Where Utilities Should Focus in 2024: Decarbonization and Cost Takeout


For utilities companies, 2023 was a year of reaction. Utilities found themselves reeling from a flood of new mandates and pressures. They needed to address decarbonization, hold the line on costs, manage the impacts of inflation and increase grid stability. And they were supposed to do all of this during a time of uncertain national energy priorities. Fortunately, at least on the policy front, a degree of engineering-based sanity is entering the decarbonization decision process.

By the second quarter, there were more open discussions about the role of nuclear and how to manage real constraints when transitioning to renewables and EVs. While decarbonization will be part of the national discussion for now on, there is an increased willingness to introduce viewpoints about how to get there in practical terms.

Looking ahead to 2024, we see a return to normalcy for utility leadership. One big exception here is the wildcard of generative AI.   

What do we mean by normalcy? In the next year, utilities will experience continued – if not increased – pressure to reduce operations and maintenance costs (O&M) as regulators push to minimize decarbonization cost impacts on end-consumers. Of course, this is not new for seasoned CIOs. What is new is the potential of generative AI. Many utility CIOs are eyeing generative AI as a tool to gain insights and reduce labor costs. We expect 2024 to be a breakthrough year for AI to play a more prominent role in addressing the challenge of O&M work scopes. Pushing against this trend will be a deeper understanding of the limits of generative AI. Successful solutions will find the right balance.

Utilities will continue to push capital projects in two areas. The first will be in grid and operations with the goal of improving resiliency via field-based systems like DERMS, WAM and OMS. The second – which will be particularly impactful to utilities reliant on SAP solutions – will be addressing overdue system upgrades. There has been a flurry of activity addressing S/4HANA and we see that trend continuing.

Customer service is likewise likely to see increased attention by Utilities in 2024. A renewed consideration of new products and services, often related to EVs and aging legacy platforms, will be key drivers. Advances in generative AI have been productionized in other industries and can be leveraged by utilities undertaking customer-related projects.

Unfortunately, workforce pressure is unlikely to abate. Utilities that have been slow to address return-to-work issues are having the greatest challenges. IT workers in some areas continue to show resistance to office-based collaborative work. But utility “business customers of IT,” who are responsible for business operations, do not have a choice. They work with wires, pipes and plant equipment. They continue with this work daily. Seasoned CIOs will need to be careful to guard against reopening or widening a cultural gap between IT and the business it serves. Many in the industry have successfully adopted hybrid work models.


About the author

Bob Lutz

Bob Lutz

Bob leads the ISG Utilities Industry Unit and is a technology centered solution development and operations leader with deep experience in business process outsourcing, shared services, managed services, vendor management, technology outsourcing, integration, cloud computing and SaaS. For client engagements, Bob is responsible for the quality of client deliverables, client satisfaction, project status management and reporting, recommendation and implementation approach development, implementation management, and governance matters.