The Digital Transformation of Small Utilities

digital transformation

Improving Performance of the Long Tail of the Water Industry

By Doug Hatler

According to the U.S. Environmental Protection Agency (EPA), there are more than 50,000 drinking water and wastewater utilities in operation in the United States serving a population of less than 10,000. These utilities face the same challenges of their larger counter parts and more, including lack of financial resources, economies of scale, and long-term planning; management limitations; aging infrastructure and workforce; ineffective treatment technologies for modern day pollutants (e.g., PFAS); partial digital transformation; difficulty keeping up with current and future regulations; achieving service levels; and meeting customer expectations.

One challenge of specific interest is “partial digital transformation,” because completing such a transformation could help overcome several other challenges. Unfortunately, according to Eric Bindler, senior research director at Bluefield Research overseeing it’s digital and municipal water research, “small utilities are in much earlier stages of their digital journeys than their larger peers.”

The Digital Transformation

For perspective, the digital transformation began with the start of third phase of the industrial revolution (“Industry 3.0”) in 1969. The transformation rapidly accelerated in the 1980s and thereafter with personal computing, networking and connectivity, the Internet, mobile devices, robotics, data storage and management, etc. Industry 3.0 introduced electronics and information technology (“IT”) to automate production and data management, and to perform human tasks.

  • Automating systems and processes, remotely monitoring equipment, and optimizing resource allocation leads to more efficient operations, reduced labor and overall cost savings.
  • Digital data management collects, stores, analyzes and reports on vast amounts of data and information empowering drive data-driven decisions that eliminate the time consuming and costly uncertainty associated with intuition and trial-and-error.
  • Real-time monitoring and control facilitate can prevent, or provide early detection of, leaks, faults or unusual behavior, allowing utilities to take prompt action and minimize disruptions in service and potential safety issues.
  • Predictive maintenance using asset information, data analytics, and machine learning algorithms can predict equipment faults and failures, and better prioritize maintenance needs preventing costly breakdowns, optimizing maintenance schedules and ensuring the longevity of infrastructure.
  • On-demand training, content management, knowledge management and skills development systems and tools are cost effective means to onboard, educate, inform and develop new and existing employees, reducing off-site travel and third-party training costs.
  • Online portals, social media, mobile applications, email notifications and smart meters allow customers to track their water usage, receive timely alerts, access billing information, keep abreast of utility news and events, and report issues conveniently, improving customer service levels and satisfaction.
  • Advanced digital technologies and artificial intelligence can monitor and detect water losses; optimize the energy efficiency of water distribution, wastewater collection and treatment equipment and processes to help achieve sustainability goals and ensure long-term availability of clean water.

What are the Barriers to Digital Transformation?

Small water utilities encounter both internal and external barriers to full digital transformation. These include limited resources, infrastructure limitations, technical expertise, cost considerations, data management, regulatory compliance and resistance to change. Collaborations and partnerships between larger utilities, government agencies, industry associations, consultancies and technology providers can help overcome barriers.

  • Financial Support: Larger utilities and government agencies can provide funding and grants. Large utilities and industry associations could act as purchasing aggregators grouping together small utility demand for digital products and services to obtain economies of scale unavailable to individual utilities.
  • Technical Assistance: Sharing technical expertise and knowledge through training programs, workshops and mentorship.
  • Collaborative Partnerships: Forming partnerships with larger utilities can facilitate knowledge sharing, resource pooling and joint technology adoption.
  • Shared Services: Large utilities could offer shared services such as centralized data management platforms, remote monitoring, cybersecurity and technical support, which can be accessed by small utilities at a reduced cost.
  • Regulatory Support: Government agencies could better incentivize and support digitization efforts by offering grants and funding, providing clear guidelines on compliance, and streamlining any required approval processes.
  • Technology Solutions Tailored for Small Utilities: Technology providers and implementation consultancies could provide pre-designed, cost-effective and scalable solutions to specifically address the requirements of small utilities, considering factors like affordability, ease of use and compatibility with existing infrastructure.
  • Knowledge Exchange Platforms: Establishing platforms where utilities, agencies, and technology providers can share success stories, best practices and lessons learned can inspire and guide small utilities in their digitization journey.

What Does the Digital Transformation Cost?

The cost of digitizing a small utility varies based on the size of the utility, the level of digitization, existing infrastructure, and specific business, operational and regulatory requirements. The first consideration is the current infrastructure including reliable networking and internet connectivity as well as the cost of hardware components (computers, servers, sensors, etc.) and software systems (financial management, asset management, SCADA, GIS, etc.) IT infrastructure can vary depending on the scale and complexity of the utility’s operations and the chosen vendors. Data management and security is a critical component for data storage, backup systems, cybersecurity measures, and compliance with relevant regulations.

The infrastructure, systems, and tools require implementation and integration. These include set up, configuration, data migration, any desired customizations, report development, employee training, and organizational change management. Integration requires establishing secure connections and exchange of data between systems and tools. The cost of these activities can vary based on the scope and scale of the systems and tools, availability and quality of data, and the amount of participation by utility resources.

Another critical component is training and change management. It’s likely a digital transformation will change how management, staff and contractors conduct business and operate the utility. In some cases, job roles and responsibilities change. Training and organizational change management will require additional investment in revised job descriptions, policies and standard operating procedures, workshops, role-based training, and skills development.

Once the infrastructure, systems and tools are fully implemented and integrated, just like any other asset, there is maintenance and support. The ongoing costs will be for software and firmware updates, technical support, licensing and subscription fees and data storage for cloud/SaaS systems.

The Future is Now

As mentioned in a previous article, the first three industrial revolutions have passed. The fourth industrial revolution, or “Industry 4.0,” is now upon us. Industry 4.0 is transforming modern society and economies through innovation brought about by advancements in digitization, interconnectivity, data analysis and automation. The elements of Industry 4.0 integrate physical production and operations with smart digital technology, machine learning and big data to create a more holistic and connected world. The result is productivity far beyond what has been seen in the past three industrial revolutions.

However, the water industry in general has been slow to adopt new technology. From a technology adoption perspective, water utilities are “laggards,” meaning they are typically the last to adopt an innovation. Therefore, the industry is not fully realizing the benefits of digital transformation. Many large and innovative smaller utilities have completed the digital transformation of Industry 3.0 and are starting to adopt the technologies and innovations of Industry 4.0. However, thousands upon thousands of utilities are mired in past innovation cycles for reasons mentioned earlier, especially lack of resources and resistance to change.

The path forward to improving the performance of small utilities through digital transformation is collaboration and partnership with larger utilities who have completed the digital transformation and offer economies of scale and scope; with government agencies who can provide funding and streamline regulatory hurdles; with industry associations who can help align stakeholders behind a common vision along with the consultancies and technology providers who receive income from water utilities. A rising tide lifts all boats.

Doug Hatler

Doug Hatler is president of the consultancy Environmental Business Ventures, LLC, helping early-stage watertech, cleantech and climatetech companies bring innovative products and services to market. He has more than 30 years of experience in roles such as environmental engineering and management consulting.

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