What is the most complex machine in the world?
A) a transcontinental electric grid
B) an international communications system
C) interconnected water systems?
The answer, of course, depends on who you ask, but as they evolve from century-old — and occasionally millennia-old roots — today’s critical infrastructure service providers are grappling with a range of forces that can redefine their businesses and the world we live in. Adapting their organizations to a more distributed, data-driven world is key to their futures, if they can harness new, integrated approaches to asset management, capital planning and how things get built.
So how do utility service providers address the oxymoron that is distributed integration? This is not just a power industry problem. Power grids certainly are shifting rapidly from centralized generation and one-directional power flows to a widely distributed, two-way grid, metered and automated across countless points. This shift towards the edge is found across infrastructure classes.
To unleash the transformative power of 5G wireless technology, telecom service providers must adapt the physical plant of their networks to include more and different access points from the standard, tower-driven model while working within a complex regulatory web to lock down spectrum. Similarly, water service providers must learn more about the condition of their assets from source to consumption to ensure greater reliability and resilience in the face of population and climate challenges. And everyone must address the challenges of capital constraints and regulatory burdens.
Headlines versus the bottom line
Over the past year, much of the public focus has shifted towards future state planning and market disrupting technologies like microgrids, digital water applications and the Industrial Internet of Things (IIoT). Yet, according to recent Black & Veatch Strategic Directions: Smart Utility Report data, service providers indicate the renewal and rehab of aging assets represents the largest challenge in the asset management lifecycle.
The focus on existing assets is consistent with nearly a decade of responses in our Strategic Directions reports relating to the electric industry (dating to 2011) and the water industry (to 2012) in which respondents chose aging infrastructure as the most challenging issue facing their industries.
With the reliability of traditional utility services being brought into focus by powerful storms, large-scale fires and rising customer service expectations, the rollout of projects to enhance resilience and improve operational efficiency continues. Some such technologies, including advances in Information Technology (IT), Operational Technology (OT) and Artificial Intelligence (AI) are accelerating the blurring of lines between traditional organization silos.
But despite positive sentiment, integrated planning is viewed as a key initiative. When weighed among top industry issues, it rated eighth of the top 10 issues among respondents for our 2019 water report, and it failed to make the list in our 2019 electric report.
This latter point could reflect utilities’ emerging shift from integrated resource planning (IRP) to integrated system planning that takes interdependencies into greater consideration. But, contrast this with data from the commercial and industrial sector, where nearly half of respondents indicated they expect to complete the implementation of smart manufacturing processes within the next five years.
One of the biggest challenges facing data scientists of all stripes is the tendency to confuse causation with causality. Does the data demonstrate that a series of events or actions “caused” an outcome, or simply contributed to the outcome? (Did Person A eat the lunchroom donuts, or were they just in the neighborhood?) As data becomes the new gold of utility operations, understanding the difference is critical to making informed decisions across functional areas, as well as in driving greater integration across capital planning and project execution.
2020 will find many electric service providers launching second- or third-generation automated metering infrastructure (AMI) and distribution automation (DA) programs capable of providing system data and expanding control capabilities. This contrasts with a water industry that has taken a more gradual approach to raising the profile and embrace of Digital Water, though over the past 18 months, water service and solutions providers have highlighted Digital Water programs at key global leadership events and technology forums such as Singapore International Water Week (SIWW) and many more.
As the results of more pilots become available generating positive results, expect an acceleration of digital water programs. However, the business case remains less robust when compared to electric utilities for many water utilities, though water scarcity has emerged as a real driver to the improved water and customer usage information at the core of AMI.
Many water utilities also face demand growth, which is necessitating finding new water sources in regions such as the American Southwest where they are just not available — so improved conservation and water management becomes key. Walking the political tightrope of rate increases, much room for improvement and investment remains as just over 5 percent of recent Water respondents indicate robust, fully integrated approaches to data management versus one-third identifying siloed data lacking integration.
This is in stark contrast to C&I respondents, where optimizing operations via data analytics was the top area of concern.
Another area that will continue to plague data integration programs in coming years are the disparate systems, different formats and turf battles that slow progress. For example, the long-term lifecycle management of IT/OT systems remains a challenge. The alignment of operational control SCADA systems and customer systems can be problematic as ownership of the systems and the data produced often falls under the jurisdiction of multiple parties, including security professionals not tied directly to either function.
Integrated Project Delivery
Consolidation impacts every industry. The engineering, construction and design space is not immune to market dynamics, but the consolidation of several historic market participants and decisions by others to exit the long-standing lump-sum engineering, procurement and construction (EPC) approach to project delivery raised some eyebrows over the past few years. While all parties involved in the design and construction of projects seek to manage financial risk exposure, there is a sense that the pendulum to offload as much risk as possible has swung too far.
According to 2019 Water Report data, outcomes from lump-sum EPC projects generated less satisfaction and represented the least likely delivery model to be chosen (32 percent, versus construction management at risk, 17 percent) by those expressing a preference.
While certain municipal regulations can prevent design-build project delivery approaches, share- holder pressure will continue to be a factor in the pursuit of future lump-sum EPC projects.
Successful integration takes — integration
From data integration and program planning to how projects move from concept to construction, 2020 will continue to see utilities grapple with fundamental shifts across their worlds. In each facet, there is great excitement and enthusiasm centered on the potential to transform utility operations and drive sustainability, resilience and bottom-line performance.
But in each case, it’s clear that leadership will have to work hard to overcome the traditional organizational and market hurdles, as well as human nature-driven turf challenges that prevent innovation, strategy and action from getting into the same room.
It is clear that overcoming these challenges to unlock the potential of a truly integrated organization requires a vision and a defined strategy on how to realize the vision. Recognizing that business as usual is no longer an option given rapid market disruption, individual teams and project groups need to see their alignment to the vision in order to drive effective, approaches and buy-in. Whether working to standardize the usage of the IT solutions, evaluate program planning or exploring new approaches to project delivery, teams must work across traditional lines to deliver effective outcomes or get left behind.
2020 STRATEGIC DIRECTIONS: MEGATRENDS
Black & Veatch is proud to release its first 2020 Strategic Directions: Megatrends report, which analyzes years of survey data to explore and illuminate some of the most striking and consistent trends across the water, power, telecommunications, natural gas, commercial and industrial (C&I) and manufacturing industries.
About the Author
Kevin Cornish is Senior Managing Director of Black & Veatch’s management consulting. He is focused on both the evolving new energy landscape as well as infrastructure modernization. He works extensively on smart water solutions such as advanced metering.