Navigant Research Blog

Smoggy Skies Drive City Innovation

— September 16, 2014

The air pollution caused by rising vehicle numbers and coal-fired power plants in Chinese cities has been well documented.  But these issues are not limited to cities of the developing world.  In March, smog levels in Paris reached levels that forced the city government to limit vehicle access to the city and make public transport free.  Subsequent analysis suggests that this drastic measure had a notable impact on air quality, if only temporarily.

Paris is not alone among European cities in suffering from deteriorating air quality.  London and other U.K. cities, for example, have been under the spotlight for failing to meet European Union (EU) standards on air quality.  A report in July suggested that Oxford Street in London was one of the most polluted roads in the word with regard to nitrogen dioxide (largely produced by diesel buses and cars), with levels 3 times the EU-recommended amount – and higher than Beijing.  London and some other U.K. cities are not expected to meet EU targets for air pollution reduction until 2030.

Fewer Vehicles, Cleaner Air

The World Health Organization estimates that outdoor air pollution causes 3.7 million premature deaths worldwide each year; this mortality is due to exposure to small particulate matter of 10 microns or less in diameter, which cause cardiovascular and respiratory diseases and cancers.  Of particular concern in cities are fine particulate matter below 2.5 microns, referred to as PM2.5, which can lodge deep within the lungs.  This life-threatening type of smog is created by burning vehicle fuel as well as other fuels such as coal and wood.

The need to address air pollution is becoming a significant driver for the adoption of electric vehicles in cities, restrictions on the worst polluting vehicles, and the introduction of technologies that can monitor and improve air quality.  Madrid, for example, is using parking fees to target the worst polluting vehicles, while also introducing an electric bike rental scheme.  Boston is piloting high-tech city benches that can collect information on air quality and provide solar-powered charging for electronic devices.  Other high-tech attempts to improve air quality have been less than successful: a project supported by the Mayor of London that used a form of glue to collect contaminants proved to be largely ineffective in capturing vehicle pollution.  More recently, the Mayor has suggested that diesel vehicles, responsible for much of London’s damaging air pollution, may face additional charges for driving in the capital under the city’s congestion charging scheme.

Looking East

In the future, western cities may look to China as a leader in air quality improvement.  In 2013, the Chinese government launched its Airborne Pollution Prevention and Control Action Plan, which will see it invest $277 billion in an attempt to reduce air pollution by up to 25% in selected provinces and cities (including the municipality of Beijing) by 2017 compared to 2012 levels.  Beijing alone is expected to invest around $160 billion.  Beijing is also working with IBM on a 10-year project called Green Horizon that will employ sensor technologies, big data analytics, weather modelling, and other advanced techniques to help the city monitor and address air pollution.  The project will also integrate renewable energy forecasting and industrial energy management.

In North America and Europe, air pollution is often associated with a previous age of industrialization, but the growing public awareness of the continuing threat to public health is accelerating policy and technology innovation.  Ultimately, air pollution in our cities needs to be addressed through a combination of transportation and energy policies and the general adoption of clean fuel vehicles and other clean technologies.

 

Urban Population Growth Drives the Need for Smart Cities

— July 15, 2014

The latest update from the United Nations on global urbanization trends is a powerful reminder of the most important of all drivers for smart city development: population growth.  World Urbanization Prospects, the 2014 revision reaffirms the core findings of previous studies but also further highlights the dramatic changes that will occur over the next 3 decades.

Today, the world’s urban population is close to 3.9 billion.  It will reach 6.3 billion in 2050, by which time two-thirds of the world’s population will be living in cities.   Nearly 90% of the increase in urban population will occur in Africa and Asia, and three countries alone – China, India, and Nigeria – will account for 37% of the 2.5 billion new urban dwellers.  Although more than half of the world’s urban citizens live in Asia today, the continent is only 48% urbanized and only 40% of Africans live in cities.  By 2050, Africa will be 54% urbanized and Asia will have reached 64%.

Percentage of Population in Urban Areas: 1950-2050

(Source: United Nations)

China and India Focus on Urban Infrastructure

China’s response to these pressures has been well-publicized.  The central government plans to invest up to $1 trillion in urban infrastructure during the 12th Five-Year Plan.  China’s Ministry of Housing and Urban and Rural Development (MOHURD) is currently assessing plans from 193 cities that are competing for up to $70 billion in investment to smart city development programs. In March 2014, the Ministry of Finance released details about the National New-type Urbanization Plan (2014-2020).  The government has stated a desire to develop a more inclusive path to urbanization that will benefit more citizens, improve the quality of life, and reduce the environmental impact of new developments.

India has taken longer than China to embrace urbanization as part of national policy.  As a result, despite the rapid growth of cities, like Mumbai and Delhi, and the global role of Indian technology suppliers, investment in the urban infrastructure has lagged economic development.  After decades of attempts to hold back the tide in favor of the traditional role of rural communities, there is a now a greater focus on the needs of the expanding urban population.

100 New Cities

India’s main smart city initiative to date has been the Delhi Mumbai Industrial Corridor (DMIC).  The development is intended to spur manufacturing and urbanization across a broad swath of northern India, with seven new cities planned and a total investment of $90 billion.  The new Indian government elected in May 2014 has put urban development at the core of its program and declared a target of building 100 new cities by 2022.  It has allocated around $1 billion for the program in its first budget.   According to M. Venkaiah Naidu, the new urban development minister, the planned cities will employ the latest technology and infrastructure, including advanced waste management and transportation systems.

