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Utilities Delaying Smart Tech Investments Due to Cost Recovery Concerns

April 15, 2015
This Black & Veatch report finds that many utilities are using smart technologies to speed their networks and become more efficient.

Black & Veatch’s 2015 Strategic Directions: Smart Utility report proves that implementation of automation and data analytics capabilities are transforming utilities. Smart technologies allow providers to be more responsive, efficient and resilient. However, the movement does not yet enjoy universal adoption. A large number of utilities are delaying investments over cost recovery concerns. 

“Smart devices, enhanced telecom networks and the expanded use of data analytics are transforming the delivery of key utility services,” said Martin Travers, president of Black & Veatch’s telecommunications business. “We were surprised to find that more than a third of utilities report that they currently do not have plans to launch smart technology projects, primarily due to investment return pressures.” 

The Black & Veatch report finds that many utilities are using smart technologies to speed their networks and become more efficient. Advanced metering infrastructure and demand response programs are seen as important steps. They also provide the backbone for broader Utility 2.0 programs. These efforts address business, operations and customer needs. 

Budgetary constraints and other factors are keeping some utilities from winning key stakeholder support for data analytics solutions.  

“The value of technology that produces and uses data for operations and planning will support the case for investment,” said Fred Ellermeier, vice president of Black & Veatch’s smart integrated infrastructure business. “Evidence is growing that acting on that data will have a payback that far exceeds the cost of implementation.” 

The 2015 Strategic Directions: Smart Utility report explores how utilities manage change while balancing complex operational and economic priorities. Some key findings include: 

  • Smart grid and smart utility initiatives are the top drivers of telecom infrastructure upgrades.
  • Nearly 60 percent of utilities plan to replace, upgrade, or deploy new communications infrastructure in the next five years.
  • Nearly 70 percent of respondents believe smart city models will gain wide adoption over the next 15 years.
  • Electricity, transportation and water were cited as the city services that respondents believe will benefit most from smart initiatives.

Resource preservation, quality of life factors and the push for efficiency gains are also driving interest in smart city programs.

“The connection between smarter utilities and smart cities is clear,” added Travers. “We believe smart utilities will extend their focus beyond their own walls. They can become driving forces in integrated smart community efforts. This transition is a major change in traditional operating models. However, it is critical to creating smart cities.”

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