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How power companies can reap IoT rewards

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Unlocking value from the Internet of Things requires more than blind investments in technology. Those organisations most likely to pull ahead of their competitors will be the ones that focus on security, performance and standards.

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The Internet of Things (IoT) is rapidly reshaping the world in which we live, one smart device at a time.

But while most end users think of this new technology paradigm in the context of things like fitness trackers, smart watches and even connected cars, the reality is that organisations are investing billions internally in IoT systems to improve business efficiencies and productivity.

Research and analysis firm Gartner claims that over a third (37 per cent) of the 8.4 billion connected “things” in use globally by the end of 2017 will be implemented inside companies. As an industry body focused on promoting interoperable IoT standards, the Wi-SUN Alliance recently undertook in-depth research to find out more.

While oil and gas and utilities firms are leading the way in terms of IoT projects, serious roadblocks remain. To stay one step ahead of the competition, they must focus on technologies which offer maximum security and performance alongside support for open interoperable standards.

We specifically looked at IoT in relation to smart cities, utilities and industrial (IIoT) initiatives. These are fast-growing markets: the IoT utilities sector could be worth as much as $15 billion by 2024 while in smart cities it’s predicted to reach a staggering $147 billion by 2020, and IIoT projects could hit $195 billion by 2022. Overall, over half of those IT leaders we spoke to who are investing in IoT said they’d already fully implemented a strategy, while a third are rolling one out.

However, the stats are even more impressive for certain sectors. With a long track record of using SCADA and ICS platforms to drive business and operational efficiency, oil and gas firms are most eager to embrace IoT, with 88 per cent considering enablement as a priority.

Utilities are not far behind, while over three-quarters of firms investing in IoT say it is a top priority for the coming year. One reason for this growing interest in IoT technologies is the fact that it plays into several other key areas such as IT automation, big data analytics and organisational connectivity.

Power providers see it as a great way not only to improve safety and quality of life for citizens but also to improve internal efficiencies and service reliability. An impressive 99 per cent of IT decision makers explained that they’re seeing tangible improvements in things like: business efficiency (54 per cent), customer experience (49 per cent), collaboration (48 per cent), business agility (47 per cent), and reduced costs (45 per cent).

The growth of smart businesses

These include companies like Oklahoma Gas & Electric, which has deployed a robust IoT network, helping to reduce operational costs, lower emissions, minimise the number of service vehicles on the roads and empower consumers to manage their own energy supply. The beauty of the firm’s expandable IoT network is that it had also been used to connect 250,000 LED street lights — improving service levels, reducing energy consumption and accelerating resolution of outages.How power companies and utilities can reap rewards from the Internet of Things

Florida Power and Light (FPL) used advanced metering infrastructure (AMI) and automated feeder switches (AFS) to boost resilience in the face of frequent storm-related outages. It worked: the firm claimed it avoided 118,000 outages and restored power within two days to 99 per cent of others affected during last year’s Hurricane Matthew.

Other utilities players including Baltimore Gas & Electric, ComEd, BC Hydro and Pepco Holdings are doing similarly innovative things with smart grids. These initiatives aren’t just confined to North America, either: smart lighting projects, for example, can be found all over the world, in places like Glasgow, Paris, Copenhagen and London.

Focus on security

While the benefits are potentially huge, there are also major IoT challenges potentially holding up deployments. Some 90 per cent of IT leaders told us that there had been problems implementing their strategy, with over a third (35 per cent) claiming to have encountered “extremely” or “very” difficult challenges.

Security is perhaps unsurprisingly the biggest potential roadblock to IoT projects, with over half of respondents citing it. A recent study told us that cyber-attacks are among the top threats for power and utility companies, while anther claimed that many companies lack the skills to address such risks. Another claimed more than half of decision makers working at industrial plants have already suffered a security breach. 

