Analyzing Utility Patents: A Lens Into Industry Innovation

Authors: Yan Yan and William McCormack

Public utilities have traditionally been reluctant to take risks, and power providers have good reason to shield their core business model from potential threats. Utilities cope with a growing degree of short-term uncertainty, dealing with fluctuations in demand, intermittent generation, weather, and equipment outages. In the long run, companies shape their investment decisions in the face of uncertainty around load growth, government policy, and fuel prices, among other things. All the while, they must reliably and affordably supply customers with a vital good: electricity. The cost of failure is steep.

Yet, power providers are also quietly energizing innovations in the space. Internal research and development (R&D) funding and external investments are unlocking new tools for energy generation, transmission, and distribution. As utilities curate larger IP portfolios, knowledge sharing and commercialization will play a larger and larger role in creating value across all services — especially in an industry which typically enjoys more cooperation than competition.

“Since Samuel Insull began the transition of utilities to regulated monopolies in 1898, they have not needed to focus on IP or proprietary technology development to build competitive moats around their businesses,” Jake Jurewicz, former Manager of Corporate Strategy at Exelon, told ADL Ventures. “However, in recent years investor owned utilities have begun to use IP and innovation investments to create optionality for their business lines as they face potential disruption associated with rapid decarbonization. R&D investments can also help act as an early warning system to possibly identify the most disruptive technology trends.”

Given the various strategic and operational benefits of utility innovation, we thought it might be worth diving into where utilities have focused their investments in order to gain a broader understanding of how this has driven — and reacted to — the evolution of the greater energy sector.

To do this, ADL Ventures analyzed nearly 400 patents filed between 2000 and 2020 across 61 North American electric utility companies. We then categorized the patents into nine core categories — renewables, thermal processes, power plant components, fuel production and delivery, transmission and distribution (T&D) infrastructure, T&D operation, advanced meter infrastructure (AMI), asset management, and pollution control — and 65 sub-categories using a latent Dirichlet allocation modeling approach with manually labeled training data.

Overall trends speak to warming support for R&D and innovation in the industry: for example, about twice as many patents were filed in 2018 and 2019 than in 2000 and 2001. Most importantly, patents from the past 20 years shed light on the breadth and value of new technologies poised to serve the power and utilities sector. No matter how niche, each patent represents or supports a potential new revenue stream that can help utilities solve internal challenges and thrive in an era of electrification and decarbonization.

Feel free to play with this interactive dashboard here, and read on below for some of our top takeaways. If you have any other takeaways you’d like to share, please email us below!

Electric Utility Patents -- Interactive Dashboard by ADL Ventures

Five Key Takeaways

1. Utilities’ focus on renewables has generally shifted from R&D to field deployment.

As renewable technologies like wind and solar matured, utilities shifted their focus from R&D towards investment and deployment. Patents related to renewables accounted for more than half of all utility patents filed in 2001, but comprised just eight percent in 2020.

The patent surge around renewable energy technologies in the 2000s predated significant annual capacity additions over the following decade. At a time when renewable patents accounted for more than 20 percent of the annual IP generation pool in every year except one from 2000 to 2006, only a few gigawatts of renewable generation capacity joined the grid each year. But since 2015, when the proportion of new renewable patents has remained below 20 percent, renewable capacity additions have exceeded 10 GW each year.

In 2019, utilities also contributed 25% of the global annual spending towards renewables, making them the largest funding source for renewable projects as a single industry.

2. Technologies for asset management and T&D operation are receiving more attention.

Transmission and distribution assets represent the lifeblood of the power and utilities industry, consisting of power stations, electricity cables, substations, and more. Optimization of T&D components is therefore crucial for delivering customers power as load continues to grow and shift. Patent data show that the proportion of filings related to both these categories surged over the last decade. The spike in asset management filings was especially pronounced over the past three years, as the category surged from 10 percent of IP filings in 2018 to 60 percent in 2020.  Two main forces may explain why utilities have devoted extra attention to T&D operation and asset management:

  • Deployment of distributed energy resources (DERs) raised the stakes for T&D operation, leading utilities to develop innovations for managing an increasingly complex grid. New sources of energy generation, of course, are not useful without the operational capacity necessary for looping them into the larger grid. The mid-decade peak for T&D operation patents helped spur on sizable grid modernization investments happening today. Note: Black & Veatch’s 2020 Smart Utilities Report found that a plurality of utility survey respondents planned to invest more than $200 million in modernizing the distribution system over the next three years.
  • Extreme weather, cyberattacks, and other threats have highlighted the importance of grid resiliency and hardening. Devastating wildfires exacerbated T&D issues and cast extra scrutiny on the grid, a quarter of which is 50 years old or older, according to Marsh McLennan. Meanwhile, severe weather events show no signs of slowing: the National Oceanic and Atmospheric Administration recorded 22 “billion-dollar weather and climate disasters” in 2020, the most on record — a trend that has only continued thus far in 2021.

Despite a clear need for grid hardening, T&D infrastructure filings have actually slowed and now account for only a small percentage of industry patents each year — 3.85% in 2019. The category’s 20-year peak occurred back in 2000. Internet of Things (IoT) and asset management solutions seem to be outpacing the classic electromechanical devices that make up T&D infrastructure. Furthermore, fully upgrading or replacing T&D infrastructure is time-consuming and labor-intensive. According to PG&E, it costs $800K per mile to build new overhead power lines and $3M+ per mile to underground them. Therefore, utilities have an incentive to develop asset management technologies that can efficiently monitor power networks and direct targeted upgrades that avoid the need for large-scale replacements.  To meet the public’s expectations for safe, affordable, continuous power — not to mention shareholders’ needs for healthy returns and optimal corporate performance at investor-owned utilities — companies have devoted focus to developing tools that help respond to the twin forces above. Scaling their IP into prolific tools for use in the field will be crucial as resiliency threats and DERs continue to influence the sector.

