Every IT specialist is a technology enthusiast by default, as most of them get to choose this profession due to their passion for technology. Sometimes, though, they forget technology must be evaluated strictly in relation to the value it brings for the customers of the company we work for. “Too often, the technology is promoted simply because it is new” says Mircea Modran, Chief Information Officer, member of the executive management team of the Electrica SA group. According to his opinion, we must remain enthusiasts, although aware of our obligation to identify the business benefits and value the new technologies bring, weather we talk about additional financial revenue, cost savings, risk mitigation or improved customer relationship.
Dear Mr. Mircea Modran, the Electrica group is already undergoing an ambitious process of modernizing its internal processes, for more flexibility and efficiency. What role does digital automation play in this broader process?
One should start from a common accepted truism stating that automation and digitalization are mandatory and unavoidable goals for every utilities’ company. Meanwhile, it is also generally agreed digitalization and automation tend to have an immediate beneficial effect when implemented upon systems and processes already standardized. Indeed, under such conditions, automation and digitalization are critical, whether they address some internal initiatives or they respond to external requirements, coming from the regulator, the shareholders or the European Union legal frame. We are talking about extremely ambitious EU policies and visions we aim to accelerate and implement as high priorities also.
Where is Electrica now in terms of the standardization of its operational flows?
Electrica group has at least three initiatives going in order to achieve standardization and alignment of its internal processes to make them suitable for automation and digitalization. Perhaps now is the proper time for some semantic clarifications. There are three terms that people tend to use without paying enough attention to their meaning: digitization, digitalization and digital transformation. Digitization has constantly developed over the last 20 years and refers to the conversion into digital format of information elements previously kept on non-digital medium (paper or other similar mediums). For instance, scanning a hand-written text on paper into a computer based PDF file means you have digitized that document. Same is true about audio – the vinyl discs, the recorder tapes or cassette tapes have traditionally used analogue technologies to store the audio signals; their conversion into MP3 format means the sound was digitized. Digitalization is the mechanism of connecting (IT term for it is “interfacing”) several digital products in order to automate a process. For example, when I scan a document and send it by email, I have digitalized the mail delivery process. Further on, once I automate such operations, it means that I have digitalized and automated the mail delivery process. Digital transformation is a term that usually refers to social, economic, sometimes even political transformations that large scale digitization and digitalization bring. For example, it is general accepted robots’ implementation will have significant impact on the job categories requesting repetitive operations. Already, their impact in the auto industry assembly lines is visible among various plants of this industry. Additional examples can be provided on other business domains, eventually due for implementation in the near future. The digital transformation triggered by technology advancement may cause significant problems in the worst case scenario or just society level structural adjustment, either proactive or reactive, if carefully controlled.
… Or at the level of a large organization, such as Electrica? Do you believe you might encounter some resistance from people who might be afraid of digital transformation?
I don’t think fear is an appropriate term, seems quite harsh to me! People performing as expected, knowing they bring value to the company, have nothing to fear. However, I am convinced there is genuine curiosity and concern about the future. I think these concerns must be answer openly with total transparency while presenting all facts and benefits for each stakeholders’ category. Regardless of the technology we’d implement, one should also remember each business depends on people knowing the processes and understanding the environment they operate within. Even more, a specific process improvement starts with detailed analysis where optimization alternatives may (or may not) be identified. Only after a certain option is decided for, the technology comes in with the IT&C department leveraging specific solutions. There are some who start backwards, answering questions like “how could we use this new cool technology or technological discovery?”. I consider the rate of success for this approach is way lower than the first one. As any other IT specialist, any gadget is interesting for me; nevertheless, the road to put it in use for production and prove its business value is long and includes many steps that cannot be ignored or skipped.
I am convinced that the IT&C component is essential business processes optimization, but my preferred approach is to start from the business objectives and support them through technology, not the other way around.
What are the guidelines of the Electrica SA digital strategy? Do they rely mostly, or maybe exclusively, on the implementation of smart metering?
Within our group of companies we have roughly three types of activities. One is power distribution for pre-determined geographic areas, a regulated monopoly with a certain specific content, hence a certain digital strategy. The second type is electricity retail supply, a segment that also has its own specific digitization and digitalization targets. Finally, there is energy services area that we have reshaped and started to offer, with its own needs. Of course, the Group digital strategy includes an overview to ensure against potential divergent streams, hence aligning demands and the specific implementation pace with the unbundling obligations we must observe as a regulated businesses.
There are two time horizons we consider. First, we take into consideration the 4th regulatory period ending 2023. Beyond 2023 the 5th regulatory period would commence therefore we expect changes in accordance with the new objectives and legal norms that the regulator would adopt.