As if that wasn’t enough, we have an almost weekly parade of eye-catching news headlines warning of nation state attempts to target the critical infrastructure sector. The intensity of these attacks has even forced British Prime Minister Theresa May and her security experts to publicly warn Russia. It is widely believed that Kremlin hackers were behind sophisticated attacks on Ukrainian power suppliers in December 2015 and 2016 which led to blackouts for hundreds of thousands of innocent customers.

The good news is that IT leaders recognise the threat from cyberspace. Half of those we spoke to said they want proven security with multi-layer protection and continuous monitoring to protect smart city IoT, while 44 per cent said the same about smart utilities. That’s why the Wi-SUN Alliance offers defence-in-depth when it comes to cyber-threats. This includes device “passporting” to ensure infected devices can’t connect to any corporate network; encryption and authentication of network traffic; frequency hopping to combat signal jamming and eavesdropping; and support for over-the-air (OTA) updates.

OTA updates are a vital way for manufacturers to ensure their products can be fixed remotely if vulnerabilities are found. Given that 15,000 new vulnerabilities were discovered in 2016 alone, this kind of capability is a must-have for any modern IoT system. As endpoint security management gets ever more complex, driven by the explosion of enterprise IoT devices, IT leaders will be looking for any help they can get to mitigate risk.

C-level buy-in

However, the challenges don’t end there. A third of IT bosses said that funding was a major barrier to IoT projects, while the same number pointed to a lack of commitment from leadership. Slightly fewer (30 per cent) claimed the board’s lack of understanding of the benefits of IoT was getting in the way of progress.

It’s more than likely that these are all related. If IT leaders can get better at communicating the business benefits of IoT to senior members of the board then they stand a great chance of turning things around. Once the C-Suite hears of success stories from competitors and insight of the kind revealed in this report, they’ll be more willing to release those all-important funds.How power companies and utilities can reap rewards from the Internet of Things

We also looked at the criteria by which IT leaders evaluate IoT technologies for use in smart city, IIoT and utility-based projects. Surprisingly, network topology was given as the number one criterion. The majority favour a combination of star-based networks and mesh networks — the latter being particularly resilient to cyber-incidents such as signal jamming and therefore well suited for use in critical infrastructure (CNI).

Network performance was also high up on the priority list, illustrating the continued importance of latency and bandwidth to effective IoT systems. Next came standards — a key requirement for over half of IT bosses. In fact, 45 per cent demanded open standards for smart city solutions, while a similar number said the same for utilities projects. Open standards are vital to keeping costs down and choice of products high for IT leaders. They promote performance, security and reliability, while backwards compatibility helps ensure that legacy assets don’t get stranded.

Driving success

According to our survey, US firms appeared to be most mature in their approach to IoT, with two-thirds (65 per cent) claiming to have a fully implemented IoT strategy in place, versus just 47 per cent in the UK, 44 per cent in Sweden and a quarter (24 per cent) in Denmark. It’s clear, therefore, that the rate of IoT adoption will vary by geography, as it does by industry. UK firms seem to have the most trouble at present, with just 3 per cent claiming their projects were completely challenge-free.

Ultimately, the most important thing to remember is the end user. Power suppliers and utilities firms looking to utilise IoT technologies to drive internal and external benefits will only achieve success if they get the consumer on board. This makes awareness raising and education programmes vitally important to sell your customers the benefits of any new IoT project. Your eye-catching new solution might have the potential to transform the customer experience, lower costs, improve efficiencies and drive greater business agility, but if your customers aren’t with you, all that planning and investment may be in vain.

We’ve already well and truly entered the IoT age. But unlocking value from these technologies requires more than blind investments in technology. Those organisations most likely to pull ahead of their competitors will be the ones that focus on security, performance and standards to drive success.

Phil Beecher is President of Wi-SUN Alliance, a global member-based association driving the proliferation of interoperable wireless solutions for use in smart cities, smart utilities and other Internet of Things (IoT) applications. 

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