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Global energy company Iberdrola sees digital technology as a key enabler for its transition to a world powered by green electricity. Its CIO, Fernando Lucero, outlines the scale of its ambitions.
Digital innovation is exerting a widely disruptive influence on businesses everywhere. But at some large companies, it is also proving to be a liberating force, freeing them from the limitations of their traditional industrial foundations.
Multinational energy group Iberdrola is a standout case. The Spanish electricity and gas supplier, with its origins in the country’s Basque region, is embracing countless opportunities to exploit advanced digital technology across its operations to dramatically improve efficiency and to offer innovative new products and services to its customers. But, above all, Iberdrola sees digital as an accelerator for its strategic shift away from carbon-based energy sources to renewables.
The company, which operates in the UK (as ScottishPower), the US (as Avangrid), Mexico, Brazil (as Neoenergia) and Eurozone countries has committed a mammoth €1 billion ($1.1bn) a year to its digital transformation strategy through to 2022 — supporting a further €13 billion investment in renewables. And the prospect of making a big impact on that transformation agenda has put its IT organization in the driving seat for many initiatives.
Climate of change
The sense of excitement is certainly experienced by Fernando Lucero, Iberdrola’s group CIO. “I consider this a fantastic moment [to be in IT]. It’s both a challenge and a very great opportunity for everyone,” he says. “There is momentum behind a host of advanced technologies — IoT, blockchain, big data analytics, AI, robotics, VR, smart mobility and others — that are able to support big changes in what has historically been a traditional industry.”
Lucero believes that the electricity utility industry is undergoing the kind of metamorphosis that telecoms went through at the turn of the millennium, when advances in mobile tech threw a stagnant and highly regulated sector, with its roots in the early 20th century, into a competitive fervour. The result: a dramatic change in vendors’ core offerings and the ways they interacted with customers.
“We are seeing a big transformation,” he says of the electricity market. “Firstly because of the industry’s re-orientation towards decarbonization and renewable energy, but also through the widespread application of digital technologies to enable greater efficiency of energy generation and supply as well as to innovation in products, services and customer engagement.”
Electricity plus customer-centricity
Customers increasingly expect their energy supplier to offer them an experience approaching that provided by an online retailer, according to Lucero. “They want to be empowered to make their own decisions, which means that energy companies need to provide different [technology-enabled] products and services,” he says. “That has radically changed the company’s focus towards improving customer relationships through the deployment of new products and services, many of which are purely digital.”
Iberdrola already gives its Spanish customers tariff choices that go well beyond the standard day and night plans offered by most electricity companies. These are designed to suit a wide range of lifestyles and patterns of consumption, giving customers options for Weekend, Summer, Winter and Stable (constant 24/7) pricing plans. There is even an option aimed at people who own more than one home, allowing them to take their energy plan from residence to residence, and a plan where customers can apply lower rates to an 8-hour peak period of their choice.
That capability is echoed in another application, Energy Wallet. In fact, this is an energy bank that enables customers to purchase energy units for themselves or other consumers. “The concept is that you buy an amount of energy and use it where you want, or even transfer it to your friends or family,” Lucero explains.
This is just the first step in of the company’s move towards providing personalized services to match the specific preferences of each customer.
“In the future we will offer fully personalized products based on the energy behavior of each individual or family,” he says. “If your records show, say, you run the dishwasher at 3am, you get up at 8am and put the washing machine on before leaving for work, then we can create a personalized tariff to reflect those energy requirements. At the end of the day, electricity is electricity, so we want to create products and services that are aligned to our customers’ many different needs.”
All such services are smart in the sense that customers can control their plans and energy consumption from a mobile device, with Iberdrola also linking them to its Smart Home and Smart Solar generation solutions.
As the company takes on nimbler energy start-ups in all of its markets around the world, becoming more “customer-centric” represents a big shift, Lucero reports.
“Historically, we didn’t have much of a relationship with the customer — indeed, that was limited by the regulator — and digital products and services were not on the customer’s agenda five years ago,” he says. “But now the customer wants to have all capabilities in a mobile app, with consistent information and access across all channels — web, social media, contact centers. The customer is changing and we need to change to match that with mobile consistent, personalized energy services.”
All about EV
The changes that Iberdrola has enacted are not all about supplying smarter energy for the home. Its biggest emerging opportunity by far lies on the mass provision of infrastructure and services for electric vehicles (EVs).
