Projecting the future is an industry obsession worldwide. We love to try and figure out how things will work out—so we can appropriately plan ahead. We’re planners. We just can’t help ourselves.
Sometimes, our projections are wrong. Sometimes our projections are surprisingly right.
The best, most accurate projections come from a good look at data sets, and one of the most interesting recent ones comes from the McKinsey Global Institute, a think tank focused on economy. Their newly released report “Beyond the Supercycle: How Technology is Reshaping Resources” is an 116-page fascinating projection on how tech advances are rewriting not just our future vision but the basic building blocks of that vision. To put it simply: We used to think about all these possible ways we could go, given the right first steps. Now, we know those first steps and can tell you at least the cornerstones of your utility future.
So, what are the top lessons from this larger McKinsey projection for us in the smaller slice of the utility industry? Here’s our top three round-up.
Tech advances will lead the way to your utility 2035, not regulatory policy: Since the advent of the utilities industry, regulation and a top-down approach have ruled, whether it was rural electrification and water infrastructure outreach or rate-base adjustments. We’ve always been a siloed universe, but tech possibilities are changing that from the edges in: analytics, the Internet of Things, electric cars, renewables, and energy efficiency adjustments from the customer back to the utility. McKinsey sees this shift from a heavy-handed change through the silo to tiny changes at the edges and points to be the new norm.
The report does add that regulators and policy makers could actually help a bit by becoming good managers of a portfolio-approach to energy and resources (and helping with the transitions involved in all this disruption rather than seeing themselves as protectors of the old system).
By 2035, tech could bring trillions in savings, and primary energy demand may hit the wall: McKinsey modeling shows some good money from all these crazy tech changes, with cost savings between $900 billion and $1.6 trillion to the global economy by that end date. And the think tank predicts a slow or even a peak in “primary energy demand growth” by that date (because of energy efficiency upticks, decreases in fossil fuel use, cheaper renewables and reduced transportation demand as well). If we go faster in our renewables adoption, we may hit that wall as early as 2025, they think.
The report doesn’t explicitly point to how these concepts will change the utility industry directly, but the concepts laid out do support the idea that utilities need to continue to evolve from a commodity-delivery model to a service-driven one focused on efficiency and the customer.
Survivors in this game will be agile: McKinsey’s suggestions are pretty simple. To get ahead of this rollicking vision, utilities and resource companies will need to focus on digital, embrace that evolving tech, understand how that tech can make them more productive and efficient (and invest in it) and, above all, be super flexible. In this race, it’s not about being first with a one-and-done approach. It’s all about being in the front of the pack over and over and over again.
The report added that efficiency, especially, will be a huge part of that agility picture, with accelerated adoption of EE products and programs leading to energy demand reduction around 12 percent by the end of McKinsey’s 2035 timeline.
While those notes are our particular top takeaways, they are certainly not the end of the interesting chatter in that 2035 vision McKinsey report. Other moments struck us as well, including the concept that renewable energy may become “the cheapest form of power” and grab a share of generation close to 40%, that electric vehicles could lead auto sales in that future, and that utilities may talk to customer devices directly to figure out appliance upgrades and retrofits for that all-important efficiency.