The vast expansion in the urban population and growing expectations among city dwellers for better quality services and infrastructure will drive demand for smart city solutions across Asia Pacific over the next decade.  Navigant Research’s latest Smart Cities report estimates that a total of $63 billion will be invested in smart city technologies in Asia Pacific between 2014 and 2013, more than one-third of a global investment of almost $175 billion.

 

LEDs Lead Smart City Networks

— July 3, 2014

The path to more systematic and dynamic control of street lighting is being blazed by the adoption of light-emitting diode (LED) technology.  The continuing fall in the price of LED street lights has made them attractive to city managers around the world, particularly for new installations.  In our new report, Smart Street Lighting, Navigant Research estimates that 53% of street light luminaire sales in 2014 will be LED, and that percentage will grow to 94% by 2023.

This rapid transition to LED street lights is occurring as new, networked control systems become widely available.  These systems can bring added energy savings as well as additional value through greater control and reduced maintenance costs (see here, here, and here for examples).  Given the comparative ease and reduced cost of installing a control node while replacing a luminaire, the LED transition is proving to be a boon in the adoption of networked street light systems.  Navigant Research forecasts that revenue from the control equipment for such systems will grow from $197 million in 2014 to $477 million by 2023.

Illuminated Backbone

With the installation of a network that can communicate with street lights comes the opportunity to integrate those controls with multiple other intelligent systems: traffic light controls, security cameras, electric vehicle charging stations, environmental sensors, and digital signage.  The availability of both power and communications on street light poles throughout a city provides a ready-made backbone for many of those other services.  The same communications infrastructure can often be expanded for additional applications, and once the value of one such system is proven, city managers become far more likely to seek new applications for the technology.

In order to fulfill the potential of integration between multiple smart city systems, however, smart street lighting systems have to become more adaptable and more open.  In short, they need to look more like platforms than proprietary, closed systems.

Standards Emerge

The adoption of standards at multiple levels is crucial if smart street lighting networks are to serve as the platform for other smart city projects.  Standards adoption will open up the market and provide cities with more choice and greater confidence about the future value of their investment.

Standards-based software and communications protocols enable greater interoperability between systems, but there is also a role for more standards at the hardware level.   For this reason, the publication of a new standard by the National Electrical Manufacturers Association (NEMA) earlier this year is an important development.  Standard 136.41 defines a dimming controller and socket for street light luminaires.  The implication of the new standard is that, as long as a city purchases compliant street lights, it will be able to add control features, such as dimming and wireless communications, at a later date simply by purchasing any vendor’s compliant controller and plugging it into the top of their lights.  I discussed the new standard in more detail in a previous blog.

For a detailed examination of the benefits of smart street lighting for smart cities, the challenges still to be addressed, and Navigant Research’s forecasts for the growth of the market, please join us for the upcoming free webinar, Smart Street Lighting for Smart Cities, on July 8 at 2 p.m. EDT.  Click here to register.

 

Smart Cities Seek Viable Financing Models

— May 21, 2014

It’s almost a truism to say the biggest barrier to implementing smart city programs is access to finance.  The same can be said of almost any large-scale capital project, particularly those involving public infrastructure.  Smart cities face the additional challenge of assessing the costs and benefits of new technologies and the uncertainties introduced by new operating models.  Fortunately, a growing range of financing options is available to cities as the financial sector comes to understand the benefits and risks of these new projects better.

A useful resource for cities perplexed by funding options is the Smart Cities Financing Guide, released by the Smart Cities Council (SCC) in association with Arizona State University.  The report assesses 28 different financial tools that are potentially available to city leaders, from the well-established use of municipal bonds to advanced financial models, such as securitization (now notorious for its role in the global recession of 2009).   Several different forms of performance contracting and green deals that have become available in recent years are also covered.

Not Available in All Areas

The report mainly focuses on financial tools available in North America, but similar options are usually available in Europe (if sometimes under different terminology).   Financing Models for Smart Cities, a guide produced by the European Smart Cities Stakeholder Platform, provides more detail on European options.  European cities also have access to additional support from the European Union.

However, not all of the potential financial tools are available in all regions, countries, or even in all states.  As Navigant Research’s report, Smart Cities: Asia Pacific, shows, even in China, with its huge infrastructure investment, financing for smart city projects can be difficult.  Cities in Asia often have fewer options for raising funds than their European or North American counterparts.

Finance and the Cloud

Smart city projects also vary widely in investment requirements and the length of time over which benefits are accrued: from a short-scale focus on the outcomes of social programs to 100-year-plus expectations for a railway infrastructure.  As the SCC guide stresses, cities should consider a range of financing options.   They should also look at consolidating requirements to achieve greater scale where this fits the preferred financial option.  On the other hand, in some cases, it makes sense to go in the opposite direction and look at disaggregating projects in order to find the right financial tool for each component.

Funding innovation can take other forms, of course.   One area not pursued explicitly in the SCC report is the change in operational models enabled by new technologies.  The most important of these is the emergence of cloud-based services.  For smart cities, cloud computing offers a cost-effective and scalable infrastructure for the delivery of new services, as well as important financial advantages – notably, shifting investment costs from capital expenditures to operating expenditures.  Cloud computing, therefore, makes it easier to establish a scalable and adaptable commercial model for the infrastructure services being provided.  Another opportunity for cities to maximize the value of their assets is to open up data resources to third-party developers.  However, crowdsourcing and open data can’t provide the resources for large-scale infrastructure, such as new transit systems or smart water networks – which is where the approaches examined in the Smart Cities Financing Guide become essential.

 

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