Smart Cities

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Written in partnership with The Climate Group, Accenture and Horizon, University of Nottingham, this report investigates how technology can be used in cities to meet the growing challenges of expanding urbanisation.

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  • The technology-enabled city is an untapped source of sustainable growth and represents a powerful approach for tackling unprecedented environmental and economic challenges.
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Smart Cities

  1. 1. InformationMarketplacesThe New Economicsof Cities
  2. 2. This report is a research Acknowledgements: Philipp Rode, Executivepartnership between Many thanks to Tashweka Director of LSE Cities, LondonThe Climate Group, Arup, Anderson and Alaa Khourdajie School of EconomicsAccenture and Horizon, at The Climate Group and Josep Roig, Secretary General,University of Nottingham. Ece Ozdemiroglu and Zara Metropolis Phang at EFTEC for earlyEditorial and Research work on a more detailed Jerry Sheehan, Chief ofTeam: approach. Thanks to those Staff, California InstituteThe Climate Group we consulted or interviewed for Telecommunications andMolly Webb, including Tom Plant, former Information Technology, UCSDHead of Smart Technologies Energy Advisor in Colorado, Chris Tuppen, SustainabilityReuben Finighan, Project Regis Hourdouillie, Smart Consultantand Research Manager Grid lead, Alstom, Martin Powell, London Development Dimitri Zenghelis, SeniorArup Agency, Peter North and Visiting Fellow, GranthamVolker Buscher, Director, Peter Daw, Greater London Institute, LSESmart Cities Authority, Geoff SnelsonLéan Doody, Associate, and Barry O’Brien, Milton SMART 2020 InitiativeSmart Cities Keynes, Henrietta Foster and Working Group:Ellie Cosgrave, Research Gunjan Parik, Transport for Martyna Kurcz-Jenn, DirectorEngineer London, Dipak Kripalani, Tata EU Regulatory Affairs, AlstomAccenture Consultancy Services, Bas Amaia Beloki, EU Affairs Boorsma, Cisco Systems, andSimon Giles, Global Senior Advisor, Basque Country Peter Head and Tim Gammons,Principal, Intelligent Cities Arup. And many thanks to our Ian Pulford, Director, BTJen Hawes-Hewitt, Advisory Group and memberGlobal Strategy Manager, Graham Seabrook, Head of Working Group for their input.Intelligent Cities Sustainability Research, BTNicola Walt, Global SMART 2020 Initiative Shane Mitchell, GlobalConsultant, Intelligent Cities Advisory Group: Program Manager, IBSG,University of Nottingham Cristina Bueti, Policy Cisco SystemsCatherine Mulligan Analyst, Corporate Strategy Nicola Villa, Senior Director of Division, International Urban Innovation, IBSG, CiscoWith thanks to: Ben McClure Telecommunication Uniom, ITU John Pflueger, Head of Environmental Strategy, DellThis report is part of The Paul Dickinson, CEO,Climate Group’s SMART Carbon Disclosure Project Benjamin Kott, Clean Energy2020 Initiative Advocacy, Google Graham Floater, Director, The Climate Centre Armin Mayer, SustainabilityThanks to our partners: Program Manager, Johnson Nicky Gavron, Former DeputyHSBC Climate Partnership Controls Mayor, City of LondonCisco Clay Nesler, Vice President, Sascha Haselmayer, Global Energy and Founder, Living Labs Global Sustainability, Johnson Dan Hoornweg, Lead Urban Controls Specialist, The World Bank Partrick Philips, CEO, Urban Land Institute Carlo Ratti, Director, MIT Senseable cities Lab ©2011 The Climate Group, ARUP, Accenture and The University of Nottingham. All rights reserved.
  3. 3. ForewordMark Kenber | The Climate GroupA Clean Revolution is quietly underway Our SMART 2020 report found thataround the world. deploying smart technologies in key areas of electricity grids, transport, logistics,In city halls, boardrooms and cabinet buildings, and industrial motors could saveoffices, government and business leaders are 15% of global emissions in 2020, and aroundembracing what humanity has been doing $900 billion a year by 2020 in energy savingsbest throughout its history: Change. They are to global industry.changing the way we produce and consumeenergy and natural resources. Their motives The report you hold in your hands outlinesfor embracing change vary: from ensuring how smart cities could pay off hugely incorporate profitability to meeting the the coming decades if we act now. Thischallenge of an expanding urban populace isn’t only a technical challenge, it is ato ensuring energy security in an uncertain leadership challenge. As the report shows,world. Whatever their reasons, they all cities are already making investments inrealise the opportunities in the low carbon low carbon ‘smart’ services from cycle hireeconomy – and they are already benefiting schemes to real time transportation apps,from them. and are increasingly the site for smart grid and distributed electricity generation pilotBut what precisely is the Clean Revolution? projects. But the explosion in access to data – 400% growth since 2005 – means thatIn short, it is a swift and massive scaling-up more low carbon services could be developedof clean technologies and infrastructure, today. To make this opportunity real, citiescombined with a fundamental shift to can set ambitious visions, measure track andsustainable production and consumption manage their progress to sustainability goalspatterns. It is the only viable route to cut enabled by the digital infrastructure, and testglobal emissions and avoid dangerous new business models to scale up solutions.climate change. It can create jobs,strengthen economic growth and enhance We hope this report inspires city leadersenergy security. It is a revolution based on across the world in their efforts to takeleadership and the belief in a better, more transformational action on the low carbonprosperous future for the 9 billion people economy and bring on board in the processthat will be on the planet by 2050. private sector partners who will benefit by providing “smart” solutions.And most of those 9 billion people are goingto be living in cities. The 21st century is an The Clean Revolution is underway. It is oururban century. Cities are going to be in the best hope for the future. And cities all overforefront of driving the Clean Revolution the world are driving the effort for a smarter,forward. cleaner better world. For all.Information Marketplaces | The New Economics of Cities The Climate Group | Arup | Accenture | Horizon | 3
