In 2016, a Global Market Insights’ report baselined the IoT Utilities Market at $4 billion.[i] However, this last January, IDC forecasted that utilities would spend $61 billion on IoT by the end of 2019. Currently, there are 1.17 billion utility IoT endpoints in North America, with a 17% increase expected in 2020 to bring that total to 1.37 billion endpoints.[ii] This rapid growth doesn’t yet contemplate the addition of potentially explosive factors like wide-spread DER proliferation, smart cities (e.g. streetlights) and electric vehicle adoption.
The significant increase in the adoption of IoT technologies is mostly due to three factors:
1) The ability to ingest and analyze massive data sets from incoming IoT data and explore the data quickly for insights;
2) The flexibility and speed by which a cloud computing environment can be established to support the collection and analytics of IoT data; and,
3)The decrease in hardware costs – between 2004 and 2014, the average cost of IoT sensors dropped from $1.30 to $0.60 and prices are expected to shrink another 37% by 2020.[iii]
As IoT endpoints in the utility environment rapidly increase in number, cyber security[iv] and integration management concerns become the biggest barrier to growth in the sector.
One of the best examples of IoTs impact on the utility market is through the growth of distributed energy resources (DERs). Each DER integrated into the grid has an associated IoT node that allows the utility to collect telemetry information and implement controls to align the DERs output with the grid’s operational objectives. According to Solar Energy Industries Association (SEIA), the number of solar DER installations in the U.S has officially surpassed 2 million and is expected to pass 4 million by 2023.[v]
While these forecasts might sound astronomical, they are also likely low. Likewise, the data generated by these devices will grow exponentially. A “smart” building generates on average 250 GBs a day. A single household smart meter can generate 400MB a year. If you multiply that by the 135 million meters in the US it comes to 54 petabytes or a little more than half of the data uploaded to YouTube a year. And that is for uploads every 15 minutes: if you read meter data every 30 or seconds to better fine-tune power forecasts, you’re moving into the exabyte territory. Critics will say you can throw most of it away, but it’s impossible to determine what data should get thrown away. More will be better[vi].
And while the magnitude and size of data are growing, cyber threats are growing evening faster. Starting with threats, the research warns that risks appear to be worsening, highlighting key vulnerabilities in utility infrastructure that malicious actors seek to exploit. These include common security gaps that are created as utilities rely on digitalization, data analytics, and artificial intelligence to help balance the grid with intermittent renewable energy and DERs and IoT grid edge devices.
A recent report by the Ponemon Institute read: “The target of attacks has shifted toward OT. The majority of respondents agree that cyber-threats are a greater risk in the OT than the IT environment. Where past attacks primarily targeted data theft, current and future attacks can hijack control systems and logic controllers that operate critical infrastructure with the intent to cause physical damage and outages.“
Integrating this scale of grid-connected DER and IoT without the right operational technology capabilities and strategy can leave a utility vulnerable. Increases caused by IoT in the magnitude of data, the risk associated with the ever-increasing number of endpoints and the timeliness of data and decisions can increase costs and leave utilities exposed to malicious actors.
Existing approaches in operational technology (OT) implementation at utilities are not often adjusted to reap the benefits associated with the IoT explosion. Heavy reliance on a single vendor limits innovation and value creation, while complex system integration often increases project costs and delays benefit realization. In addition, this ad hoc process of OT integration has led to a situation where many utilities are left with non-standard, incompatible databases and software interfaces and a dependence on a small number of proprietary third-party vendors to secure their solutions and connections into the utility networks – leaving the utility vulnerable.
The gap that exists for many utilities in managing the benefits and the risks of IoT and DER adoption requires a simple and secure solution. What is needed to help utilities bridge this gap is a solution that simplifies the acquisition, transport, and integration of data over a utility’s network – allowing the utility to realize the benefits of IoT and DER adoption while improving security and simplifying integration.
What is required is a platform designed to help utilities simplify the complexities of the operational technology and information technology convergence that IoT and DERs are ushering in at a not before seen pace. A platform that supports all legacy utility systems (e.g., SCADA, ADMS, DMS, OMS, DERMS, GIS, and AMI) and devices and integrates new grid-edge devices (e.g. DERs, EVs, application databases, energy storage, and microgrids) seamlessly to reduce costs and increase value creation. In addition, centralizing utility security governance and expanding that governance to edge devices via transport encryption and certificate-based management help reduce exposure and cyber risks.
Exponential scale. Exponential gain.
[iii] Goldman Sachs and BI Intelligence
[iv] KPMG: “Innovating a smarter and safer power network; Managing IoT risk in power and utilities.”