• September 25, 2023

Energy is a Risky Business Now More Than Ever

The energy and utilities industry is facing new technological challenges that require the next generation of load forecasting and risk management tools

Posted by Jeff Wright – Chief Revenue Officer at Innowatt

One of the primary concerns of retail energy and utility companies is to consider the impact of weather on the energy loads of the customers they serve. For example, when it gets warmer than forecast, many customers typically increase their energy needs by running their air conditioners for longer periods and at lower temperature settings than usual in order to maintain their comfort. As recently discovered in Texas, the Pacific Northwest and the United Kingdom, extreme heat weather events are transforming the way utilities seek to serve their customers in a safe, reliable, and affordable way.

The opposite is also the case and can lead to similar burdens when it comes to energy procurement. If it gets colder than forecast, and especially if the cold spell lasts longer than expected, customers can increase their energy requirements to maintain comfortable temperature settings. Last winter, many customers in Texas also installed portable heaters, which further exacerbates load challenges and demand problems.

In the past, utility companies have had a relatively good track record of managing supply and demand for both of the above scenarios. In t-shirt weather or sweater weather, it was acceptable and “good enough” to apply standard operating practices to reduce energy-related risks to a minimum and to constantly and effectively control the dynamics of demand.

Today, however, things are very different. As the number of weather-related events increases, and the intensity and severity of some of these events, “good enough” is no longer good enough. We are experiencing seismic changes – from extreme weather events to the emergence of new technologies like microgrids, solar parks, battery storage, electric cars, and the general electrification of our nation – and that means the energy sector is fast moving forward and growing in complexity. These facts represent significant qualitative and quantitative changes in the risks that utilities must and must manage in order to comply with the charter of providing inexpensive, safe and reliable energy to their customers.

Many utility companies have been quick to embrace the new, more exciting, and more challenging energy world we all live in now. Those who have failed to do so leave themselves vulnerable to the risks of today’s energy ecosystem and also miss out on new opportunities that arise as innovative technologies emerge to help energy providers adapt and thrive.

Here are 5 ways you can get the most out of new energy technologies so you don’t stay on the sidelines:

1. Get granular. The grid is much less uniform than it used to be. In fact, it is quickly becoming a bi-directional energy highway. It wasn’t originally designed or designed that way. Technologies, consumer behavior, a large number of devices and sensors – such as intelligent thermostats, solar systems on the roof and small battery storage systems – enable private and commercial customers to fine-tune their energy consumption. The change is exponential and will continue to accelerate. Retail utilities and utilities need to identify and leverage these trends to capture, forecast, and provide detailed insights into the way electricity is generated, distributed, and used by customers, including the visibility of behind-the-meter equipment illuminate.

2. Do not leave any data unused. The downside of data granularity is that retail utilities and utilities have to interpret terabytes of data. The reality of many vendors is that the value of millions of meters is largely ignored because utilities haven’t built the infrastructure or in-house expertise necessary to turn big data into actionable information. Bringing in the right data scientists and engineers – perhaps from an outside partner – is an important step in unlocking the power of the data already collected.

3. Become a contrarian. At the time when risk management was essentially trying to predict the weather, it was possible to use historical trend lines to anticipate and meet demand. However, historical data is less useful when trying to adapt to new situations. To address this challenge, utilities need AI tools that can quickly identify new signals as they emerge from real-time data sets.

4. Stay flexible. It is tempting for utilities to respond to new challenges by expanding new ways of generating electricity. What better way to decarbonise, for example, than by installing solar or wind capacities? It’s true that we need capital investment to deliver lower carbon energy, but utilities can mitigate significant climate risks and make significant carbon savings by simply combining renewable generation with flexible loading.

5. Don’t hesitate. Of course, utilities know that innovation is important – but they are also slow to evaluate and implement new technology. That is understandable. But the reality is that these are obstacles that must be overcome if our energy suppliers are to survive and thrive. The time for innovation has already come – and utilities can’t afford to wait on the sidelines.

For utilities, the bottom line is that there is no safe game in today’s business environment. Risk is a fact of life and challenging and unstable market conditions are the new normal. But that doesn’t mean that companies should just keep their fingers crossed and hope for the best.

By leveraging new technologies, it is possible to build more resilient infrastructure, smarter pricing models, and more responsive and effective forecasting tools that can help providers adapt to and meet new challenges. Both intelligence and agility are required to survive and thrive in the new era, and this is exactly what state-of-the-art, AI-powered analytics promise.

The risks are already there and are changing the way utilities work. Vendors who try to ignore this transformation will be unprepared for the challenges ahead – but those who evaluate and implement future-proof analytics now will be much better positioned to remain profitable in our decarbonizing, increasingly decentralized energy ecosystem.

Jeff Wright – Chief Revenue Officer at Innowatt

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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