  4. 4. Foreword Volker Buscher | Arup Time for change Technology as a driver of change Cities deliver opportunities; providing The technology has reached a critical point; efficient access to essential services as well as cloud computing, the internet of things, a rich tapestry of culture and entertainment. hyper connectivity and modern analytics But cities and their citizens face new are providing opportunities at affordable challenges. Economic uncertainty, austerity, cost that only a few years ago would have growth within a new ecological context and been described as science fiction. The the demands of citizens for a great place success of Information and Communications to live and work is driving leaders to seek Technologies (ICT) at home and at work opportunities to innovate. has meant that citizens now have access to powerful smart devices wherever they go. Over centuries, cities have developed sophisticated solutions for many of the Time for leadership physical aspects of urbanity: architecture, transport, utilities and the public realm to Continuing with the status quo will not name a few. However the use of information capture this opportunity. Our research has and the role of technology in cities has shown that the city that makes the change barely progressed. from fragmented use of technology projects to a systemic approach will improve local Some leaders in cities around the globe are conditions and gain export opportunities for starting to move beyond the physical city; the solutions they develop. they are conceiving Digital Infrastructures and Information Products as a platform for Leaders in government, small to large economic development. This is the missing businesses and academia need to redefine link in the ecological age and in creating great their roles in this emerging world. Civic urban centres for people to live and work in. leaders can determine priorities and set strategic frameworks. Industry is providing Politicians around the world are faced with innovative combinations of capabilities, new choices due to emerging technologies, products and services in new partnerships. how they respond to these has become a Academia is developing the human capital and factor in how people will vote. demonstrator campuses for all to learn from. We produced this report with our partners to help cities capture this opportunity. Our aim was to provide a coherent framework that government, academia and industry can use to move forward in this exciting new world of: “New Economics of Cities”.4 | The Climate Group | Arup | Accenture | Horizon
  5. 5. ForewordMark Spelman | AccentureWe are at a point of inflection. As the processing power and storage capacity of computer chips double every 18 months4The size and economic output of cities is and the global sales of smart phones is set tobecoming on par with small nations. Today rise to over 1 billion by 20165 – we have theonly 600 urban centres generate about 60% ability to apply technological innovation. ICTof global GDP1. Tokyo, with 35 million people can be applied to our built environment andand nearly $1.2 trillion in economic output, will not only help address the problems thatranks among the world’s top 15 economies, we see in our cities today – like congestionlarger than India and Mexico2. and wasted energy – but also offer exciting new consumer experiences and convenience,The pace and scale of the change is and help to stimulate the much neededunprecedented. economic growth and job creation, that is particularly required in the Western world.Cities alone will have to spend a staggering$350 trillion or 7 times current global GDP Whilst technology is a core enabler, Smartin the next 30 years on urban infrastructure. Cities are not just a technological issue;With 180,000 new people moving into cities they also require innovative business andeach day3, the 21st Century will be a century operating models.of urbanisation. 1 http://www.mckinsey.com/mgi/ publications/urban_world/index.asp For any city, the first step is to understand 2 http://www.theatlanticcities.com/The challenges posed to our national and the diverse value that smart technologies jobs-and-economy/2011/09/25- most-economically-powerful-cities-municipal governments, to businesses can deliver. City leaders need the tools and world/109/and individual citizens are immense. vocabulary to be able to translate the value 3 http://youthink.worldbank.org/ issues/urbanizationThe interconnectedness of our national of their technology investments in to terms 4 http://www.economist.com/economies, supply chains, talent and that resonate with their voters and to the node/15557443 5 http://imsresearch.com/press-resource pools, means that this is a businesses that would like to invest in their release/Global_Smartphones_Sales_collective problem to solve. Fortunately, the city. City leaders will need to nurture their Will_Top_420_Million_Devices_ in_2011_Taking_28_Percent_of_all_opportunity of technology to help address digital economies. Leaders will need to step Handsets_According_to_IMS_these challenges has also never been greater. outside of their traditional focus on the Research physical footprint of their cities and put in place the appropriate strategic direction, operating frameworks, and incentives that will enable the digital aspects to flourish.Information Marketplaces | The New Economics of Cities The Climate Group | Arup | Accenture | Horizon | 5
  6. 6. Contents Executive Summary 7 Chapter 1: Cities in Transition 11 Chapter 2: Connecting Smart Cities to Value 21 Chapter 3: The Smart City Value Chain 31 Chapter 4: Smart City Vision and Leadership 37 Appendix 1 476 | The Climate Group | Arup | Accenture | Horizon
  7. 7. Executive SummaryNow is the time for government and business leaders to recognisethe value created by smart city thinking. The technology-enabledcity is an untapped source of sustainable growth and representsa powerful approach for tackling unprecedented environmentaland economic challenges. By unlocking technology, infrastructureand public data, cities can open up new value chains that spawninnovative applications and information products that make possiblesustainable modes of city living and working. While smart initiativesare underway in urban centres around the world, most cities haveyet to realise the enormous potential value from fully-integrated,strategically-designed smart city development programmes. Webelieve that through clear vision and, most of all, leadership,civic leaders and executives can help cities make the transition toinitiatives that maximise the smart city value opportunity.Home to more than half of the world’s Cities that face choking congestion frompopulation, cities around the world must traffic, rising CO2 emissions, or brown-outsthink ‘smart’ to deal with the growing during times of peak energy demand nowpressures of urbanisation. Cities are have new options to solve those challengeseconomic drivers and places of opportunity; by building on this digital infrastructure.but they also face unprecedented An ‘intelligent’ or ‘smart’ city is one thatenvironmental and social challenges as meets its challenges through the strategicmore and more people migrate to cities and application of ICTs to provide new servicesdemand ever higher standards of living. to citizens or to manage its existing infrastructure.Information and CommunicationsTechnologies (ICTs) are also transforming Cities are already ‘smart’ in tackling theirour lives. Social media, the internet, ‘cloud’ challenges by implementing cycle and carcomputing, sensors and mobile phones are hire schemes to get vehicles off the road,creating a ‘smart’ or digital infrastructure and building performance monitoring tothat is more powerful every year, allowing us drive down peak demand. While more ofto do everything from communicating with this should be encouraged, our findingsone another to solve problems collectively, to show that cities may be missing some of themaking our electricity grids more efficient, value that is at stake if they do not thinkto providing new options for services such as strategically about how to manage technologyusing video conference instead of driving to innovation. Beyond the visible roads andthe office. building infrastructure of the city is a hidden set of complex interactions from resource use, to consumption and waste, where huge inefficiencies are occurring all the time.Information Marketplaces | The New Economics of Cities The Climate Group | Arup | Accenture | Horizon | 7
