Executive Summary: ISG Provider Lens™ Power and Utilities Industry - Software and Platforms - Global 2023
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The need for EAM is driven by changing energy mix, aging assets and need for cost optimization
Asset management is an important area of focus in asset-intensive industries, such as oil and gas, metals and mining, industrial machinery, and power and utilities. The need to increase the life span of equipment, plants, machinery and other assets is driving the adoption of asset management tools and software. Implementing EAM software helps utilities and companies from other assetintensive industries improve efficiency, lower emissions and reduce costs, with maximum uptime and reliability.
As utilities chart their digital transformation journey, asset management and field service management are two of the most important areas that will influence the ability of energy firms to deliver new services and/or products. With the advent of new-age technologies such as AI, cloud, IoT and analytics, the EAM software space is witnessing rapid product development. The EAM software market is dominated by players such as IBM (Maximo®), IFS, Hexagon, CGI, SAP and Oracle.
Asset management helps utilities across the water, gas and electricity segments to manage mission-critical assets, tracking age, usage and maintenance history. EAM and asset performance management (APM) enhance asset management with data analytics, monitoring and predictive maintenance to enable better decision-making. With a utilities asset management system that includes APM capabilities, the risk of equipment failure is minimized while the equipment life is optimized.
Assets that are a major component of the power and utilities industry include power stations, gas pipelines, electricity cables and substations. Deploying and integrating asset management tools into utilities operations facilitates the collection and storage of real-time data in a centralized system. Access to this data, when made available to workers, managers and technicians, helps in accelerating workflow, helping workers on the field. Asset management accounts and distribution (T&D) company’s operating expenses and capital expenditures, and optimized operations and investments in EAM products will result in significant cost savings.
Integrating and using IoT devices can further optimize real-time performance data collected by an asset management tool. Introducing IoT alongside asset management solutions can drive gains for utilities in areas such as maintenance, downtime of essential assets and infrastructure, environmental impacts, and risks and safety concerns of assets.
The barriers to the adoption of enterprise software for digital transformation in power and utilities organizations include conflicting priorities, change management, inaccurate ROI measurement, lack of skills/knowledge and industry legislation/regulations.
As an advisor, ISG has helped several globally leading utilities navigate their digital transformation. Thus, ISG believes that building a successful, competitive and futureproof utilities requires strengthening the technical and digital foundation, transforming grid operations, continuously improving cybersecurity, digitally enabling the workforce and improving CX through digital channels.
ISG sees the following trends in the global power and utilities industry:
Need for grid and asset resiliency
Financial damages caused by weather-related disasters increase every year, and utilities get increasingly exposed to litigation risks related to asset and infrastructure damage. The U.S. witnessed more than 15 weather-related disasters, with an average loss of $1 billion, in 2022. This has led utilities to focus on grid resiliency, disaster readiness, grid and asset reliability, and aging assets. In addition, the need to drive energy transition causes more disturbances than ever before. Companies such as National Grid plan to invest heavily ($15 billion in New York over the next five years) to make the grid more resilient and prepare for the electrification of cars and buildings. Furthermore, the aging U.S. electric T&D infrastructure needs a significant upgrade as the industry faces challenges around energy transition, EV adoption, sustainability and net zero initiatives, and changes in customer preferences and regulations. Players invest in upgrading the grid, metering, technology infrastructure and workforce through digital solutions that leverage cloud, IoT, AI and ML.
Decarbonization of the energy mix
Utilities are shifting from traditional energy sources to wind, solar and other green sources. This change, coupled with an increasing shift towards distributed energy, disrupts the energy production patterns it creates. Per International Energy Agency’s (IEA) forecasts, the global renewable capacity is expected to increase by almost 2,400 GW or 75 percent between 2022 and 2027, driven by rising fuel and electricity prices and the ongoing Russia–Ukraine conflict.
Aging assets and infrastructure
Aging electric network infrastructure continues to be an issue for the global power and utilities industry, indicating a significant distributed energy generation shift underway. The U.S. is estimated to have 246 GW of solar capacity by 2040. Such scale makes it critical for asset operations to maintain the performance of older and newer assets with variable complexities. When the effective use of assets determines companies’ capacity to handle tough market conditions and succeed, they need efficient performance management.
Legislation and regulatory changes
Recent policy changes and developments continue to influence homeowners, utilities and new technology areas such as energy storage. The most notable new policies include the Inflation Reduction Act in the U.S., signed into law in August 2022, which provides more than $369 billion in funding for clean technologies. The act may further help U.S. utilities fast-track their emission-reduction plans.
Data- and cloud-driven business
Utilities need to realize the full potential of data by addressing issues around access to data, data insights, data governance and quality and cross-functional analytics. The need to derive value from data for asset maintenance, weather-related warnings, customer preference and other areas drives the adoption of cloud and IoT platforms. Many industries are moving toward cloud-based solutions for key workloads, which can enable greater resiliency, faster innovation and better customer service. However, utilities run into unique challenges around adopting cloud-based solutions. Asset management software vendors should focus on helping utilities capitalize on their cloud investments by creating transformational assets comprising cloud subscriptions and transformation services supported by regulatory review and approval.
Growing cybersecurity concerns
Digitalization threatens security. Rising connectivity through digitalization and the proliferation of decentralized energy resources require holistic and complex energy networks. The rise in the number of intelligent grids brings a higher vulnerability to cyber threats. Strategic and operational security in utilities is, therefore, critical at an enterprise level. These utilities should proactively run risk assessments and cybersecurity programs and share intelligence to prevent cyber and physical attacks on grids. Separately addressing cybersecurity while constructing managed service strategies is a strong market trend.
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