The utility ecosystem

Building a “total cost of energy” utility ecosystem

Power and utilities company executives continually work to balance capital expenditure (CAPEX) efficiencies, operations and maintenance (O&M) cost pressures, and energy system reliability, but even though everyone is reading the same book about managing materials and services costs, they may be on different pages.

Using data to empower the supply chain

Operations is focusing on uptime and reliability, engineering is working on design specs, finance is worried about return on capital deployed, and procurement is concentrating on delivering lowest total cost of ownership, typically within O&M.

It’s time for everyone to get on the same page and take a proactive, holistic approach to managing materials and services costs. Doing so can drive step change improvements across all facets of a utility’s business, including upstream suppliers and downstream customers, and produce a total cost of energy (TCE) ecosystem.

Technology-based innovations such as Smart Grid, sensors, and predictive risk tools have the potential to change the traditional break-fix utilities maintenance model to a predictive, replace-before-break version. On the capital side, critical components can be monitored using dedicated sensor technologies that measure and transmit "health data" to a central control room that analyzes it for trends and potential issues.

This automated, real-time information system can help to identify problems, deploy maintenance crews, secure needed repair materials, and reorder consumed materials.

Taking a TCE view and using analytics-driven insights allows executives to ask new and different questions such as: Would it make sense to change a transformer’s lifespan from 20 to 30 years? Doing so may increase the initial outlay but it could also lower maintenance and repairs over the product’s life, increase reliability, and lower regulatory risk.

The “power ecosystem”

Successful implementation of the power and utilities TCE ecosystem will bring disparate functions within a utility model into a single, integrated value chain. The ecosystem may be one independent utility or a collection of pure-play utilities that leverage each other’s expertise to collective advantage.

The most advantageous model may be a collaboration among several IPPs a Transco, a Distco, and a customer-focused retail company to drive the lowest TCE—in essence, forming a “power ecosystem.” Including key suppliers with installation and maintenance expertise may further increase the ecosystem’s competitive advantage.

The stronger and more connected the ecosystem, the greater the value. Utilities and their customers should gain:
  • Unprecedented levels of customer service, transparency, and flexibility to choose among generation (wind, solar, etc.) and delivery alternatives
  • Increased reliability based on leveraging best-in-class operations and each partner’s area of expertise
  • Clear understanding of the value delivered from a pure-play, focused business within their ecosystem
  • Lower overall cost structures
  • Alignment with the PUC on future investments and programs

As utility companies grapple with balancing CAPEX and O&M cost pressures with system reliability, they will need to embrace a more proactive and holistic way to manage materials and services costs—one that focuses all company functions and external suppliers on driving to the lowest total cost of energy. Doing so can be the catalyst to drive enterprise-wide operational, financial, and supply chain improvements.



Martin Brotschul
Deloitte Consulting LLP

Grant Poeter
Managing Director
Deloitte Consulting LLP

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