  8. 8. Sources: We call this the ‘surplus’ city where value The risk is that this potential for valuehttp://www.sustainable-innovations. is not being recognised or captured today. creation does not come to pass, and benefitsorg/GE/UNEP%20%5B2009%5D%20A%20global%20green%20new%20 Tackling this complexity and delivering for citizens are not realised. A key first stepdeal.pdf value is a leadership opportunity that brings to realising the potential is to set a vision andhttp://www.itif.org/files/2010-1-27- vast rewards. Cities will be able to access create common metrics for cities, allowingITS_Leadership.pdf economic, social and environmental benefits them to access new financing options and from economies of scale in combining build new partnerships and business models resources across projects, stimulating their that involve the private sector. As cities economies and international competitiveness, improve their ability to manage the digital improving existing services, mitigating risk infrastructure, they will be able to not only to through better planning and prediction, and build an ecosystem of service providers and engaging citizens in the process. value chain at home, but will be able to take the lead internationally, learn from what has Our findings show that there is an explosion been invented elsewhere, collaborate, and of interest in ‘smart’ solutions and we are at transfer knowledge to reap the most benefits. the first stage of realising this opportunity today. Open Application Interfaces (APIs), It is time for cities to step in and create a (the interfaces between developers that market, or citizens will lose out. enable new data-driven services) have grown A smart city can’t be measured by internet at 400% since 2005 and government, retail, connectivity alone, and it will be just as transportation and utility APIs have grown important to have a Chief Information Officer faster than any other area. In addition, or policy for including small businesses existing literature shows the potential for (SMEs) in their procurement process as it is smart grid investments to yield 50% more to have ubiquitous broadband. It is time for jobs than the typical infrastructure projects, political and private executives to achieve and Integrated Transportation Systems to a strategic view of innovation to meet its drive economic benefits 25 times the original challenges, setting a high level vision and investment. working iteratively to manage a process of organisational change to unlock benefits for citizens.8 | The Climate Group | Arup | Accenture | Horizon
  9. 9. 5billion people will be living in cities in 2020 Buildings use40% of world’s energy Smarter savings and up to 40% of energy savings are logistics not captured today€27billion 15%Access to public data is estimated to be worth could yield 27% fuel savings in the EU of emissions can be saved in ICT-enabled energy efficiency 2020 through ICT-enabled €600billion could translate into over energy efficiency worth of cost savings for the public and private sector Smart grid creates South Korea’s Green New Deal50% more jobs than the average infrastructure project and low carbon strategy create over 500,000 jobs Smart grid initiatives 5billion people have mobile More than have created over 12,000 jobs in Silicon Valley 50% phones today of web connections will be mobile by 20131 http://www.smartgridnews.com/artman/publish/Business_Strategy/ Smart-grid-equals-jobs-at-least-for-Silicon-Valley-4128.htmlInformation Marketplaces | The New Economics of Cities The Climate Group | Arup | Accenture | Horizon | 9
  10. 10. The promise of a data-driven city is to measure and manage progress toward a city’s sustainability goals Interview with Adam Freed, Deputy Director of Long Term Planning and Sustainability, New York City, October 2011 Already, 3,000 government buildings in New York City benchmark and publicly disclose their energy use. Next year, under New York City’s Greener Greater Buildings Plan, every building in the city over 50,000 square feet will be required to annually benchmark and disclose their energy use. This is one of 132 initiatives in PlaNYC, Mayor Michael Bloomberg’s data-driven strategy to create a greener, greater New York. Adam sees the benefits of this approach, but knows it will not be easy. Cities aren’t built to collect the data to make that cost benefit analysis work: “There used to be one energy bill for the city of New York. Now, the major city departments are getting charged separately so that they can figure out how to save money.” In addition, utilities are not set up to easily provide detailed data—often facing regulatory obstacles and legacy data systems. But measurement is a key part of knowing how to effectively reduce energy use and greenhouse gas emissions, two of the key goals of PlaNYC. That is why the City has adopted a data-driven approach to target investments and track progress toward its sustainability goals. The City uses its GHG inventory, benchmarking data, and energy audits to prioritize $100 million in annual energy efficiency investments to reduce municipal government GHG emissions. “We need the data, to show what could be saved, and then we can make it happen.” Adam’s approach is to carefully sequence the interventions they can implement based on the data they have collected. “If you don’t have a good understanding of your buildings, which begins with benchmarking, you shouldn’t be investing in a ‘bells and whistles’ system to manage an entire network.” The carbon inventory is the city’s roadmap, but they are starting with what they are able to tackle first. In transportation, the Midtown in Motion project uses algorithms to speed up traffic and GPS units were placed in cabs to better understand how drivers were using the streets and what caused congestion. With 90,000 miles of underground cables in the city today, the smart grid has to be done gradually. “We need an incremental system or retrofit, so that when we have a high impact area or challenge, we can tackle that first. This is also why when we get pitched a ‘smart grid for the city’ it doesn’t work. The wholesale rebuilding of an enormous system like New York City’s energy grid just isn’t practical from a fiscal or regulatory standpoint.” Adam also sees the benefits to industry beyond a cost benefit analysis. He wants to create the energy efficiency industry in New York – where companies can be located near world class engineering schools, to drive the market. The case for the Greener, Greater Buildings Plan showed that 17,000 jobs could be maintained or created while saving New Yorkers $750 million a year in energy costs. Technology and data are necessary enablers of solutions. And the benefits can be measured: On September 19, Mayor Bloomberg announced that city-wide Greenhouse Gas (GHG) Emissions are down 12% since 2005, and the government’s own emissions fell 5% in the last year.10 | The Climate Group | Arup | Accenture | Horizon