“In the coming years, the way you fuel your car is going to be very different. We’re all aware that the major car manufacturers are switching to electric vehicles,” says Lucero, who adds that, wherever they may be, “customers want to charge their vehicle using the best tariff available to them. The market is growing exponentially and already we’re launching multiple initiatives to install charging points [on streets] and chargers at customers’ homes, again with very personalized tariffs.”
Intelligence and efficiency
Alongside that move to customer-centricity, digital is supporting a wave of technology-driven initiatives designed to significantly enhance Iberdrola’s operational efficiency — from the roll out of smart meters to tens of millions of customer homes to the use of AI to maximize the performance and reliability of wind turbines.
Iberdrola has already installed smart meters for 14 million of the customers it serves worldwide, a number that it predicts will rise to 20 million by 2022. The benefits to the company are compelling. “Smart meters automate all of the meter’s operations related to the grid,” says Lucero, while providing deep insight into patterns energy usage.
“Through the vast amounts of data they collect, we can now know the consumption patterns of our customers in real-time. That is highly valuable information when we are trying to manage demand as well as plan new products and services,” he adds.
Push towards renewables
All these initiatives underpin the group’s strategic move from carbon-based sources of electricity to wind, hydro and solar power. It started the transition almost 20 years ago and has since invested €100 billion in renewable energy and smarter infrastructure. Today, 62% of its total capacity is derived from renewable energy.
Some of its subsidiaries have gone even further — and faster. This year, for instance, Scottish Power sold the last of its thermal generation facilities to become the first big utility in the UK to provide all of its electricity from renewable sources.
Such ambitions would not be economically viable without the help of IoT and big-data analytics, Lucero stresses. “In every renewable energy generator we have thousands of sensors gathering information online constantly. Everything related to the plants we operate — their maintenance and regulation — needs detailed and accurate data in order to deliver the performance and reliability we need. IT is leading the agenda to maximize the use of technology to support the company’s strategy and deliver business benefits.”
A two-headed tech
Iberdrola’s transformation has required Lucero’s team to become a “double IT organization.” He explains that it used to focus purely “on the operational side, supplying technology services,” just as its counterparts in other many other companies would do. Today, “everyone still expects IT to be very resilient, accurate and efficient in terms of operating costs, but the business wants us to lead the transformation too.”
The IT function has had to change its approach to rise to this dual challenge. “We are running the operations, generating value in the traditional way, keeping our infrastructure running, our back office reliable,” he says. “But at the same time we have a new IT organization that is more agile and engaged with the business.”
In certain areas — retail, for instance — the IT organization has become intertwined with, and inseparable from, Iberdrola’s operational functions. “On many projects many people don’t know who’s from IT and who’s from the business,” Lucero observes. “It’s part of our agile way of providing products and services.”
He calculates that close to 50% of the IT group is now operating in this mode.
To spur innovation, Lucero’s team is continuously exploring business cases for adopting new technologies and, where it sees clear benefits, investing in these. He cites a few favourite examples:
• Virtual reality to prepare employees for complex and dangerous environments
“The cost of logistics and preparing people adequately to work in environments such as offshore wind farms is very high,” Lucero says. “So we use gamification and VR technology in our training.”
• Blockchain to check the provenance of energy
“A customer choosing an Iberdrola or ScottishPower tariff may want to be assured that their electricity is coming from 100% renewable sources,” he says. “Using blockchain to certify this gets round a process established by energy regulators that is otherwise highly bureaucratic and would normally take several weeks. That certification will only grow in importance. It’s expected to become part of Iberdrola’s smart mobility offering for EV charging. If you have made the commitment to buy an electric car, you are likely to be sensitive about the origin of the energy you use to charge it and want that certified as from renewable sources.”
• AI to improve wind-farm efficiency
“All the information coming in from sensors — the movement of blades, vibration [in the platform] and temperature of generators — can be tracked and analyzed by AI. That helps us to identify operational issues, maximize performance and support predictive maintenance,” says Lucero, who adds that the tech is also proving useful in identifying potential locations for new wind farms.
Providing that level of analytics capability is already a core activity for IT — and this will only grow in importance, according to Lucero, who says: “Each success story we have encourages the business to ask for more.”
But Iberdrola’s digitally inspired cultural shift goes well beyond the IT function, as he explains: “Years ago, the business saw its activities as separate from IT. Now it’s ‘thinking digital’ about the uses of technology for transformation. The business assumes that it needs the IT organization for its deeper knowledge and to lead the technology part of transformation. Now, if you are talking digital you’re not necessarily part of IT or talking to IT; you are part of a wider digital transformation activity. And that’s a huge change.”
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