Digitize or Die: The Power Producer's Imperative in 2017

Another year has come and gone in our industry, and what a year it has been. We rode into 2016 off the wave of COP21, which set an unprecedented global commitment led by the United States. The momentum was further felt here with the extension of the investment and production tax credits, which hastened the boon for renewable development. And as costs in solar and wind kept dropping to unprecedented levels, the market never looked better.

However, this year wasn’t all sunshine and roses. The fall of Sun Edison showed us what happens when you fly too close to the sun. Its fate stresses the need for greater compliance and responsible project financing. A wave of populist movements throughout Europe, most notably Brexit, stands to threaten the U.K.’s own energy targets, as well as well as greater Europe’s, if they ramp down renewable development and revert to fossil fuel reserves. However, the one stunning result that overshadowed all others in 2016 was none other than the U.S. election, with the upset win by notorious climate change skeptic, Donald Trump. Trump’s promises to repeal environmental regulation, revive the coal industry and pull American support of COP21 all sound too disturbing to be true, especially in light of the fact that humanity is at a critical point in the race of our lives.

While we are certainly going into 2017 against a headwind, there is still a significant amount of tailwind to keep propelling us forward. Remember that economics are in our favor. Thanks to the precipitous decline in advanced energy project costs, renewables are beginning to undercut fossil fuel prices. In many countries, solar and wind are quickly becoming the cheapest form of electricity, as evidenced by the record low PPA prices that we saw this year. The world has now reached a significant inflection point where more capacity for clean energy is being added than for coal and natural gas combined. So despite what happens in the White House this year, we must remain optimistic because economics will always ‘Trump’ policy.

With that being said, the race for renewables is officially on. The massive shift from centralized to decentralized generation is occurring rapidly, and causing unprecedented challenges for our industry. The shift is proving to be very impactful on operational and capital expenditures. Now more than ever, new investors are demanding better compliance, risk visibility and transparency, and real-time reporting. In efforts to meet these new requirements, adding headcount is driving operational costs past the point of profitability.

How are energy companies responding? Their choice is either to digitize, or die. As highlighted in the new IDC Insights whitepaper, Energy Investment Lifecycle Management: The Power Producer's Digitization Imperative, businesses that digitize their processes with Investment Lifecycle Management (ILM) are able to improve data visibility and integrity, increase productivity and drive profitable growth and compliance. Ultimately this provides the competitive advantage that they need to survive and thrive in this higher-volume and higher-velocity renewable energy future.

In the words of David Crane, former CEO of NRG, “Strong IT platforms are key to the distributed future”. Legacy systems and business processes designed to support conventional, centralized power generation are no longer adequate to support the distributed power generation model of the future. They are fraught with organizational and data silos, manual and disconnected business processes and inadequate decision-support systems. This year will be a transformative year for our industry, only if we become smarter, nimbler and more agile. I encourage you to resolve to position your company for a future characterized by technological innovation and rapid change. You have no choice but to accelerate the pace of digitization and the way in which you do business. Companies that fail to respond risk being left behind. Companies that emerge as leaders in digitization will have a sustained competitive advantage.

This post originally appeared on the Mercatus IGNITE Blog.