  11. 11. Chapter 1Cities inTransition
  12. 12. Smart thinking holds great promise for urban centres; it’s time city leaders recognise the opportunities If you are a city leader looking for ‘smart’ What is a smart city? solutions to meet sustainability challenges, you are not alone. The problems of The technology-enabled city is mass urbanisation – from overburdened an untapped source of sustainable infrastructure and transport congestion to growth soaring energy consumption and inter-city competition for investment – are becoming Cities now represent the core hubs of the6 http://ec.europa.eu/information_ so complex that those offering solutions global economy, acting as hives of innovation society/activities/ sustainable_growth/green_digital_ are finding a receptive audience willing in technical, financial and other services. charter/index_en.htm to listen and act. Indeed, the proliferation Globalisation has led to the creation of a7 Egger, Determining a Sustainable City Model, 2006 of smart grid, smart city and sustainable hierarchy of cities across the world7 within8 Nolan, Global Business Revolution, city initiatives announced by all levels of which cities compete for access to natural Cascade Effect and the Challenges for Catch-up for Large Indigenous Chinese government is creating an audible ‘smart’ resources and skilled workers. Cities must Enterprises, 2006 and ‘sustainable’ city buzz. In cities around not only create traditional employment9 http://www.theclimategroup.org/_ assets/files//BTCDJune08Report.Fin. the world, such as Lavasa in India, Songdo in opportunities, but also help create and pdf, p.20 Korea and Masdar in Abu Dhabi, ambitious attract new industries to their areas. To10 http://www.unfpa.org/swp/1996/ ch3.htm attempts are being made to build new ‘smart maintain and secure global competitiveness,11 http://www.brookings.edu/~/ and sustainable’ cities from the ground up. cities today must tackle their own challenges media/Files/rc/papers/2010/03_ china_middle_class_kharas/03_ In Europe, 23 cities have signed up to the while also maintaining growth. china_middle_class_kharas.pdf Green Digital Charter mission of developing12 http://m2m.vodafone.com/ insight_news/2010_12_03_m2m_ ‘green digital’ pilot projects that meet the Technology has already had a profound and_enterprise_innovation.jsp greenhouse gas (GHG) emissions reduction impact on the way corporations do goal of 30%6. For the C40 global network of business, leading to the creation of global city mayors, measurement and monitoring conglomerates that sit atop the ‘apex’ of tools are regarded as underpinning thriving, massive value chains that span the world. sustainable cities. 17 of the C40 cities have This helps to make those companies more smart metering projects underway, 18 have productive through more efficient use made real-time traffic information available of resources.8 to citizens. The value chains achieved in the world of Smart thinking holds huge potential for business, however, have yet to be realised in cities, but the full value of smart cities is not cities. The connected, technology-enabled being realised. While it is encouraging to ‘smart city’ is today more vision than reality, see pilot initiatives and even some large- and its features are as varied as the citizens scale projects, few cities are maximising who reside in them. For some, the smart city the full opportunities offered by digital is about its infrastructure: how efficiently infrastructure development. It is time for are its services delivered? For some it is city leaders – working with other levels of about the knowledge and information that is government, universities and large and small available to citizens and what they do with companies – to recognise the opportunities it to create new services and become more and take the lead in creating strategies and sustainable. policies for managing the wave of innovation that comes from citizens who have greater access to new technologies.12 | The Climate Group | Arup | Accenture | Horizon
  13. 13. In the context of this report, we use the Cities share a set of challenges relatedfollowing definition: to climate change, globalisation and sustainability. They have the challenge ofA city that uses data, information and maintaining and raising living standards for acommunications technologies strategically to: growing population with only 1/10th of the Greenhouse Gas (GHG) emissions we emit• provide more efficient, new or enhanced today9. As one million rural people resettle services to citizens, in cities every week, cities will be home to Information Product:• monitor and track government’s progress almost 5 billion people in 202010, with more A tangible asset to drive the toward policy outcomes, including than 3 billion people moving into the middle economy forward. meeting climate change mitigation and class11. Such explosive growth will escalate adaptation goals, the need for upgrading aging infrastructure, tackling rising costs of service delivery, and• manage and optimise the existing infrastructure, and plan for new more meeting ambitious targets for innovation and sustainability agendas. Cities must do this Smart cities effectively, all within a post-financial crisis, risk-averse are driven by• reduce organisational silos and employ new levels of cross-sector collaboration, funding environment. the need to• enable innovative business models At the same time, Information and tackle long for public and private sector service Communications Technologies (ICTs) are rapidly changing our world. 5 billion people term challenges provision. have access to mobile phones, and 2 billion such asBy aligning the interests of stakeholders, of these are ‘smart’ phones with an internet connection. In India alone, there are 20 climate changeemploying new technologies and new marketmechanisms, cities will be better able to million new mobile subscribers each month. and agingobtain the full value of the smart city. This More than 50% of web connections will be mobile by 2013. Furthermore, ICT is infrastructure,report explores specifically how cities andcompanies can begin to capture value by becoming part of the citizens’ expectations and shortmaking infrastructure management more of a great place to live and work. term problemsefficient and by supporting the market for anentirely new kind of digital infrastructure- Computing in ‘the cloud’ means crunching such as trafficbased product: the information product. data is cheaper and data services are more powerful than ever. Communications are congestion,Why do we need smart cities? increasingly possible not only between peak energy people but also between sensor-embedded digital devices, appliances and databases, demand andCities today need the tools to tackleunprecedented environmental and a system known as the Internet of Things rising energyeconomic challenges (IoT). Ubiquitous connectivity, super fast internet access, and falling costs of sensors costs. and instrumentation mean that ‘big data’ will grow in size while better mining and management of that data will be possible. As many as 412 million ‘machine to machine’ applications are expected by 2014, enabled by 50 billion connections by 2025.12Information Marketplaces | The New Economics of Cities The Climate Group | Arup | Accenture | Horizon | 13
