Energy Networks: Transmission & Distribution

Electricity networks around the world are being squeezed by a set of challenges: plateauing or falling demand, the need to invest in building and replacing assets, regulatory pressure to reduce costs, and the growth of distributed energy resources. Any one of these challenges would be cause to review business models and cost positions. Combined, they create an urgent need for energy networks worldwide to transform their strategy and operations.

Greater operational complexity arises from emerging power generation and digital technologies, changing consumption patterns, and new market opportunities. There are eight key disruptors influencing the grid business—and presenting key opportunities for transformation:

Planning for the Power Grid of the Future

The speed of disruption and regulatory change—which will determine the future shape of the centralized grid infrastructure—will vary among markets, creating risk and uncertainty for companies.

These uncertainties make the task of defining a strategy a difficult one for grid companies, but luckily they can refine their plans over time. By answering the following questions, they can start to set a course for modernization:

  • How can we leverage disruptive technologies to drive efficiencies in our existing business model?
  • How can we build a convincing case for regulators that accounts for the “functionalities” they want to achieve?
  • What are the specific building blocks needed to meet regulatory goals and manage the grid in the future?
  • What no-regrets decisions—such as investment in digitization—can we make now, regardless of how the future evolves?
  • What is the optimal roadmap for modernization, bearing in mind external factors such as the pace of rate hikes allowed by regulators?
  • How will modernizing affect investor perceptions?

The Benefits of Digital for Power and Gas Network Companies

From reality simulators for field workers, to drone-enabled maintenance, to AI support functions, operations of the future may look dramatically different. A digitally connected workforce and “self healing” technologies—enabling grids to automatically detect and isolate problems and minimize their impact on customers—are certain to be part of grid infrastructure regardless of the dynamics of individual markets.

Digital transformation isn’t just about capex and technological change, however. It’s also about changing organization structures and the way people work. The integrated grid plan will need to factor in faster and more agile decision-making processes built around data analytics.

An Integrated Approach to Transformation

Transmission and distribution companies have already deployed traditional cost-saving measures and implemented lean processes. The next wave of improvements will be aimed at revitalizing organization structures and operating procedures—with the biggest value creation coming from a close link between operational technology and processes.

Transforming a power and gas network company requires the following components:

  • 20% people capabilities (analytics skills and algorithm development)
  • 20% technology
  • 60% business transformation

To extract maximum value, companies need a structured approach to future planning. Once the vision is clear, teams need to develop and document a detailed transformation plan. Transformation delivery executed against the plan can deliver long-lasting value to the company.

Learn More About Transmission & Distribution

Meet Some of BCG’s Experts in Network Transmission

BCG’s global leaders have experience supporting hundreds of transformations. Their direct work with leading global utility companies gives them a detailed understanding of what it takes to succeed in this challenging business environment.