Building a resilient future: Why grid modernization matters for industry electrification

As industries shift toward electrification, a modernized grid is necessary to handle the changing energy landscape. Upgrading the grid means to strive for improved reliability, increased efficiency, enhanced flexibility and better resilience. In turn, these improvements can minimize power outages, reduce waste and costs and accommodate variable renewable energy sources. By modernizing the grid, industries can access a reliable and uninterrupted power supply, optimize energy consumption and quickly recover from power disruptions.

With rising energy demand, more frequent extreme weather events, and increasingly sophisticated cyberthreats, the imperative for digital, data-driven grids is at an all-time high. But not all utilities companies share the sense of urgency around such an endeavor.

A new study from the IBM Institute for Business Value (IBV) found that utilities are, on average, investing 9.8% of their revenue in grid modernization efforts. Encouragingly, all executives surveyed said that they have a strategy and execution plan in place. But despite this preparedness, the pace of progress varies significantly.  Alarmingly, 21% of respondents claim their companies did not progress, limiting their ability to support the clean energy transition and maintain a reliable, affordable and secure grid. Clearly, companies move at different paces and with varying approaches when embracing new efficiency-boosting technologies.

The survey identified four distinct groups emerging in the utilities industry based on their grid modernization strategies:

·       Pioneering integrators represent 14% of the total that is surveyed and are the most advanced in grid modernization. They excel in capabilities such as simulating grid performance, orchestrating bidirectional networks, and setting integration standards, which clearly distinguish their adaptability to modern energy demands. They are less advanced in using self-monitoring assets to limit outage and asset damage and in integrating advanced metering infrastructure 2.0 (AMI) with automated outage management customer communication systems.

·       Energy optimizers comprise 21% of the total that is surveyed and prioritize the management and optimization of energy usage through advanced technologies. They display a strong commitment to demand response, with a solid understanding of integrating advanced metering infrastructure. Nevertheless, they are also less advanced in implementing bidirectional networks, reflecting a gap in their technological sophistication.

·       Power connectors constitute the largest group, 35% of the total that is surveyed. They excel in establishing connectivity and operational functionality within energy networks, and they exhibit a strength in linking DERs with grid systems. Yet they require enhancements in their digital and automation infrastructure. Their integration of smart assets signals a slower adoption pace in embracing the communication and data management aspects of smart grids.

·       Moderate achievers represent 29% of the total of those surveyed and show that solid progress with meeting demand flexibility, but their peers are outpacing them in the adoption and integration of advanced energy technologies.

By identifying with the group most like them, and understanding the respective behaviors, strategies, and actions, utilities can make better-informed decisions and tailor strategies accordingly.

Despite this patchwork landscape, there are three key objectives to pursue to become future-ready.

1. Increase resilience and reliability

Building grid resilience requires a comprehensive approach to strengthen its ability to prevent, detect and recover from failures or disruptions. Key tactics include grid self-control and optimization, interconnectivity and integration, and flexible load management with tools such as dynamic pricing or demand response. Investments in predictive analytics and Volt/VAR optimization (VVO), for example, are proving vital for grid stability and efficiency. Interconnectivity, supported by Advanced Distribution Management Systems (ADMS) and fault detection, are enabling leaps forward in real-time monitoring and control. Finally, dynamic pricing and demand response programs are effective in regulating energy use. Notably, 82% of pioneering integrators use real-time pricing, compared to just half of their peers.

2. Accelerate the clean energy transition

To accelerate the clean energy transition, meanwhile, utilities must be able to manage renewable intermittency. A range of technologies are emerging to tackle variability. Flexible generation management, for example, adjusts to fluctuations by using quick-response sources and energy storage for stability. Large-scale renewables integration also requires enhanced grid capacity, real-time data analysis and continuous monitoring. Integrating Distributed Energy Resources (DERs) is helping boost grid flexibility, with about 60% of utilities adopting standardized interconnection. Blockchain technology is also emerging to enable energy trading at distribution level.

3. Improve operational excellence

Underlying operational excellence is key to optimizing grid efficiency, asset usage, and overall system performance. Strategic planning and demand modelling tools play an important role in managing grid congestion. Incorporating climate and weather forecasts, meanwhile, enhances the management of renewable energy resources. Continuous asset monitoring, automation and maintenance are crucial for maintaining grid infrastructure, with real-time tracking and automated alerts preventing costly failures. According to this survey, nearly two-thirds of utilities are already creating asset failure forecasts to evaluate failures’ impact on network performance.

The two key enablers that are critical to driving grid modernization are the development of advanced control rooms and the introduction of new ways of working. Both innovations enhance decision-making and optimize grid performance.

The control room of the future uses advanced technologies and data systems, integrating AMI, IoT and SCADA for real-time grid management. Enhanced situational awareness, dynamic configurations and third-party DER integration improve response times, resource optimization and energy storage management.

But on a more basic level, utilities modernize grids by investing in specialized IT and OT skills, fostering cross-disciplinary collaboration and promoting data-driven cultures. Training and mentorship programs play an important role in enhancing expertise in data analytics, cybersecurity and renewable energy integration. In turn, enhanced expertise helps ensure efficient grid operations and real-time management through advanced communication networks.

Use of AI, particularly agentic AI and Time Series foundation model, provides a new dimension to the advanced control room and an autonomous or self-healing grid over time.

Achieving a modern, adaptable grid is a journey that requires continuous advancement, robust planning and strategic implementation of the afore-mentioned strategies. These three steps can help utilities move forward in their grid modernization journey:

1. Strengthen grid resilience through technology and automation, including real-time monitoring, self-repair systems, demand response platforms and cybersecurity collaboration.

2. Enhance energy flexibility to better manage renewable variability. Invest in hybrid storage, microgrids, standardized protocols, EV infrastructure and AI analytics to enhance grid adaptability and stability.

3. Future-proof the grid to improve usability, efficiency and asset availability. Use digital twins, predictive algorithms, IoT, AI and real-time data for grid optimization, resilience and cost efficiency.

Ultimately, the modernization of electric grids is a collective responsibility that requires collaboration, innovation and a shared vision for a secure and sustainable energy future. By taking decisive action now, utilities can pave the way for a more resilient and adaptable grid that meets the needs of tomorrow's energy consumers.

To read the full study, download it here.