  14. 14. In 2050 cities will need to meet the needs of future citizens with 1/10th of the carbon we generate today ‘Smart‘ holds the promise of finding new How is this value actually ways for citizens get the services they realised? crave, without using exponentially more resources. The marriage of technology with By unlocking information, ideas and the physical and built environment enables energies, smart city applications more efficient construction and management and services create more sustainable of infrastructure, and the potential to change modes of living and working behaviour for personal or public good.In economic Through better use of information andterms, ICT The SMART 2020 Report13, the definitive communications, our cities have the potential report on ICT and climate change, highlightsenabled energy the promise created by the convergence of to be ‘mined’ for surplus capacity, by using data and information to improve services forefficiency could the environment and digital infrastructure. citizens at a low cost. The report found that globally, ICT-enabledtransalte into solutions of smart grid, smart buildings, Opportunities arise from:over €600 smart logistics and industrial processes can • Measurement, automation and potentially reduce urban global greenhousebillion worth of gas emissions by as much as 7.8 Gigatonnes feedback to decision-makers, creatingcost savings for in 2020 – a reduction larger than total more efficient use of infrastructure, including buildings and roads, emissions produced by China in 2010.the public and In economic terms, ICT enabled energy enabling both short term benefitsprivate sector efficiency could translate into over €600 from crisis management and long term benefits from better planning. billion worth of costs savings for the public and private sector. Some of this value is For instance, as we better understand being captured today, but not all, as we will energy use in buildings through explore in Chapter 2. benchmarking and monitoring, building operations can be better managed. The Recent research conducted global by Booz tools used plan and construct buildings & Co. finds that cities alone will have to can be fine-tuned to match intended spend a staggering $350 trillion, or 7 times use with operational realities, saving current global gross domestic product over construction time and material costs the next 30 years, on urban infrastructure, along the way. Smart grid solutions including energy systems, residential and enable utilities to have more transparency commercial buildings, water and waste over the electricity distribution networks systems, roads and transportation, and and manage supply and demand supporting information and communications dynamically, a crucial tool for managing technology.14 To do so without applying the growing peaks in demand from home transformative solutions will be appliances. In future, utilities will need unsustainable. The same research shows to manage the growth in electric vehicles that additional $22 trillion invested today in as a mobile energy storage option to help ICT to improve building and transportation balance supply and demand for power. efficiency would save cities $33 trillion and reduce future emissions by as much as 50%.14 | The Climate Group | Arup | Accenture | Horizon
  15. 15. • Making both public and private work network in place, it could build a city- datasets about the interaction wide, city-employee smart work strategy to between people, infrastructure and allow people to work from home. This will technology systems available to allow the city’s 20,000 workers to occupy third-party service providers and 120 buildings instead of 200, a direct savings developers. in energy and carbon, and save people time For instance, city transportation sitting in traffic,” says Bas Boorsma, Cisco departments, in a bid to reduce road Systems, who has been working on smart congestion, are seeking to get people working solutions for the last five years. The ‘Surplus out of their cars and into public City’ is our transportation and onto their bicycles. Digital access to energy information similarly Already, developers are creating mobile is opening up service provision options opportunity phone apps that draw on city data that to non-traditional suppliers17, with the to turn helps people use public transportation potential to create services and associated more easily15. We will explore this further jobs and benefits beyond what the energy inefficiencies in Chapter 3. industry could predict today. Cities that have into value by participated in the Living Labs Global AwardBut cities can do more than manage the process over the past 2 years have seen over understandingconstruction, automation and use of 500 digital and IT service providers vie to the city asinfrastructure in cities. They can build an solve their challenges. See Appendix 1 forindustry around creating new services a list of solutions and enabling technologies a system,for their citizens. In 2010, Clay Shirky envisioned in the coming decade. breakingobserved a phenomenon he called ‘CognitiveSurplus’16, in which new digital technologies What are cities already doing? down silosallow people to aggregate their individual and reducingcreativity with others online (sometimes The signs are encouraging: smart citycalled ‘crowdsourcing’), creating valuable initiatives are underway in many fragmentationprojects such as open source software. urban centresToday we can link not only people, but also Cities are already beginning to link solutions 13 The Climate Group and GeSI, SMART 2020: Enabling the lowdata and information to a city’s challenges, to policy goals and initiatives, assessing carbon economy in the informationto unlock a new untapped resource for smart city value either based on individual age, 2008 14 WWF- Booz, Reinventing the City,solutions and economic growth, what we technology analysis, such as smart meters, or 2011are calling the ‘surplus city’. Cities are vast grouping technologies as solution sets, such 15 http://www.mta.info/apps/ 16 Shirky, Cognitive Surplus, 2010interactions between people, infrastructure as smart grid systems. San Diego’s benefits 17 http://www.ey.com/GL/en/and technology that can be accessed, shared from a planned smart grid implementation Newsroom/News-releases/Energy- companies-must-reinvent-themselves-and inter-connected thanks to new digital were estimated to be US$2.7 billion over to-competetechnology. Giving policymakers and citizens 20 years with an internal rate of return up 18 San Diego School of Law, San Diego Smart Grid Study – Final Reportthe opportunity to tap these resources, to 75% and payback period of 3.5 years18. Energy Policy Initiatives Centre, 2006technology can ignite new applications and Some cities are also improving pricingservices, and, in turn, create better ways policies, through initiatives such as mobileof living and working. In Amsterdam, for parking payment options, and infrastructureinstance, a new application service helps city management, such as smart buildingworkers find a ‘smart work centre’ to avoid management systems.travelling during rush hour. “Amsterdamrealised a year ago that if the city had a smartInformation Marketplaces | The New Economics of Cities The Climate Group | Arup | Accenture | Horizon | 15
