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KPMG evaluates future readiness of the energy industry

The German energy industry is confident - but are they truly ready for the challenges of the future?

teaser-t-kpmg-futureLiberalisation and political pressure for the energy transformation has resulted in sinking wholesale prices for the European energy industry. This has in turn placed pressure on a traditionally rather conservative industry to become more innovative and forward-thinking. But how ready is the energy industry for the future? In the Future Readiness Index, based on a survey of over 600 companies in twelve industries, KPMG evaluates how prepared German companies truly are for future challenges and where there is room for improvement.

 

Optimism rules…

Energy suppliers have an optimistic view of their future readiness, with 64% rating themselves as well or very well prepared in terms of innovativeness, and 62% in terms of keeping up with technological advances and using innovative technologies. This is fairly in line with the overall results of the study.

Yet the authors warn, “The Future Readiness Index shows that German companies are heavily ruled by the motto: ‘Never change a winning system!’. But in disruptive times this should be expanded with ‘Disrupt, before you are disrupted!’.

On the surface it seems a good sign that 70% of energy companies consider themselves well-prepared in terms of their product and service portfolio, and 76% believe they are doing well at meeting the needs of their customers. However, this begs the question: are they truly well-positioned in these areas, or are they resting on their laurels and missing out on disruptive possibilities?

 

…But disruption will determine the future

In a ranking of the most important global trends, energy suppliers rate automation as only a moderate priority, whereas KPMG rates it as the most important. In this respect the industry is, at least according to the study authors’ evaluation, not only out of sync with reality but also below average compared to other industries. Automation can deliver significant gains through greater efficiency, but more importantly it enables radically different new business models.

At the same time, the study shows that companies in most industries do not adequately value disruptive business models and technologies. How is this possible? Disruptors such as AI, robotics, IoT and decentralised business models have the potential to make current business models obsolete. A thorough evaluation is not only helpful to grow the business, it’s necessary to simply survive.

Do energy companies simply fail to recognise the disruptive potential of automation and other technological advances, or do they lack the courage to follow through with it? Yet they are certainly innovating in some areas, such as smart meters and the convergence of power, heating and transportation.

Part of the resistance to automation in particular may lie in fear. Will robots and software make my job irrelevant? In reality automation creates new jobs. Any form of artificial intelligence is based on underlying human intelligence. Experienced experts in all fields will be needed to define and control automation and to keep up with ongoing changes in the market. Automation primarily relieves people of routine, repetitive tasks, allowing them to concentrate on more challenging activities.

 

The future looks bright – for some

Several applications of automation are beginning to take hold in the energy industry, spanning the complete value chain. Diving robots perform maintenance and inspection of hydroelectric plants, while drones do the same for transmission lines and wind farms. Decentralised wind, solar and storage facilities are combined into virtual power plants for better control and balancing capabilities. Smart meters gather data for more precise modeling of demand. And as the study authors point out, “Intelligent transmission grids and automated energy trading act faster and more precisely than their human counterparts.”

These and other automation technologies are finally making it out of pilot projects and into production. So although there may be tough times ahead for those energy companies that do not come to grips with the direction the industry is taking, the most agile, innovative companies will come out on top in the energy world of tomorrow.

 

The full study results (in German) are available from KPMG.


About KPMG

KPMG_logo.svgKPMG is a professional service company and one of the Big Four auditors. It is one of the largest accounting and consulting firms in the world with around 189,000 employees in 152 countries and has over 100 years’ experience in the industry.

KPMG provides broad energy industry knowledge, combined with experience in core areas including accounting, treasury and tax.


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