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Electricity Utilities and IoT

More and more connected devices will require more and better electricity solutions.

In many developing economies more people have ready access to a smartphone and the internet than they have access to electricity. For that reason we have seen mobile telecoms operators starting to include power solutions (mainly through distributed energy systems, using solar panels) in order to sell more phones and telecom services.

This shows how important access to electricity is.

In the developed economies, people do have universal access to electricity but here we see an increased requirement for more efficient and effective electricity products. Energy is needed everywhere nowadays—by smartphones, thermostats, kitchen appliances, electric vehicles and a range of wireless-operated consumer devices.

Requirements include more efficient use of electricity, cleaner energy, better battery life, wireless electricity, distributed energy solutions, and so the list goes on.

While the internet of things (IoT) will not have solutions for all of these issues, it will be essential to enable the provision of a more reliable, scalable, flexible, and more modular infrastructure that will be better equipped to face these new challenges.

At the moment, the electricity companies are lagging behind the needs of their customers and we see customers themselves taking a lead in finding better solutions. They are already installing solar systems, and battery storage will follow soon. With the push for electric vehicles coming from the car manufacturers, we will also see a hockey stick curve coming into play once the price of these cars comes down. The amount of money already invested in these last two developments will most certainly create their own energy revolutions.

At the moment the need for Li-Fi (Light Fidelity—a bi-directional, high-speed and fully networked wireless communication technology similar to Wi-Fi, using LED lights for the distribution of Li-Fi) might not be clear, but this is another development that can lead to disruption. The development of wireless electricity is another area to keep an eye on, which is already being used in several pilot projects around the world.

So far few electricity companies are leading these new developments. Nearly all of them are initiated outside the traditional industry. However it is critical for the future of the industry—and the integrated nature of the national electricity networks—that the electricity companies are going to step up their activities here.

In the case of the disruption of the telecoms industry, we saw a massive increase in the need for telecoms capacity. However the disruption in the electricity industry has the opposite effect—the use of energy is decreasing.

While telcos saw the value-added telecoms market passing by, they still saw their basic revenues increasing. Electricity utilities don’t have such a buffer. Their revenues are going down and down, and if they are to survive, they will have to become involved in the disruption of their industry. They also can’t rely on the government to continue allowing them to raise consumer prices, as the effect of that would be more people going off-grid, with the result of even less revenue, the so called spiral of death.

Flattening Electricity Consumption per Capita (U.S) – The trend of falling electricity consumption is 50 years in the making. The chart illustrates the shift toward lower electricity use per capita, driven by price shocks and the continued improvement in the energy efficiency of the economy. (Source: Institute for Local Self-Reliance)

There certainly are no easy solutions for an industry with a business model and a culture that will be very difficult to transform. Nevertheless something will need to be done, since energy supply is critical—not just to the viability of their own organisations, but also to the society we live in and to the economy.

So what are the options the industry should consider?

It will first of all have to ask itself what its role is in all of this. What are their customers expecting from them? And accordingly they will have to make changes to their business models so they can remain relevant in this rapidly changing marketplace. In order to be a player in the smart energy market, electricity companies first need to ensure that their participation is based on a smart organisation. This requires a massive business and culture transformation and can take up to two years or more to achieve.

Once such a structure is in place the electricity players could look into some of the following options:

  • Investment in batteries (back-up power is a key issue at the moment).
  • There could be a financial advisory role and a potential investment role for new distributed energy systems for companies, communities and cities.
  • Becoming a retailer of a range of smart home appliances (including safety and security) linked to comms and energy infrastructure (perhaps in collaboration with other industry sectors).
  • Big data – providing energy-related data services.
  • Becoming the key provider in the EV infrastructure (potentially including operating the EV car-charging stations).
  • Selling and managing self-generation and distributed energy products.
  • Or even all of the above.

The pace of change and disruption is very fast and this doesn’t work in favour of the utilities, which move significantly more slowly. But in order to remain relevant they will have to quickly sort out how they fit into the evolving new energy ecosystems—with new competitors from different industry sectors, businesses that are based on different skill sets and different distribution retail systems. They need to rather quickly find out what their role is in this changing market, what new skills are needed, and how to collaborate, especially with the ICT sector. We already see this sector aggressively entering the energy market on their own and, as mentioned, the car manufacturing market will not be far behind them.

By Paul Budde, Managing Director of Paul Budde Communication

Paul is also a contributor of the Paul Budde Communication blog located here.

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