  16. 16. Sector Actions Description Implemented Authorised or awaiting authorisation Energy Smart grid Sensors and instrumentation to improve distribution network 6 11 efficiency, in conjunction with smart metering, helps match energy demand and supply Building energy Occupants can automate the energy-consuming systems in 13 3 management buildings system Smart building Building sensors and controls allow for better use of buildings, or 12 9 sensors and prediction of faults controls Smart energy Automated meter reading enables utility and occupants to access 17 14 metering information digitally Outdoor lighting Dimming and other controls enable greater energy efficiency 3 3 smart controls Transport Smart transport Ideally smart cards link multiple forms of transport and make 18 10 cards it more convenient to use, and for transport authorities to understand mobility patterns Car clubs Users can hire or share vehicles easily, and will ideally not buy a 6 1 car, but instead simply use one when it is convenient Cycle hire Uses can hire bicycles instead of driving 10 7 programs / sharing programs Electric buses Buses that are more efficient and ideally run on renewable power 10 3 Electric trains Trains that are more efficient and ideally run on renewable power 8 3 Electric vehicles Vehicles that can become mobile storage for energy, helping to 14 14 balance peak demand Real time Telematics and communications with drivers to optimse routes 7 0 information for logistics Real time Provides the basis for mobile applications for journey planning 18 10 transport information Real time Provides visibility to users and encourages uptake of public 12 7 transport displays transportation Water Smart water Monitors and helps water managers reduce waste in the system, 12 3 metering saving 10-15% per household Total 29 28Figure 1.1 Technology-enabled actions by C40 cities. Digital infrastructure: The pockets of success at the project level are (data centre capacity, prevalence of encouraging. A survey of policies, initiatives smart grid, connectivity and bandwidth, The hardware and software assets, including mobile and activities by the C40 cities to address software and visualizations, etc.) and ‘soft networks, mobile phones, climate change in 201119 clearly shows infrastructure’ that manages this technology fixed broadband, sensors, numbers of initiatives already underway that and infrastructure. Although it is easiest to databases, visual interfaces, require ICT or are improved by a significant describe the common elements in levels or data assets generated from ICT component (see Figure 1.1). stages as shown in the framework described the movement of people and things, and open APIs. in Figure 1.2, in practice, implementation Although the specific path to a ‘smarter’ may not be necessarily a linear process. It city will depend on context of the local city may be, for example, that infrastructure challenges, such as congestion, rising costs development progresses before the of water or heat provision, or reliability management is in place. Alternatively, of electricity, for all cities some common, management and leadership capability may core features will be part of the transition be more advanced than the technological to a smarter city. One common feature is infrastructure. We will discuss the steps that the development of ‘digital infrastructure’ cities can take to manage this process in which includes the physical ICT assets chapter 4.16 | The Climate Group | Arup | Accenture | Horizon
  17. 17. Smart City Project Implementation Level 1 Level 2 Level 3 Level 4 Soft Infrastructure Value Assessment Individual project Some non-financial Holistic value Holistic value business cases value assessed assessment (social/ assessment supporting environmental/financial) diversification of funding sources Governance Departmental Some cross- Cross-departmental City-wide governance governance structures departmental ‘Smart City’ management structures and collaboration positions in place shared performance targets combined with international collaboration Strategic ICT Focus Limited ICT capability Some strategic focus on ICT vision for the city ICT vision and strategy ICT overseen by dedicated City CIO Citizen Engagement Limited citizen Project-level, basic needs Citizen feedback loops Citizen participation in with Service Design engagement analysis, pilots established integrated service design Hard Infrastructure IT project focus Little or no ICT projects Targeted ICT project Integrated ICT Real-time city investments (e.g. Smart investments (including operations optimisation Grid) embedded sensing, control and actuation) Integration of No data integration Small scale data Creative data mash Open data and crowd- Data Streams integration ups pulling data to a sourcing initiatives common platform Digital Service Little or no digital Handful of digital Integrated digital Diversity of cloud-based Provision service provision services services around the city citizen services environmentFigure 1.2 Framework for a Smarter CityWhy is the value not being city development programmes. Media hype 19 http://www.arup.com/Publications/ Climate_Action_in_Megacities.aspxrealised? and the political rhetoric aside, deployment 20 http://www.arup.com/Publications/ of smart city initiatives that maximise Climate_Action_in_Megacities.aspxSeveral challenges are holding back integration opportunities is still limited.the promise of smart city planningand development Of the 36 cities interviewed for the C40 report20, very few had made the connectionWhile many smart city technologies – between the initiatives listed in Figure 1.1including smart electricity grids, smart meters and ICT strategy. None had a strategic plan inand real-time transportation information place to set a vision or policy framework for– are already in pilot programmes and some putting major technology trends into theircities are even implementing large-scale city planning. The vast majority of citiessmart transportation and grid projects, there are not more than level 2 on our smart cityare no examples to date of cities launching framework sketched in Figure 1.2.fully-integrated, strategically-designed, smartInformation Marketplaces | The New Economics of Cities The Climate Group | Arup | Accenture | Horizon | 17
