GE’s companywide earnings fell short of expectations last week, but its digital grid business keeps on growing.
Descended from Thomas Edison’s electrical appliance enterprise, GE still has its fingers in a nearly unfathomable number of pies. It continues to lead in conventional power applications, like wind turbines and gas generators, but it’s also been building out Predix, an industrial internet-of-things business that pairs on-the-ground sensors with local and cloud computing.
In Q3 2017, GE Digital orders grew 50 percent year over year, the company said. In previous quarters, power was the fastest-growing segment within the digital category.
That momentum continued this week thanks to a new partnership with Exelon, one of the biggest power providers in the U.S. and a flagship customer for GE Digital. In a separate deal, the New York Power Authority will expand its use of GE software and analytics as well.
Exelon had already adopted Predix across its fleet of competitive generators, which includes the largest nuclear capacity in the U.S. Now, the company is rolling out the industrial internet service to its portfolio of six regulated wires utilities, it announced at GE’s Minds and Machines conference Wednesday.
The goal is to work with GE to improve the cost-effectiveness of electrical distribution and prepare for regulatory grid overhauls coming to Exelon’s various markets.
"What we want to do is use the analytics to allow us to be prepared to pivot and support any of the models that may come up," said Brian Hurst, VP and chief analytics officer for Exelon Utilities.
The expansion marks an evolution from the initial Predix application of monitoring the health of discrete generating assets, said Ben Kellison, director of grid research at GTM Research.
"This is one of the first large extensions of a cloud-architected analytics platform in the utility industry, and it’s a strong endorsement from one of the largest companies in the space that there’s value to be had from investing in digitization that crosses functional and business-unit boundaries, in this case generation, transmission and distribution."
A smarter way to keep the lights on
The deal will focus on five key grid modernization efforts: storm preparation, network connectivity, outage prediction, grid asset health and historical outage analysis.
The old way of preparing for a major storm, Exelon Utilities CFO Carim Khouzami explained, would be to split a service territory into large segments and allocate resources ahead of time based on “gut feeling and experience.”
The live data-crunching from GE’s service allows the utilities to pre-emptively dispatch crews based on more granular indicators, like vegetation data, detailed barometric readings and the health of the wires.
The historical outage data can be used to inform decisions about where to harden wires or put them underground, based on an understanding of trouble spots over time.
Putting all the wires underground would protect them from the elements -- at great expense and disruption. GE's data platform can allow a more nuanced cost-benefit analysis.
"We need to invest more in the system, so we can continue to make performance better, but we also have to lower people's bills at the same time," Khouzami said. "Being able to leverage data to find ways to be more cost-effective with how we do the activities we have to do -- to be smart about where we invest our dollars -- that can help us achieve the goals we're trying to achieve."
Regulators across the nation are examining new models for more efficient grid utilization, but the outcomes of those investigations won’t be clear for months or years to come. Operational analytics across the transmission and distribution network will make it easier to benchmark asset utilization and show regulators where new investments make the most impact.
Not just a customer
The agreement goes beyond a conventional vendor/customer relationship, because GE and Exelon will work together to develop new applications for Predix.
The platform remains young. GE fleshed out the initial core applications -- or bought or partnered with other companies that did -- but it still has limited insight into how its customers could customize the platform for their needs day in and day out.
Companies like Exelon are starting to develop their own applications for Predix based on internal IP, and to work with GE to co-develop projects. The new arrangement includes both the traditional vendor relationship and a more collaborative research and development component.
Exelon became an early adopter for its generation fleet and began developing applications for things like nuclear plant operations. If an app they develop could be useful to others, GE can pitch it elsewhere.
"We are out there with lots of other energy companies, and we can say, 'Here's a solution that Exelon helped us develop -- want to buy it?' And Exelon would get a cut of the revenue," said GE Chief Digital Officer Ganesh Bell.
The new deal suggests that if Exelon figures out promising ways to use Predix to reduce storm outages, for instance, that tool could find its way into other utilities' portfolios. That helps them grapple with a shared problem, and it helps GE bring more customers onto its platform
One platform to rule them all
GE has no trouble communicating its breadth of expertise. The main-stage programming at Minds and Machines (the conference it hosted about itself) featured a steady stream of executives talking up the visionary achievements that Predix unlocks for everything from wind farms to gas pipelines.
The challenge is matching that lofty rhetoric with the reality of deployment, which can be slow. The company, though, has bet on its breadth and legacy as a key selling point.
"GE has privileged access to information on a very large set of generation assets,” GTM's Kellison said. “That said, companies need to partner and incorporate asset models outside of their own, as different utility asset managers subscribe to different methods and utilities rarely only use one vendor’s assets, even in one product class."
The transformation from an equipment manufacturer to a tech-savvy service provider didn't happen overnight.
"There are plenty of legacy players; we're the new player," Bell said. "We've gone through the pain of having to transform ourself over the last five years. Now we have a unique set of software capabilities that nobody else has."
The key difference, he said, is not just having cloud-based analytics or services or control software, but linking them all up. GE offers what they call "outcome as a service," where it uses the sensing, analytics and operational controls to produce outcomes like lower fuel use or reduced operations and maintenance costs. Then it sells a subscription service.
"All of those things are outcomes that customers can measure, and we track and deliver those values," Bell said. "If we don't deliver those values, customers will fire our software."
At Minds and Machines two years ago, there were a handful of power producers and utilities that had bought into Predix. Last year, the number rose to 25. This year, 78 utilities were either pilot-testing or moving forward with fleetwide adoption.
This scale is notable in the embryonic world of grid management software, but it's still a tiny sliver of the overall GE pie. New CEO John Flannery will need to consider how much the rest of the company should learn from the digital initiative.
"We're generating new sources of revenue that we didn't generate before," Bell said. "As a business, at the end of the day, for shareholders, we've got to create new value, and here we're showing that it's not the old GE -- we're building a whole new franchise for GE."
Come join us for GTM's first annual U.S. Power & Renewables Conference in November. You'll get an in-depth look at how the renewable energy market will interact with the U.S. power market, and how those interactions can impact overall industry development and market growth. Curated by GTM Research, MAKE, and Wood Mackenzie energy analysts, we’ll take an expansive view of key issues and timely topics, bringing together a diverse group of energy experts and stakeholders to discuss demand dynamics, economics and business model shifts, and policy and regulatory implications.