Individual

Society

Environment

Markets

Considerations for Investors

Technology increasingly sits at the heart of the sector: from power generation to customer service. While the responsible use of automation and data analytics can improve safety, efficiency, and sustainability, irresponsible uses that violate privacy or disproportionately harm vulnerable groups can create significant regulatory and legal risks. As innovations like smart grids, electric vehicle infrastructure, and renewable energy technology are deployed, impact assessments and community engagement can foster goodwill and maintain the sector's license to operate. Proactively addressing ethical concerns through governance structures that embed responsible innovation can help bring social legitimacy and stability to the sector.

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Creating Future Us is the Not-for-Profit arm of Paradigm Change Capital Partners LLP

Utilities - Individual

The key individual impacts of concern for investors are: 

 

Accessibility: Some customers may not benefit from innovations unless accessibility is considered. For example, smart meters provide data to improve efficiency but could penalize low-income families who access the technology. Similarly, usability interfaces on meters and customer portals need to consider people with disabilities to ensure universal access.

 

Privacy risks: The collection of immense quantities of customer, infrastructure, sensor, and operational data warrants clear consent permissions, stringent access controls and purpose limitations to prevent misuse.

 

Job losses: The greater use of automated software in the sector may lead to significant job losses.

 

Unless the above are proactively addressed, potential ramifications include:

 

  • Lawsuits and fines over privacy violations relating to smart systems.

Utilities - Society

The key societal impacts of concern for investors are: 

 

Cybersecurity: Grid assets like power lines, pipelines, and storage facilities can be compromised by cyberattacks. Rigorous maintenance protocols and redundancy help minimize disruptions to these core services.

 

Safety: The development of autonomous drones, robots, and vehicles can harm local communities unless they are rigorously tested before deployment.

 

Discrimination: Underlying flawed data or biased algorithms used in areas like service eligibility assessments, grid maintenance, and billing could disproportionately impact marginalized communities if not proactively audited.

 

Ethical component sourcing: Much of the hardware in the sector relies on materials that can be sourced from conflict zones. The responsible resourcing of these materials can mitigate this risk.

 

Unless the above are proactively addressed, potential ramifications include:

 

  • Reputational damage if automated systems are seen to exacerbate energy poverty issues.
  • An increasing regulatory burden to counter the lack of accountability around algorithmic decision-making.

Utilities - Environment

The key environmental impacts of concern for investors are: 

 

Environmental sustainability: New technologies such as renewable microgrids and battery storage can reduce fossil fuel dependence. However, they are also dependent on the mining of rare earth metals whose extraction can harm local ecosystems. The sector needs to balance transitioning to clean energy with responsible sourcing of materials.

 

Cyberattacks: The increased reliance on software for critical infrastructure like transmission grids and nuclear facilities raises accountability challenges. Bugs or hacking could trigger dangerous system failures and cause extensive environmental damage. Utilities need robust quality assurance testing and contingency planning to avoid harmful incidents.

 

Unless the above are proactively addressed, potential ramifications include:

 

  • Fines and lawsuits for violations of environmental regulations related to issues like network infrastructure.
  • Reputational damage and loss of consumer trust if companies are seen to be avoiding green commitments.
  • Loss of access to green financing options or environmentally-focused funds.

Utilities - Markets

The key market impacts of concern for investors are: 

 

Vendor ethics: Clear governance requirements for external data partners reflects duty of care obligations over potential consumer and societal harms enabled by opaque third-party data practices. Accountability requires due diligence.

 

Transparency: Lack of visibility into proprietary grid management algorithms, outage analytics, usage forecasting models, and automated decision systems reduces accountability unless there are adequate levels of transparency.

 

Cybersecurity: Storing customer data in the cloud can improve efficiencies but poses cybersecurity risks if not properly encrypted and access-controlled.

 

Unless the above are proactively addressed, potential ramifications include:

 

  • Noncompliance costs as regulations tighten around issues like emissions, safety, and data privacy.
  • Remediation costs associated with outages, accidents, and instability if critical infrastructure is vulnerable to cyberthreats.