  18. 18. This is perhaps not surprising. Capturing • Value objectives for one stakeholder the benefits of converging technology to may not be aligned with social, solve social, economic and environmental economic, environmental value for the challenges is not straightforward in practice, city. European utilities, for instance, and will happen once those technologies are estimated to gain between €22 and make ‘common sense’. However, given the €29.3 billion annually from smart grid urgency of the challenges cities are facing, it investments. However, the same smart “We have so many service is worth accelerating the pace of innovation grid projects could produce energy for providers coming to us with when the benefits are so vast. European consumers worth €3.6 - €18.2 a ‘smart city’ offer, but they billion, potentially cutting into utility don’t seem to understand sales. The gap between utilities’ and that it’s not just a matter of The implementation gap stems from several cities’ societal value goals could slow finding the newest, most challenges that we see within the smart complex system available. development plans22. cities context today, which arise from the They know they have the interaction between citizens and consumers, • Cities are complex organisations product to sell and cities know they would like to cities, national government and companies. and decisions that involve multiple be smarter, but there are a departments can take time and can • Smart city dialogue and plans that are number of competing factors often be at odds with the sales cycles of that go into making a match.” technology-led, rather than needs and companies. Procurement cycles for cities values-led, run the risk of compromising Adam Freed, Director for can take up to three years from initiation Long Term Planning and development plans. Smart metering to sale, which can prevent innovative Sustainability in New York is a case in point. In US markets, a under-resourced companies from technology-driven approach has led to a participating in smart city development backlash amongst consumers who do not opportunities. see the benefits of energy savings that were promised21. We point to possible ways through these • The value of digital investments is challenges in later chapters. not being clearly articulated for all stakeholders. Cities may be unsure of the Given the size of the challenge ahead, we payback or may not possess mechanisms need to proactively nurture smart city to pay for up-front costs even if payback initiatives that are already underway and is certain in the long term. support city leaders who are driving change, especially those who are looking across departmental silos in an effort to make connections and achieve greater innovation.18 | The Climate Group | Arup | Accenture | Horizon
  19. 19. The vast majority of citiesare not yet developing fullyintegrated physical, economicand digital master planningMaking the Smart City Transition Meeting cities’ challenges will only possible if the role of Information andMaking the move towards smart city Communications Technologies are madedevelopment requires a full understanding of explicit. ICTs or ‘smart’ solutions are no silverits strategic value bullet, and must be seen within the context of what they can achieve.The smart city offers a holistic, strategicvision for bringing together innovative Real transformation in cities will require us 21 http://gigaom.com/cleantech/why- the-smart-meter-backlash-story-isnt-digital infrastructure solutions that address to look at the ‘surplus city’ hidden within the going-away/a multitude of issues facing modern urban city. Beyond the public transport systems, 22 Geert-Jan van der Zanden, The Smart Grid in Europe: The impact ofcentres and communities. But if the smart micro-wind turbines, and parks there is an consumer engagement on the value ofcity is to evolve from an infrastructure underlying system, connecting resources to the European smart grid, IIIEE Theses, 2011:33concern to a strategic part of the urban waste to consumption in a set of complexdevelopment, then city leaders will need to interactions. ICT can begin to help us managerecognise its full value opportunities. this complexity – and redefine how we operate our energy networks, our transportThis report intends to help address some of infrastructure, and the buildings in which wethe open questions within the industry today work and live.and help expedite the transition to a smart,more sustainable future. Within each chapter 3we will work to uncover:1. What value is derived from a ‘smart’ city and how can it be better captured?2. What is the “product” of a smart city and how can we maximise its value?3. What leadership and softer infrastructure is required to realise the opportunity? billion people will move to cities by 2050Information Marketplaces | The New Economics of Cities The Climate Group | Arup | Accenture | Horizon | 19
  20. 20. Transparency helps departments in Rio de Janeiro work together for better city services and outcomes Interview with Rodrigo Rosa, Special Advisor to the Mayor on Sustainability, Rio, Brazil, May 2011 As Rio prepares to host one of the most anticipated climate change events in 2012, Rio+20, marking the 20th anniversary of the 1992 Earth Summit, the city is also gearing up to launch its own new sustainability initiatives. One of these is the sustainable favela project, “Morar Carioca Verde”, a policy of urbanising, retrofitting and improving the city’s favela slum areas. “We would love solutions to be brought to us, and we can see how we could incorporate them,” says Rodrigo. He hopes to find innovative ideas that will involve both public and private sector. Rio’s power utility Light, which now provides service to Rio’s favela neighbourhoods, offers discounted electricity bills to customers who recycle – a low-tech solution to the problem of too much trash in the neighborhood. For a city whose mayor was awarded a national prize for his innovative use of IT to solve the city’s challenges last year, technology is also part of that sustainability agenda. Indeed, one of the most advanced operations centres has recently opened in Rio. Built with the help of IBM and Oracle, it is a high tech ‘situation room’ designed to support the city in managing its services. Another promise of an operations centre is in delivering support crisis management, increasingly important following the devastating mud slides that have hit Rio state in recent years. “Our biggest challenge is flooding and landslides. We are learning a lot about crisis management and coordination. 25 people were killed last year in the city, and 800 in the state. Better weather prediction will help avoid this. And we can better collaborate with state officials.” The operations centre is a powerful decision-support tool. “Sometimes we don’t even know what it can do for us.” Rodrigo is considering the necessary training for municipal government employees who are not used to the high tech tools they now have access to. “We have people out there on the ground working on their issue, such as transport or security, but aren’t used to looking at the data to do something different.” Rodrigo is sure that the city is better off just by having transparency between the different departments that may not have worked together before. “Information is more clear - you can see it on screen. You have the concept of geo-referencing everything that makes it easier to understand. If traffic is bad in a particular part of the city and you know a waste management truck can help quickly to clean something up, that truck can be routed to the location to avoid traffic.” Rodrigo looks forward to seeing how the project develops and to measuring its impact. He hopes that it will support knowledge-sharing between city officials and sub-national government that will ultimately lead to better services for Rio’s citizens through more efficient use of resources.20 | The Climate Group | Arup | Accenture | Horizon
