Electric utilities are confronting an ever-increasing pace of disruptive technologies. These significant generational and previously unforeseen drivers of change pose major challenges to asset managers who need to manage a changing landscape of business and asset risk.
To compensate for the uncertain nature of the future, one must find and measure signs that influence the business landscape and underpin strategic asset decisions. In the context of the Australian electric utility industry, scenario planning and signposting is being increasingly utilised to provide the necessary strategic information to identify important technological and behavioral trends; define risks and opportunities; and assess impact on overall strategy.
The dynamically changing energy market forces electric utilities to gain a better understanding of the impact of disruptive technologies and the challenges they create. Disruptive technologies are emerging that compete with utility-provided services and directly threaten the centralised utility model. For example, due to rising electrical prices, there is a drive for efficient load shifting with the use of demand side technologies coupled with new products to enable changes in customer behaviour to monitor and reduce consumption.
The convergence of new technologiesincreases risks and costs, creates customer-behaviour trends and, thus, forces utilities to consider alternative strategies to respond to the sedisruptive challenges. In effectively addressing these challenges, scenario planning and signposting tools are seen as a vital approach to develop asset strategies that best match what is actually occurring in the present and allow the forecasting of future scenarios and outcomes.
Scenario planning allows the utility to explore potential future outcomes, develop and assess technological options and strategies. The CSIRO Future Grid Forum developed a system modelling of the electricity sector. Core scenarios were explored with a set of distinct themes and topics such as peak demand modelling, distributed on-site generation and energy efficiency. Where scenario planning describes the possible future outcomes, signposting analysis provides the direction, path and timing in which these possible futures may head. A signpost is an event (i.e. company investment announcements, technological breakthroughs, etc.), giving information as to the direction, magnitude and probability of a possible future scenario. Signposting analysis often utilises advances in “big” data analytics such as machine learning, computational linguistics and natural language processing, to synthesise the increasing amount of information available today.
Strategic management involves the implementation of major objectives based on an assessment of internal and external environment. Scenario planning (the destination) and signposting (the journey) allows management to assess their long-term strategic goals and ensure alignment with their plan to achieve those goals. This allows for a more robust method in which to gauge the potential impacts of events to overall strategy. An organisation can hence move from being reactive, to being proactive with the ability to course correct when signposts indicate changing direction, magnitude or probability.
With the right tools in place, a dynamic and uncertain environment can now become an opportunity, not a threat.