IoT 3 mins read

Utilities Must Save on Operational Expenses

In 2020, utilities are facing an accelerating risk to their business model – their aging infrastructure.

Saul Zambrano Saul Zambrano

Whether it’s turning on the lights when you flip a switch, or getting water when you turn a tap, utilities provide the gateway to health, education, entertainment and security.

But in 2020, utilities are facing an accelerating risk to their business model – their aging infrastructure. 

The U.S. Department of Energy concluded that 70% of power transformers are 25 years or older, 60% of circuit breakers are 30 years or older and 70% of transmission lines are 25 years or older. And aging infrastructure is not confined to electric utilities.

Rocky Mountain Institute estimated that a quarter of active gas mains in the United States are more than 50 years old and a recent report released by the American Water Works Association said the cost of restoring underground water pipes in the US will total at least $1 trillion over the next twenty-five years.

The impact on budgets

Over time, the rise in operations and maintenance expenditures knocks down capital budgets. For every dollar that shifts from capital to operating expenses, utilities sacrifice earnings that would have been generated by investing that dollar in infrastructure.

In North America, utilities are cutting customer care budgets to afford their expanding capital re-investment programs. This can also be called cutting off their noses to spite their faces. So, if utilities need to reinvest in their networks, how can they do this without compromising their capex budgets and customer relationships?

Wouldn’t it help to make their operations and maintenance more efficient? This is easier said than done. Historically, their strategies are focused on preventative maintenance schedules where they send out a crew every so often, regardless of whether their assets need maintenance or not.

They have little choice in this approach, because most of their distribution networks were not enabled with SCADA monitoring technologies. If an asset is not monitored in real or near real time, the ability to employ a condition-based maintenance strategy is not possible.

If they can transition to a lean “digital” field force with full visibility of assets, processes and field workers – they could achieve up to a 20% improvement in productivity, said McKinsey, plus a 50% improvement in customer satisfaction. This could not only preserve capital budgets, but also provide a better customer relationship.

Leading utility companies are investing in technology enablers such as IoT, process digital twins and dispatch optimization analytics to drive down operating costs. These technologies allow utility operators to have a real-time view of how critical assets are performing in the field. It also centralizes the data so that field worker dispatch decisions are optimized, with full understanding of field maintenance crew dispatch decisions relative to customer experience service interruptions. 

They can then continuously monitor how processes are executing, and enable continuous improvement centered on operating metric KPIs – and planning against those KPIs s to drive incremental productivity gains through forward operating cycles.

Thus, allowing them to preserve capital budgets and great customer service.

This article originally appeared in POWERGRID International