What does the internet of things mean for the energy sector?

When renowned American psychologist Abraham Maslow came up with his famous Maslow’s Hierarchy of Needs in 1943, he had studied what he called “exemplary” people, such as Albert Einstein, Eleanor Roosevelt and Frederick Douglass, to describe the pattern that human motivations generally move through. The highest level of need – self-actualization – referred to a person’s full potential and the realization of that potential. Maslow’s description of self-actualization can be summarized by the famous US Army slogan, “Be All You Can Be.” Maslow believed that for a person to realize their full potential, they must not only achieve the previous needs, but master them.

TechCrunch Network Contributor Jim Hunter wrote a piece last year entitled The Hierarchy of IoT ‘Thing’ Needs. In it, he suggested we start treating internet-connected ‘things’ more like people – in the sense of thinking about them the way you would an employee hired to fulfill a specific job function. He argued that this sort of mentality would help not just the individual thing, but the entire IoT network, achieve its full potential. I agree with this and therefore, have adapted the pyramid for the needs of the smart energy market.

As an illustrative example to help explain the pyramid above, let’s examine the utility industry within the smart energy market in the United States. There is no lack of change in today’s energy landscape and no surprise that this puts the US energy industry at a crossroads – one of challenge, but also opportunity. Utilities are at the heart of this transformation.

Level 1: Modernizing infrastructure and improving operations

It may be easy to overlook the importance of modernizing existing power infrastructure, but the bottom line is that we cannot rebuild our power grid from scratch. We have to rely on intelligent technologies to improve the systems we have in place to improve power quality and security, and continue to deliver safe, affordable, reliable energy to consumers. Utilities are transforming while still performing. For example, a large percentage of BC Hydro’s smart meter programme’s benefits are realized in revenue protection/assurance application. IoT-connected devices with tighter security have the ability to give utilities unprecedented levels of control over their operations through both improved hardware and digital technologies and fulfil this most fundamental need. Just as with Maslow’s theory, this most basic level of need must be met before the individual “thing” can focus upon the secondary or higher level needs.

Level 2: Enhancing efficiency and cost savings

Maslow also coined the term “metamotivation” to describe the motivation of people who go beyond the scope of the basic needs and strive for constant betterment.

Similarly, focusing on digital technology drives efficiencies across a utility’s business by increasing the opportunity to integrate new renewable generation and distributed energies into their system to help go beyond the scope of basic infrastructure and operations.

Utilities are improving total uptime and reducing overall maintenance costs by deploying predictive maintenance analytics that increase the quantity and quality of maintenance schedules. For example, PPL Electric has reported a 38% improvement in service reliability enabled in part by the deployment of sophisticated analytical capabilities.

Level 3: Business transformation services for more value-added services to consumers

In the final level, the value to a utility goes far beyond basic operational enhancements or efficiency, ultimately leading to major change to the business value for the utility, typically reflected in the form of new products and services that are outside of the traditional utility model and offering more value-added services to consumers.

The smart grid enables utilities to offer new services at both the wholesale and retail/consumer level by providing deeper insights on capacity demand, issue identification, pricing options and more. Oklahoma Gas & Electric, in a bid to substantially shed load by 2020, is using customer analytics to gain visibility on individual customers’ responses to price signals. This is allowing them to identify the best customers to target with specific marketing campaigns.

To address the challenges described above and realize the full potential of a true IoT for smart energy, we need to modernize utilities’ infrastructure, improve operations and enhance efficiencies first, but the ultimate goal is to transform into a customer-centric company that can offer more value-added services to the end-consumers.

Author: Sonita Lontoh is the Vice-President of Marketing at Siemens Digital Grid and will be speaking at the 2016 Global Entrepreneurship Summit hosted by President Barack Obama in Silicon Valley on 22-24 June.