Energy Industry Disruption Is Creating Smart City Opportunities for Utilities

The shift to a decarbonized global economy and toward an increasingly clean, intelligent, mobile, and distributed energy ecosystem presents immense opportunities and challenges for energy utilities. In parallel, digital technologies are transforming the energy infrastructure and the vertical sectors it supports. Many of these issues are crystallized in the emergence of smart cities across the globe (Guidehouse Insights analyzed new opportunities in the urban Energy Cloud extensively in a 2017 white paper). 

Utilities have been key partners in many early smart city projects but often with a limited focus on technology evaluation. That is changing as utilities realize that smart cities also offer opportunities to develop new business lines, extend their partner ecosystems, and establish new bonds with local communities. Utilities around the world are already increasing their involvement with smart city developments, particularly in North America and Europe. Several smart city applications provide a particularly good entry point for new services as they offer a chance to build on existing assets and skills. 

EV Charging a Must-Win for Utilities

EV charging is likely the single most important smart city business opportunity for utilities. Utilities can use their expertise as electricity providers and managers to help develop and operate the EV charging infrastructure needed for the global transition to EVs. By 2020, Guidehouse Insights estimates that more than 4,000 GWh of electricity will be consumed by plug-in EVs annually in the US alone. If utilities do not become the primary provider of EV supply equipment and services, they will be shut out of the most significant load growth factor within the next 10-20 years. With energy consumption declining due to energy efficiency and distributed energy resources, the EV charging market is a must-win for utilities.

Lighting the Way

Within the smart cities market, smart street lighting is a logical entry point and one of the primary emerging business opportunities for utilities. Smart street lighting fits well with utility priorities since they have ownership over considerable street light assets in some jurisdictions (e.g., North America). It also leverages traditional utility capabilities as providers of lighting services and connected lighting has a strong business case compared to other smart city solutions. Other utilities are recognizing the potential of this market and have deployed significant commercial projects. For example, Florida Power & Light partnered with Itron for one of the largest networked street light projects in the world. Itron has installed nearly 500,000 networked street lights controlled by its Streetlight.Vision software in Florida Power & Light’s service area. In partnership with Telensa, Atlanta-based Georgia Power has nearly 300,000 street lights equipped with networked lighting controls. In Europe, Enel X has installed over 1.8 million LED lamps across Italy.

For more information on utility experiences and opportunities in smart street lighting, register for Guidehouse Insights’ upcoming webinar on November 28, which will take a closer look at Georgia Power’s experience. 

Significant Market Barriers Remain

While utility interest and involvement in smart city deployments is increasing, several key barriers to greater market participation remain. These barriers include regulatory challenges, utility business culture and organizational structure, technical and operational challenges, and the lack of a business case for some smart city applications. The configuration of these challenges is unique to each utility given its history, location, culture, and current asset base, but there are many lessons to learn from the early leaders who are already establishing their footprint in the smart cities market. For more analysis and recommendations on how utilities can capitalize on smart cities markets, keep an eye out for Guidehouse Insights’ 4Q 2018 report, Utility Opportunities in Smart Cities.