While electric companies in the Global North wrestle with how to keep the lights on as ever bigger solar and wind park capacities come online, developing-world utilities are experimenting with new ways of working and transforming the relationship between themselves and millions of new customers.
When planning for change in the decades ahead, Western utility companies could learn much from the experience of competitors active in emerging markets, as well as from business units of their own based in such regions. While it is intuitive to think corporates in the world’s most advanced economies will always have first-mover advantage, and be able to rely on the latest technology, such assumptions may ultimately lead to them falling behind their developing-world peers.
There are several reasons why Western companies cannot afford to be complacent. Firstly, developed markets can be prone to sticking rigidly with longstanding infrastructure which is typically complex and expensive to change. As a result, modest improvements and updates are likely to be preferred over wholesale change and the introduction of new systems.
The rollout of new infrastructure may also face democratic and bureaucratic resistance, as well as regulatory inertia – even if it offers obvious gains. For example, the resistance to building new railways is entrenched in Britain and almost impossible to overcome, with costs spiralling out of control, as England’s beleaguered HS2 high-speed rail project is demonstrating. Such opposition is present despite the fact the country’s economy was historically revolutionized towards the building of large-scale railways.
Developed markets may also carry a bureaucratic burden that discourages business model evolution. By contrast, less-regulated emerging markets can foster flexible and dynamic business models, adaptable to regulatory change and market disruption. That is why disruptive technology and new approaches tend to have the best chance of getting off the ground in emerging markets.
While technology is often developed in the Western engineering labs of academia or industry, emerging-market utilities face fewer bureaucratic obstacles to adoption, which means it is easier to carry out large-scale testing and faster to learn the necessary lessons.
This flexibility has enabled emerging markets to leapfrog traditional utility models in some instances. The adoption of microgrids and off-grid renewable energy plants in sub-Saharan Africa, for example, demonstrates the efficiency of decentralized power generation. Flexibility encourages the rapid proliferation of new systems and methods, whereas this would be inhibited in developed markets by the large-scale investment required to change legacy infrastructure.
Another advantage of emerging markets is the widespread adoption of internet and smartphone technology. In the context of utilities, this means emerging markets can generally offer the necessary networks for monitoring energy usage, making payments, and implementing real-time communication with utility providers. This offers lessons in business operation and, crucially, consumer engagement.
It is no surprise that renewable energy technology’s increasing affordability in emerging markets is fuelling a “prosumer” trend – with people not just consuming energy but also producing it, and selling any surplus back to the grid.
Utilities in emerging markets have shown the effectiveness of incentive programs such as demand-response and time-of-use tariffs with their use in incentivizing prosumer participation, balancing the grid load, and promoting energy efficiency.
Smart appliances with artificial intelligence capability are hugely exciting, as models learn and adapt to consumption habits in markets across the world, from Egypt and Brazil to the Philippines, then respond to price signals. These smart grids allow for two-way communication between utilities and consumers, enabling a dynamic, interactive energy ecosystem and better grid management.
In such fragmented and diverse markets, the need for interoperability is very clear. At Pylon, we have developed a hardware-agnostic infrastructure management platform which can integrate as many as 26 different metering models and enable utility companies to monitor usage, detect losses, and improve revenue in real time.
This approach demonstrates how emerging market utilities can leapfrog well-established competitors, providing a blueprint for the future. Similar lessons, regarding subscription models to supply affordable metering infrastructure, could be useful for Western utilities, particularly as high inflation makes consumers in developed markets acutely aware of costs.
For Western utilities, emerging market innovation should provide insight into the changes needed to work in unfamiliar conditions, as well as the opportunities and limits offered by smart grids. Both can ensure further development is adjusted, to make adoption in developed markets as seamless as possible.
The lesson is that distributed-generation, coupled with energy storage, can provide reliable, sustainable power, even in remote locations. It is a necessary example for many markets, particularly given the execution challenges of widespread renewable power installation.
Likewise, utility companies can play a crucial role in enabling and managing virtual power plants. These offer services similar to traditional power plants but with greater flexibility and lower environmental impact.
It is said that necessity is the mother of invention and this is particularly true for utilities in emerging markets. Time after time, these companies develop and apply new, technology-based solutions in often inhospitable environments. Their successes and setbacks could offer vital lessons for Western utilities over the coming years.
About the author: Ahmed Ashour is the co-founder and CEO of Pylon, the utilities management platform transforming water and electricity companies in emerging markets. Ahmed plays a crucial role in driving the efficiency of utilities and helping to save the planet, one smart metering point at a time.
This post appeared first on PV Magazine.