The second time horizon we contemplate point to the end of this decade (2028-2030 interval). This one has come up as a result of various European Union initiatives accepted and adopted by all Member States; one of the last bundle includes specific digitalization objectives, large scale smart metering implementation being one of them. At that time we will evaluate the digitalization level we were able to reach and probably analyze new objectives we can support with the technology made available at that time.
What are the main objectives of Electrica for these time horizons?
With respect to the distribution segment, the main objectives include business efficiency improvements and impact prone technologies over business optimization. it is not about smart meters only, but also about machine learning elements we currently test in order to reduce our self-technological energy consumption. Usually the automation lingo call this approach a Decision Support System (DSS). In particular, the business process works like this: the procurement of self-technological energy consumption is a continuous process based on short and medium term projections. These are quite difficult to make, require a lot of experience, in-depth knowledge of the consumer and producer market and other complex various influences. We are currently testing various DSS products where a computer can provide also these predictions based on machine learning concept and help the responsible person to take the final decision. By reducing the error margin, significant cost savings can be achieved. Of course, the final decision is still a human decision, but it can be supported by the machine learning technologies estimates.
We are also interested in smart grid solutions, an interesting concept, with relative high investment costs, but also a substantial potential for positive impact on specific operational parameters (SAIDI, SAIFI).
What does a smart grid mean besides the smart meters?
The smart grid provides information on top of the expected energy consumption level for a specific area. A simple scenario to illustrate this concept would sound like this: Imagine that, due to specific weather conditions, the grid trail vegetation has grown faster than expected; the smart grid signal allows an urgent operation to adjust and clean the grid corridor vegetation. This operation has nothing to do with digitization, but getting the pertinent information in real-time has a tremendous operational value! The alternative to a proactive real-time decision is a reactive decision triggered by the grid incidents the grown vegetation would cause.
To be noted, there is already an inspection and evaluation system, with people working onsite and transmitting such information. However, a drone based system, for example, carries much lower costs, greater accuracy and allows larger areas to be covered with increased frequency.
Another relevant example is the “status-based maintenance” concept. There are various kinds of sensors and technologies able to transmit data on the attrition level of different grid elements (i.e. transformers, grid poles, distribution stations, etc.). It is a kind of advanced warning that maintenance activities must be performed regardless of them being included or not in a preset maintenance calendar (made in accordance with the “time-based maintenance” concept). Accessing the real-time operational data and the technical reports flagging a potential .
We are still at the beginning with this status-based maintenance approach. We work on various pilot projects; based on their outcome we will analyze the cost-value ratio, in order to decide eventually a possible large-scale solution implementation. Significant investments are foreseen, of course!
Are these investments recognized by the regulator?
There are two types of investments the regulator recognizes: direct power grid related on one hand and all other types of investments on the other; for the moment, IT&C investments are classified into the ‘other investments types’ category. The ratio among these two types used to be 90% – 10%; it has recently changed to 85% – 15%
It is still a matter of clarification the new technology categories originating from the classic IT&C but migrated towards the electric grid command and control operations. At minimum, the cyber security technologies and the operational technology are relevant examples. The sensors installed on the poles, for example, are part of the electric grid but are generated by the operational technology. On top of this, sensors do communicate and transmit information through comm lines to the servers – are these part of the electric grid or part of the classic IT&C? It is a blurry area where additional clarification is needed.
One must still recognize the importance for the power distribution grid the operational technology, SCADA control technology carry. Similar, the fiber optic through which we can remotely control the parameters of a transformation station and launch commands. Commands rely on remote industrial computers not located within the distribution station; are the costs for remote operation part of the power distribution grid or part of the classic IT&C system?
What are the roles of digitization in the supply segment?
At the end of the day, we do exist because of our customers, therefore we have launched multiple initiatives to get closer to them. We talk about online interaction, automatic payments and other services aim to optimize time and save money for customers.
In addition to payments, we can offer extra services included to an existing contract – for example, the energy efficiency assessment. There are also IoT monitoring services, solar panels installations and many other options, based on the available digital technology .
What are the main differences Electrica customers and business partners will perceive during the next 3-5 years, due to the implementation of digital strategies?
Customers will discover Electrica as a friendly organization that knows their particular needs and helps them with customized offers. Although we are a large company, we aim to have a close customer relationship- digitalization can help this through process optimization. For instance, at the present time, a request to a utility company to make a contractual change may be processed in days, sometimes weeks. If the process of changing the standard contractual conditions would be digitalized, we could respond and solve within a few hours, and we would still have more time to analyze each specific case with extra care.
I expect the digitalization and automation of the large energy & utilities companies to continue with strong support from technology, either IT or OT. However, many items remain to be evaluated and managed carefully, like the costs benefits ratio, as well as benefits versus risks incurred due to digital technologies accelerated and continuous evolution.