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Cyber attacks, rise of distributed generation among top risks to utilities

Disruption caused by cyber attacks and the rise of greater decentralised generation pose of the greatest risks to traditional utilities, analysis by consultancy firm EY has concluded.

The consultancy announced its findings within its Risk Pulse: Navigating the power and utilities sector in transformation report, for which EY surveyed 50 senior executives at leading power and utilities firms.

It asked them to consider the risks posed across four key categories – strategy, operations, financial and compliance – ultimately concluding that business disruption caused by cyber attacks, major storms and other catastrophic events posed the biggest all-round risk to utilities.

However the greatest strategic risk to power companies, voted for by 80% of those surveyed, is the rise of distributed energy resources, which EY said were continuing to blur the lines between traditional customers and competitors.

It noted that as decentralised generators and batteries were becoming more economical, the prospect of independence from the grid and, therefore, centralised sources of power, was becoming “increasingly feasible”.

“Utilities that rely on a centralised power supply over large networks risk becoming disintermediated from their customers,” the report states.

It concludes by arguing that utilities need to prepare for a new and emerging energy paradigm by establishing “risk-enabled cultures” within their teams, typified by “exceptional leadership”; begin assessing risk appetite and tolerance within their businesses; and focus on new innovations within the power sector.

Matt Chambers, global power & utilities risk & cybersecurity leader at EY, said that utilities needed to consider whether or not their operating model was agile enough to react to unexpected events.

“Risk management will evolve in exciting new ways as enabling technologies, like robotic process automation, blockchain and data analytics are increasingly deployed to increase efficiencies, reduce costs and improve performance. Utilities will need to monitor the digital landscape and innovate in order to remain relevant and succeed in a future energy world,” he said.