Transforming the utility industry


Relevance
For a very long time, the electrical infrastructure has remained unchanged. But over the last couple of years, the smart grid has been developed as a new type of electric power system (Güngör et al, 2011). Factors that have contributed to this change are the growing demand for energy and climate change considerations (Farhangi, 2010). Both of these drivers request for a more efficient energy system which will allocate electric resources better and give more insights in our personal and professional usage of energy. Part of the solution is delivered by the increased amount of data that is collected, stored, and analyzed. This has motivated companies to research the possible value which they can extract from the data in order to achieve a competitive advantage (Provost and Fawcett, 2013). The combination of the need for better understanding of the allocation and usage of resources and the increased availability of information on these matters have accelerated the potential of the smart grid.

Smart grid and consumer participation
The smart grid is a new infrastructure for electricity that improves efficiency and integrates different energy sources and communication technologies (Güngör et al, 2011) that give insights in the usage, source, and efficiency. Because of the different sources of information, the smart grid integrates people, businesses and things and is the key enabler of new business designs throughout the utility sector (Gartner, 2015).

Smart Grid

Figure 1: A graphical representation of the smart grid (source: http://www.smartgrids.eu/News_2014_and_before)

However, one thing is essential in the process of making the smart grid live up to its potential and that is the involvement of consumers, one of the key characteristics of the smart grid (U.S. Department of Energy, 2016). One of the essential contributions to the value creation of the smart grid is the connection to smart devices by consumers that give information about the usage to the grid as well as the consumer. This results in a dynamic system where consumers and their actions will be an integral part (National Energy Technology Laboratory, 2009).

In the smart grid design, value is created by placing the customer and its information flows central to the business functions as opposed to centralizing the product (Vargo and Lush, 2008). In their article, Grönroos and Voima (2013) separate the terms value co-creation and the creation of value-in-use. As the value created by the consumer is explicitly relevant for the transformation of business models in combination with the data from the companies and sources of energy, the type of value created with the smart grid is co-creation.

Future prospects
Because of the co-creation nature of the smart grid’s value, the key challenges facing a successful implementation of smart grids lie in the communications between different sources of information, both existing and new, and the incorporation of security and privacy principles (Fan et al, 2011). As these issues are not unique to the utility sector, companies and researchers are and should be working together in order to tackle these challenges. In the future, new business models will be emerging in the utility industry from the active role of consumers in the energy markets (Gartner, 2015). And consequently, these new business models will transform the utility industry.

Sources
Fan, Z., Kulkarni, P., Gormus, S., Efthymiou, C., Kalogridis, G., Sooriyabandara, M., Zhu, Z., Lambotharan, S. and Chin, W.H., 2013. Smart grid communications: Overview of research challenges, solutions, and standardization activities. Communications Surveys & Tutorials, IEEE, 15(1), pp. 21-38.

Farhangi, H., 2010. The path of the smart grid. Power and energy magazine, IEEE, 8(1), pp. 18-28.

Gartner, 2015. Top 10 Business Trends Impacting the Utility Industry in 2015.

Gartner, 2015. Hype Cycle for Smart Grid Technologies, 2015.

Grönroos, C. and Voima, P., 2013. Critical service logic: making sense of value creation and co-creation. Journal of the Academy of Marketing Science, 41(2), pp. 133-150.

Güngör, V.C., Sahin, D., Kocak, T., Ergüt, S., Buccella, C., Cecati, C. and Hancke, G.P., 2011. Smart grid technologies: communication technologies and standards. IEEE Transactions on Industrial Informatics, 7(4), pp. 529-539.

National Energy Technology Laboratory, 2009. Smart Grid Principal Characteristics: Enables Active Participation By Consumers.

Provost, F. and Fawcett, T., 2013. Data science and its relationship to big data and data-driven decision making. Big Data, 1(1), pp. 51-59.

Smartgrids, 2016. http://www.smartgrids.eu/News_2014_and_before

U.S. Department of Energy, 2016. http://energy.gov/oe/services/technology-development/smart-grid

Vargo, S.L. and Lusch, R.F., 2008. Service-dominant logic: continuing the evolution. Journal of the Academy of marketing Science, 36(1), pp. 1-10.

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