zero ambitions. It is estimated that global electricity demand will double by 2050, so a move towards a net-zero position requires not only an increase in renewable energy, but also greater efficiency of electricity distribution.
A report by digital energy services company eEnergy suggests that the energy wasted by companies across the UK could power London for seven years and this is costing businesses £33.9 billion annually.
Through this transition, technology and technology providers will play an increasing role in enabling organisations to reduce the carbon impact on the current system.
Machine Learning (ML) and Artificial Intelligence (AI) can support energy and resource efficiency measures by optimising operating conditions, improving transmission and management of supply and demand.
A concern with the increased proliferation of alternative energy sources is the increased effect of natural disasters and climate change, which will have real impacts to energy sources.
Along with this, there have been big infrastructure problems in recent years in this country for setting up hydrogen plants, nuclear plants, wind farms and many other alternative fuel sources.
This can be in part due to metropolitan areas running out of space and with the infrastructure difficult to manage when repairs are required due to staff shortages, changes in flexible working practices, remote working and increasing skill shortages.
The UK could run out of warehouse space within a year, as supply chain disruption and a boom in online shopping propel demand to record levels, according to property agent Cushman & Wakefield.
Population increases in urban areas also compounds the problem.
The need for sustainable innovation is also motivated through changes in consumer opinion around green energy and the need for ethical suppliers and practices. Companies within the sector now face significant legislative and stakeholder pressure to demonstrate clear and active pathways to net-zero emissions.
By 2025, a net-zero commitment and/ or pathway will be a standard piece of governance for medium-to-large businesses with an international customer base. The energy sector is no stranger to innovation. Many oil and gas companies already use cloud solutions, advanced analytics, scenario modelling, AI, ML and many more within their daily operations.
Such technologies can be put to use in supporting the Environmental Social Governance (ESG) initiative by:
Aggregating ESG data from across the organisation as a whole.
Tracking and analysing progress against targeted ESG goals.
Monitoring real-time stakeholder sentiment.
Improving accountability throughout the organisation on ESG initiatives.
Energy and Utilities organisations are part of the critical infrastructure of any nation, making them a high-profile target for cyberterrorists and hackers alike. Technology now plays a critical role in enabling organisations to accelerate progress in protecting physical and digital assets, including SD-WAN and edge computing as part of an end-to-end solution to address the compelling event of BT discontinuing PSTN by 2025.
The cyber threat is increasing at an alarming rate, with the UK energy sector the target of 24% of all cybersecurity incidents in the country last year. This makes the energy sector the most targeted industry, followed by the manufacturing and financial services sectors, which each received 19% of all attacks. According to IBM Security’s X Force Treat Intelligence Index, the UK became one of the top three most attacked countries in Europe in 2021.
Modernisation brings efficiency gains, but also increases the attack surface through which threats can target utilities’ infrastructure. Industry regulations require utilities to make further investments to meet these stringent requirements, but this can breed an attitude that compliance is sufficient. This is exposing customers, as cyber attackers are constantly evolving and growing in sophistication, so utilities must go above and beyond compliance.
The UK has been stepping up efforts to meet the security challenge, with the government publishing the National Cyber Strategy and Government Cyber Security Strategy 2022-2030. It has also proposed amendments to the Network and Information Regulations to improve the cyber resilience of UK businesses.
Additionally, the government’s latest Annual Cyber Sector Report also underscored the level of investment in the cybersecurity sector last year, with the industry reporting revenues of over £10 billion.
The National Cyber Security Centre recently revealing that it has defended the UK from a record number of cyber-attacks in the last year, including those targeted at supply chains, has made it clear just how vulnerable the UK’s energy sector is likely to be at this moment in time and why it is imperative that the industry pays attention and invests in its cybersecurity operations.
Instead of waiting for an attack to happen, which it will, IT teams operating in this sector must prioritise further investments in cybersecurity technologies to ensure their organisation and legacy systems remain protected. Now is the time to make meaningful cybersecurity investment.
New technologies are key to enabling the Energy and Utilities sector to succeed in this period of profound change. As a result, utility organisations are introducing new technologies to serve their increasingly sophisticated customers who are expecting the types of digital experiences that other industries offer.
Start-up entrants to the market can be more adept with more dynamic online, digital systems that are born in the cloud. This is in contrast to the established energy companies that often have antiquated legacy infrastructure that is not so agile, always on or available.
Legacy providers are under increasing pressure to transform as regulators increasingly set budgets and project funding based on performance and value for money.
They are under pressure from the regulator to drive more value for money for customers, as the regulator decides the budgets for each utility company. There can also be fines executed by the regulator with penalties for bad service, non-compliance or acting in bad faith. It is crucial in this regard to be compliant within their infrastructure wholly.
The larger, traditional energy suppliers serving the lion’s share of both domestic and commercial customers in the UK are often burdened by legacy systems, which control how they serve consumers and make it more difficult to evolve. The industry last implemented major enterprise system changes about 15 years ago when it moved from existing CRM systems to SAP-based platforms.
Established energy companies in general can be risk averse and they are often reluctant to take action that might expose them to risks and that might impact their ongoing operations, cause reputational damage or earn them fines for non-compliance.
They are recognising that they need to accelerate more agile practices, but there is still much work to be done.
It is clear that greater agility and integration are needed to change proof of concepts into something that can be done for all customers, but the bigger the ship, the more difficult and time-consuming it is to turn around.
In addition, while larger organisations have higher costs than start-ups, their customers also expect more from them, which leaves them at a disadvantage when they try to implement any kind of innovation.
Legacy systems can be streamlined to make them more efficient. Automation can help in the short to medium term to free capital being spent on tweaking inherited systems and playing catch up, while providing pathways towards new ways of working.
Investing in modernisation would quickly develop a better customer journey and help the legacy provider more readily understand what their customers are asking from them. If they lack the latest technology to enable automation and machine learning, they can partner with organisations that do, to bridge the gap while they focus on the foundations.