Nishandra Baijnath | Systems Architect | Power Systems | Schneider Electric | mail me |
Modernising power networks through digitisation and innovative technologies, such as Artificial Intelligence (AI) and Machine Learning (ML), is essential. Utilities and municipalities must improve efficiency and manage the growing complexities of energy distribution.
A key element of this transformation is using advanced software. This software serves as the backbone for integrating AI and ML into utility operations. However, the financial investment required for such a shift often poses a challenge.
Shifting from CAPEX to OPEX
By shifting from Capital Expenditure (CAPEX) models to Operational Expenditure (OPEX) frameworks, utilities can distribute costs over time.
Subscription-based payments for software reduce the necessity for large upfront investments. This transition facilitates the gradual integration of advanced technologies into their operations. It enhances grid efficiency and reliability.
Large electrical utilities typically invest in enterprise-level software like Supervisory Control and Data Acquisition (SCADA), Advanced Distribution Management Systems (ADMS), and Outage Management Systems (OMS). These systems help them operate their networks efficiently. Historically, this software was provided through perpetual licences.
OPEX model for utilities would pay an upfront fee and own the licence indefinitely. This model is similar to how Microsoft Office used to be sold.
Significant CAPEX
However, this perpetual license model required significant CAPEX from utilities. They needed to purchase and maintain these software systems. These perpetual licence models usually included maintenance and support contracts with software vendors. This added to the ongoing OPEX for the utility.
The upfront cost for deploying a typical OMS system can start around R25 million. The level of implementation affects the total expense. This cost does not include maintenance, support contracts, or the hardware required to run the software. The significant capital investment for these enterprise software systems is difficult for municipalities and other utility providers to pay upfront.
In recent years, the software industry has shifted towards a subscription-based model. Customers no longer own the platform. Instead, they “rent” or subscribe to the platform for a set duration. ADMS, OMS, and SCADA applications have followed this trend. Utilities now use subscription-based or Software-as-a-Service (SaaS) models instead of traditional perpetual licenses.
Beyond financial considerations, the subscription-based model is key to modernising utility networks. For example, an ADMS generates large volumes of real-time network data. To leverage this data with ML and AI analytics, utilities using on-premises software must push data to the cloud.
OPEX model for utilities are easier to analyse
However, with a SaaS model, the data already resides in the cloud. This setup makes it easier to apply AI and ML to analyse network behaviour and conditions.
A cloud-based SaaS approach enables utilities to leverage advanced analytics and insights. This process improves operational decisions and network management. Additionally, leveraging the OPEX model and cloud-based platforms provides access to innovative capabilities in energy trading and management.
Utilities can invest in solutions that enable energy trading based on time-of-day usage patterns. This flexibility allows utilities to optimise energy production, generation, consumption, and storage. The platform provides insights that enhance decision-making. The OPEX model supports innovation and flexibility in energy management and trading. Achieving this was more difficult with traditional, capital-intensive, on-premises software deployments.
Ultimately, shifting from CAPEX to OPEX models impacts utilities’ balance sheets. It reduces the high expenditure associated with capital-intensive projects. The OPEX model, through SaaS, helps finance teams better manage cash flow. It also reduces reliance on internal IT teams for enterprise software maintenance and support.
This transition allows utilities to focus more on core operations, such as keeping the lights on. They no longer need to dedicate resources to maintaining software systems.