Overview presentation at Central European University (Budapest) on Smart Cities, 3 March 2015

1. Jorge Núñez Ferrer
CEU, 4/3/2014

2.  The what and why of Smart Cities
 Balancing objectives of cities
 Transition to a Smart City
 The role of (right kind of) standards
 The city planning revolution
 The challenges of efficient integration
 Creating value
 The need for new Financial models
 EU strategy for Smart Cities, now and …later?
 The clash of systems

3.  Is smart synonymous with unnecessarily
complex and expensive?
 Are there stupid cities too?
 Is this a corporate invention to sell gadgets?
 Do we need them?
 Are we smart enough to live in a smart city?
 Is a smart city a controlling-restrictive city?
 Is it worth the cost?

4. In the last 40 years urbanisation has expanded
as much as the previous 4000 years.To double
now in the next 40 years.
 Urban population grows now by 150.000 people a
day!!!
2011
3.6 billion
52% of
world
population
2050
6.3 billion
67% of world
population
72%

6. Source: Global City Indicators Facility, Cities and Ageing, University of Toronto, GCIF Policy Snapshots No. 2, September 2013.

7.  In Europe Cities….
 Generate 85% of GDP
 Consume 70% of energy
 Emit 70% of greenhouse gases
 Without addressing city inefficiencies
global or European growth, energy, climate
and environmental objectives will simply
fail

8. • Economic & Financial Sustainability
– Wealth Generation, attractiveness to businesses and
citizens, economic resilience
– Ability to cover investments, new financing models, strong
link with economic sustainability
• Social Sustainability (Inclusive city)
– Equity, stakeholder involvement, understanding behavior
• Environmental Sustainability
– Resource efficiency, emissions, environmental quality, risk
management

9.  Developing smart cities is NOT about city authorities
procuring technologies
 It is not only on supporting technology innovation
 It is about:
 Developing the right environment for smart solutions to be
effectively adopted and used.
 Being inclusive: Citizens are not only inhabitants, but shapers of
the smart city as prosumers of city services
 Partnering with industry, financiers and end users…this is
sometimes a non-traditional partnership.
 Reforming and adapting the administrative, finance and
procurement mechanisms to take into account the lifecycle of
new infrastructures

10.  Cities are in general run rather inefficiently
 Utilities and services need to collaborate and
infrastructures need to integrate.
 For this it is important that companies and
authorities collaborate
 Key is open data – in standardised formats

11. Source: IEC (2014, P.26)

12.  To allow planning, benchmarking and technology
compatibility standards are taking a central role
 Standards ensure collaboration, allow
replicability, enable the creation of new markets
 International bodies ISO, IEC
 European CEN CENELEC, ETSI
 National BSI, etc.

13.  Standards enable smart cities: an aligned
approach for design, development and operation
of the system of systems
 Standards increase the number of solutions,
increase competition and benefit customers (cities
and citizens)
 Standards guarantee:
 Specified performance levels;
 Compatibility & Interoperability
 Increase competition
Standards allow for smart opportunities

14. a) Planning requires:
1. understanding the OBJECTIVES of the city
2. a holistic approach – INTEGRATION
3. Knowledge of the cities needs today and good projections
– INDICATORS
4. Know the stakeholders and their role
5. TECHNICAL KNOWLEDGE
6. CAPACITYTO ADAPT in time. Investments risk locking
the city for a long time into a specific infrastructure.
Technologies need to be compatible, interoperable.
b) There will be a need for REGULATORY AND PUBLIC
PROCUREMENT REFORM

15.  Traditional procurement is generally:
 Anti-innovation
 Seeks the lowest investment cost
 There is a need of further reform:
 Include the lifecycle costs of projects
 Encourage innovative procurement
 Focus has to move away from CAPEX to OPEX
 Administrations need to learn to partner with
private sector - PPPs

16.  Citizens are key
 Not only as users, but as prosumers
 They will be important providers of services
 Planning needs to take into account the market
opportunities of smarter systems, enhancing
entrepreneurial possibilities
 Improving opportunities and living standards

17.  We are facing a financial crisis
 Municipal budgets weak
 Municipal finance providers are in trouble
 Banking regulations affect long term investments
 We need new business models – new ways to
address the challenges ahead
 New cooperation mechanisms
 New administrative structures
 New financial instruments
 New regulatory frameworks

18.  The monoline insurance companies that provided
bonds and guarantees got severely hit by the
crisis
 The banking sector regulations (Basel III) make
infrastructure lending less interesting: higher
capital reserves and additional financial save-
guards in line with loan size and duration
 Taxation avenues are limited

19.  Green bonds
 Guarantees
 In EU:
 Innovation - EIP:
▪ Horizon 2020
▪ Risk Sharing facilities
 Deployment:
▪ EEEF, etc.
▪ Project bonds
▪ Juncker’s investment initiative

20.  DEPLOYMENT
 EU does not manage to bring innovations to the
market.
 Lack of scaling up and deployment
 Low risk appetite in the market
 EU market is inflexible and fragmented
 EU funding focused on innovation
 National restricted due to economy and state aid
rules
 Some funding available through structural funds,
Cohesion Funds and CEF
 External Industrial Competition

22.  Guarantees for green bonds – EU level for
Energy and for Smart Cities (to cover the
receding investments from banks and other
financiers)
 Equity and guarantees for innovation.
 Risk: Uptake of projects that would be done
anyway due to political pressure – 315 bn in 2
years.

23. Two models:
 Mainly large but decentralised producers with
interconnectors
 Decentralised energy Islands
 Large producers are tending to prefer 1 despite
competition
 Second option linked with storage can change the
landscape of energy radically
 Emerging concern: Stranded assets

24. + Interconnectors
Source: http://www.eu-ecogrid.net/images/Pictures-and-photos/Bornholm.jpg

26.  www.ceps.eu
 Cities:The Juncker Commission should not miss this key to growth, jobs and the
environment
http://www.ceps.eu/book/cities-juncker-commission-should-not-miss-key-growth-jobs-and-environment
 www.iec.ch
 White paper – Orchestrating Smart Cities
http://www.iec.ch/whitepaper/smartcities/?ref=extfooter