3. AMI innovation is happening, but utilities can go further to maximize its value.

Advanced metering infrastructure (AMI) — an integrated system of smart meters, communications networks, and data management systems that enables two-way communication between utilities and customers — is a key element of grid modernization. Utilities have increased filings pertaining to AMI, a category that commanded over 30 percent of patents in 2018 and just below a quarter of the pool in 2019. Certain AMI technologies receive more attention than the rest: smart meters and smart building/home apparatus designs account for almost 60 percent of inventions.

Patents are intrinsically hardware-oriented, but software solutions are just as critical to fully realizing the benefits of AMI. Surveys suggest power companies are not currently maximizing the value of available AMI offerings: a 2020 report by the American Council for an Energy-Efficient Economy (ACEEE) polled 52 American electric utilities on whether they used AMI for six major energy efficiency use cases. Among the 52, only Portland General Electric (PGE) and Southern California Edison (SCE) engaged in all six uses, while many others deployed AMI for only two or three uses.

4. Utility patent filing varies with the U.S. business cycle.

Utility patent filing is anything but linear; rather, the temporal distribution of patents follows a cyclical pattern. Two adjacent peaks and troughs appear in the time series plot, and the average span between each peak and trough is seven years, which generally aligns with the six-year average for U.S. economic expansions since 1970. Plotting patent dates against the U.S. business cycle and economic recessions (as defined by the National Bureau of Economic Research) suggests that economic downturns temporarily reduce R&D funding.

Filing dips occurred four or five years after recessions technically ended and roughly peaked during recessions themselves. Patent filings may lag short-term reductions in funding given the time lapse between actual R&D work and patent filing and approval, throwing patent peaks and troughs out of line with the business cycle across the utility industry.

5. Utility patents only offer a partial snapshot of power sector innovation.

Analyzing utility patents offers a lens into areas of R&D focus, but filings do not capture the full scope of industry innovation. For example, utilities do not uniformly devote resources to internal R&D; some rely on venture capital or investments through institutions or other partners. It should be noted that of the 61 companies analyzed in the data set, only 22 filed five or more patents between 2000 and 2020.

New York’s Con Edison emerged as the clear patent leader and has filed more than 80 since 2000. But other power companies that rely on a dedicated corporate venture capital branch may not produce many patents at all, choosing instead to invest funds in startups or smaller companies that already possess their own IP. To highlight a few, DTE Energy, NextEra Energy, National Grid, and Exelon all maintain their own corporate VC arms: DTE Energy Ventures, NextEra Energy Partners, National Grid Partners, and Constellation Technology Ventures, respectively.

Finally, many innovations internally developed within utilities are not actually patented. One key example is PG&E’s field mobility platform Asset360, which was later spun out by ADL Ventures and now operates as FieldNav. Though this product is not patented, it represents a product developed with internal R&D funding that offers substantial value for PG&E and, moving forward via FieldNav, its peers.

Market Potential of Utility IP

The intellectual property that utilities are developing today have the chance to upgrade and advance the power sector. Innovations with market potential can deliver immediate advantages for the companies that invested in their creation and diffuse benefits for the industry over time. Just like patents for renewables possessed great market potential when they commanded the majority of R&D focus in the early 2000s, recent filings hint at exciting opportunities in T&D operation, asset management, AMI, and more.

ConEd’s large pool of patents, for example, contain specific inventions that could help ConEd and other utilities better monitor equipment, increase the lifetime of power infrastructure, and integrate smart meters: US10253915B2 (application filed 2016) entails an electrofusion fitting for repairing a leaking polymer pipe; US20200182918A1 (application filed 2019) involves a patent-pending technology that can provide constant power to natural gas detectors capable of communicating over the smart meter network; and US20190301639A1 (application filed 2019) is a newly patented sensor method for monitoring an underground utility structure.

Monetizing Innovation

Inventions are not always the same as transformative innovations. To realize gains for their customers, improve the resiliency of their equipment, and advance an increasingly decarbonized energy system, utilities should move to capitalize on the market potential of their R&D work. As electric utilities face an increasing number of threats to their core service, however, devoting resources to scale and deploy existing IP can feel secondary to their mandate: providing affordable, reliable electricity safely. According to the Public Utilities Fortnightly 2020 Pulse of Power Survey, 45.5 percent of respondents within the industry — utilities, regulatory commissions, manufacturers, and service providers — see “risk averse utility culture” as the primary factor preventing companies from investing in new business models. This needs to change.

Utilities can benefit from support to grow the fruits of internal R&D work into fully developed technologies and services, and ADL’s Monetizing Innovation framework can help turn patents and other IP into new revenue streams. Innovators within legacy-sector corporations are developing technologies that solve vexing technical challenges, but too often these technologies are “stuck” within their parent organization — complex regulatory structures, internal governance rules, and other obstacles prevent utilities from maximizing their external value. Patented inventions can morph into new services or products that complement a company’s core operations and find new customers throughout the industry, and ADL Ventures would love to help.