PUBLISHED DATE: 2025-08-13 05:47:19

Digital Strategies for Utilities: A Step-by-Step Guide

Introduction

As utilities aim to support the transition to renewables and increase the resilience of their networks, the need for a digital strategy is more prevalent than ever. Utilities must become “digitally mature” to optimize network operations, adapt to fluctuating distributed energy resources (DER) demand, and monetize data sourced from low-voltage (LV) and high-voltage (HV) assets.

Utilities Need a Digital Strategy

Utilities need to do more with less. The adoption of renewable assets, combined with already uncertain load demand, has imposed greater challenges on utilities’ ability to predict network volatility and proactively make decisions in real time. The demand for electricity worldwide surged by six percent in 2022, and the rising costs of maintaining a consistent energy supply have put a global strain on electricity systems. In the United Kingdom, for example, demand for electricity in 2022 rose 11 percent over the previous year, igniting fears that overloaded systems would trigger power outages.

To enable the level of advanced analytics and streamlined operations required to meet these conditions, utilities must employ a digital strategy to make the right investments at the right time. By improving power plant and network efficiency, reducing unplanned outages and downtime, and extending the operational lifetime of assets, digitalization is expected to save an average of $20 billion per year until 2040.

The year-on-year change in electricity demand by region from 2019 to 2025, measured in terawatt-hours (TWh), shows that after a dip in 2020 (with the largest decreases in the United States and European Union), demand rebounded strongly in 2021, especially in China. From 2022 through 2025, positive growth continues, with China consistently contributing the most to the increase, while other regions show smaller but positive contributions. The net change remains positive each year after 2020.

Decarbonization is Adding Costs

The transition to wind and solar power—which generated 10.2 percent of worldwide power in 2021—will only increase the capital and operating expenditure for utilities, accounting for 70 percent of total new power-generation investment globally. As utilities move to sustainable methods of power production, investments in clean energy will contribute to rising costs in the short to medium term. To ensure that this transition is viable, utilities must strive to extend the operational lifetime of their assets through digital systems that improve utilization and reduce physical stresses. The International Energy Agency reported that research and development into the reduction of network operating expenses will cost approximately $20 billion per year.

The share of cumulative power capacity from 2010 to 2026, according to the International Energy Agency (IEA), shows a steady decline in coal and hydropower, while solar PV and wind rise significantly. By 2026, solar PV is projected to reach about 15% of total capacity, wind about 10%, and coal falls below 25%. Natural gas remains relatively stable, and bioenergy stays below 5% throughout the period.

Net Zero Will Have Digital at Heart

The energy industry is the source of approximately three-quarters of greenhouse gas emissions, and a transformation in the production, transportation, and consumption of resources must occur for the world to reach net-zero emissions. Digital technologies and processes will form the foundation of this project, which requires huge increases in electricity-system flexibility, demand response, and energy efficiency. From the use of smart meters to advanced climate analytics, utilities can optimize their network operations and power production to improve energy efficiency, enhance asset performance, and enable real-time tracking of CO2 emissions. In the European Union alone, increased storage and digitally enabled demand response are predicted to avoid 30 million tons of CO2 emissions by 2040.

A Step-by-Step Guide to Creating a Practical Digital Strategy

How can utilities organizations make the move toward digital? They can develop an actionable strategy by taking the following steps:

  1. Investigate Emergent Themes and Major Investment Areas within the Industry
    Digital strategies should be guided by both comparable utility peers and digital innovators. This provides a set of digital use cases and portfolio investments that are indicative of the future landscape and will guide organizations’ key initiatives. As utilities continue to pursue smarter, AI-driven solutions, second-mover advantages include the ability to learn from other companies that are modernizing their supervisory control and data acquisition (SCADA) and asset management systems and implementing data-driven network decision-making. Since 2015, grid-related digital technologies have grown by over 50 percent, reaching 18 percent of total grid investment in 2021, demonstrating the value that utilities have placed in digitalization and improving the reliability of their networks.
    The global stock of digitally enabled automated devices from 2010 to 2021 has grown steadily, approaching 10 billion connected devices by 2021. The largest growth is in Sensors and Other IoT devices, followed by smart meters, lighting, audio, appliances, and other categories.
  2. Assess the Relevancy of These Emergent Themes and Investment Areas
    Each industry trend should be assessed against its impact, relevance, and outcome enablement. Start with determining the impact-to-relevancy score and the aggregated level of impact which could be realized relative to time and adjacency; then compare this to desired business outcomes and viable industry trends.
    Once an initial view of potential portfolio investments has been completed, aggregate the performance of each industry trend and compare this against their relative strategic priority. This will aid in the development of a prioritization framework to suggest which initiatives should be funded and when they need to occur.
    For example, a prioritization matrix may show that Predictive Demand Forecasting and Outage Detection are high in both impact/relevance and business outcome enablement, while initiatives like Virtual Storm Rooms and Cloud Migration are lower in priority. System Consolidation and Smart Metering fall in between, depending on the specific business context.
  3. Identify Key Pain Points
    Key pain points must be identified to confront the core issues facing utilities. Doing so pinpoints areas of opportunity for quick efficiency and performance gains. These pain points should be assessed against the level and impact of risk to determine which ones must be addressed now and which should be solved later.
    For example, a risk matrix may show that being unable to provide a real-time view of LV transformers is both high impact and high likelihood, and should be addressed immediately. In contrast, inaccurate financial and investment reporting may be low impact and low likelihood, and can be documented and deprioritized for now.
  4. Develop Key Focus Areas of Investment That Are Practical
    Once an assessment of industry trends and pain points has been conducted, the next stage involves collecting and consolidating these digital opportunities. This step provides a clear strategic view for tactical initiatives, capital/operating expenditure, governance, and benefits, enabling a practical, easily implemented digital vision.
    These investment areas must include:
    • Ambitions & goals: Description of the future state and core objectives that need to be achieved.
    • Detailed initiatives: Phased initiatives that directly achieve the utility’s investment-area goals based on industry trends and stakeholder pain points.
    • Use case examples: Focus area examples that tell stories about how the collection of initiatives work together in network operation, asset management, or customer engagement scenarios.
  5. Develop a Horizon Roadmap
    Based on the prioritization framework and key investment focus areas, defined initiatives should be prioritized based on agreed-upon horizons. This sequencing should consider dependencies between the utility’s current and recommended initiatives, adjacency with current operations, available resources, and complexity of the initiative. There should also be a strict understanding of what needs to be completed today, with the flexibility to adjust future horizons as operational technologies, customer needs, and network constraints shift.

Things to Remember

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