  21. 21. Chapter 2ConnectingSmart Citiesto Value
  22. 22. The time has come to clearly understand and articulate the smart city value proposition The previous chapter introduced the Smart Measuring within a Common City and its environmental, economic and Framework social drivers, and explored reasons why the value of the smart city is not fully exploited Setting common metrics will enable today. In this chapter we look at how cities cities to evaluate different projects can better recognise, capture, communicate on a like-for-like basis and commercialise the value of their smart city initiatives.Use of a single Smart city initiatives are typically evaluated using metrics that are specific to a sector orset of metrics We introduce several limitations to department. For instance, smart grid projects current approaches for valuing smart citysheds light investments and highlight opportunities to are measured by a reduction in energy losses and efficiency gains, and Variableon a smart provide a more holistic methodology for Road Pricing is measured by reduced traffic assessing value. The value of smart citytechnology’s projects is often assessed on an individual, congestion. While the value of each project can be readily assessed at the departmentalrate of return case-by-case basis, rather than as part of level, it is less easy to understand the the greater jigsaw of the city. As a result,on investment the benefits of economies of scope and contribution of the project to the city’s overarching objectives. For example, howand enable scale created by smart projects are often would a city compare the relative value not measured and consequently, notcomparison communicated. Value assessments tend contributions of a Smart Grid and Variable Road Pricing towards its city-wide aimsagainst other to overlook core benefits of smart city of economic development, livability, and initiatives, such as cleaner air, new jobs,technologies and entrepreneurship. City leaders need environmental sustainability? Such questions present a challenge to city leaders who need to be able to better crystallise the benefits to make capital allocation decisions across a of a smarter, faster, more environmental- portfolio of smart city initiatives. Cities do friendly city and then, by applying business not yet have the necessary tools to deploy model innovation, translate these desirable their finite resources in the most capital outcomes into city revenues that support efficient way. new financing mechanisms. For the value of smart city projects to be effectively compared, a common suite of metrics needs to be developed that tie the performance of individual initiatives to the city’s long-term strategic aims. The aims of a city will be unique to the challenges it faces. Mexico City, for example, may aim for greater public security, job creation and reliability of electricity networks, while Copenhagen may have its sights set on being CO2 neutral capital by 2025. A single city scorecard, based on specific objectives, enables the city to understand the relative22 | The Climate Group | Arup | Accenture | Horizon
  23. 23. value of different smart technology context. While selecting and implementinginitiatives based on how well each delivers benchmarking metrics is no easy task,on the city’s overall strategy. It helps city the benefits of greater understanding andleaders decipher whether a smart buildings international credibility will only increasescheme, for example, is more or less valuable over time as historical data is accumulated tothan an electric vehicles pilot to their city’s drive new insights about the city.needs. As the value of smart city initiativeschange over time, using a single set of In the corporate world it is becomingmetrics sheds light on a smart technology’s common practice for companies to It is importantrate of return on investment and enable measure their performance against a set for city leaderscomparison against other technologies. of sustainability measures; the number of companies producing sustainability reports to understandAs well as helping to select initiatives, a has increased by 600% between 1999 and which disclosurecommon set of metrics enables the city 201028. To support this process, companiesto monitor its overall performance over have developed automated sustainability platforms besttime and compare this against other cities. measurement tools, such as Enterprise suits the city’sHistorical analysis of a city’s performance Resource Planning (ERP) of reportingcan reveal useful results that generate modules. Cities such as Singapore29 and needsunderstanding and provide evidence for Abu Dhabi30 are starting to partner withhow well the city is meeting its targets. software vendors to create web-based 24 http://www.cityindicators.orgAround the world, cities are increasingly management solutions. While cities may not 25 http://www.cdproject.net/en-US/participating in benchmarking activities be willing to invest in developing their own Respond/Pages/CDP-Cities.aspx 26 http://www.citiesprogramme.org/to better understand their performance measurement tools, options are available index.php/about/#ungcand to share lessons with other cities, for cities to purchase similar software as a 28 http://fm.sap.com/data/ UPLOAD/files/EIU_-_Sustainability_from the Global City Indicators Program24, service. As more and more companies and Performance_Management[1].pdfwhich now has over 180 city members, to cities recognise the value of having a single 29 http://www.carbonneutral.com/ about-us/media-centre/press-the environmentally-focused disclosure set of sustainability metrics, the barriers to releases/singapore-to-lead-the-way-platforms, including the Carbon Disclosure adopting measurement tool are decreasing. with-carbon-management-tool-pilot/ 30 http://www.thenational.ae/news/Project for Cities25 and the United Nations Soon all cities will be able to measure and uae-news/environment/abu-dhabi-Global Compact Cities Programme26. benchmark the performance of their smart to-monitor- greenhouse-gas-emissions#The proliferation of methodologies and initiatives, giving them a greater, connectedreporting frameworks in the marketplace understanding of their operations.can, however, make the decision on whereand how to disclose potentially confusingfor cities. It is important that city leaderschoose the disclosure platform that bestsuits their city’s needs. Once selected,city leaders can then create customisedmethodologies to gather local data againstthe chosen set of standardised metrics. Thisapproach would enable a city to effectivelybenchmark itself against a global audiencewhilst still incorporating the city’s uniqueInformation Marketplaces | The New Economics of Cities The Climate Group | Arup | Accenture | Horizon | 23

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