Navigant Research Blog

Utilities Embrace Innovation at EUW, but Struggle with Culture

— November 25, 2015

There was a palpable buzz at European Utility Week in early November centered around change, innovation, and outsiders. For instance, one of the crowded presentations I witnessed was Neil Pennington’s talk about smart thermostats. Dr. Pennington, the director of innovation for RWE npower in the United Kingdom, noted that smart thermostats are a logical first step, but utilities should consider going beyond these devices and offer products and services that are highly personalized, connected, and automated. Move outside the heating, ventilation, and air conditioning (HVAC) system, he says, and think about home security and customer lifestyles if you want to succeed as an innovator.

Pennington’s message was effective. It generated some enthusiastic questions, and people in the audience were hungry for insights into how to engage customers in new and effective ways.

Other vendors and presenters at this trade show, which set records for attendance (some 9,000 visitors from 77 countries), offered similar stories about innovation and change. Joris Jonker, one of the founders of residential energy management company Quby, told me his company’s offering was gaining traction as a dashboard for the home, and that Netherlands-based utility Eneco would be installing 1 million units over 2 years. Indeed, Eneco has embraced Quby’s solution so much that it acquired the firm just ahead of the trade show. Eneco’s move demonstrates it is no longer business as usual for some utilities.

Other discussions included the outsiders, or non-utility companies like Google (or Alphabet, Google’s parent company), and how these firms might alter the utility game. Might Google, or perhaps Apple, or an unknown startup move aggressively with a customer-centric and data-driven business model to disrupt the utility status quo? Possibly, but others were not so sure, saying it would be hard to disrupt the incumbents, especially for smaller players. Still, the question about potential disruption sparked debate.

Beyond these change and innovation issues, several other themes played out at the show. The smart cities concept is gaining wider attention (as my colleague Eric Woods so aptly demonstrated in sessions he moderated), with companies like Itron and Sensus touting their capabilities in this area. And, of course, the Internet of Things (IoT) concept seemed to be on just about everyone’s lips. In that vein, one company that stood out was Sigfox, a French firm promoting its unique cellular communications technology that is designed for low-throughput connectivity among IoT devices. Very buzzy.

But for all the talk about innovation and change, there was an interesting poll conducted among attendees that revealed an Achilles heel for the utility business: an ongoing lack of innovation. The poll asked “What is the biggest threat to the utilities?” The results of the unscientific survey among about 400 people were:

  • Falling/flat demand: 6%
  • Revenue loss/distributed solar: 12%
  • Challenge Renewable/Integration: 12%
  • Regulatory/Policy uncertainty: 23%
  • Lack of “innovation culture”: 46%

So a key takeaway for me from the Vienna conference was that while there is a welcome mat set out for change and plenty of talk, true innovation is still some ways off. And the staid utility culture in Europe is ripe for a shake-up, internally, externally, or from both perspectives.


Do Cities Need Large Hydro to Go 100% Renewable?

— November 11, 2015

Cities are becoming increasingly proactive in setting targets for their utilities to shift from fossil fuel power generation to renewable energy resources. There are currently three cities in the United States that run on 100% renewable energy, and there are 96 cities globally that have pledged to accomplish the same feat. Although only small cities in North America have made the transition thus far (including Aspen, Colorado; Burlington, Vermont; and Greensburg, Kansas), large cities such as Vancouver, Canada and San Francisco, California have also set targets to transition to 100% renewable energy. While these cities are using significant amounts of solar and wind energy resources, having access to large hydropower generation is a luxury common to cities with 100% renewable generation goals. Vancouver, for example, has been using hydropower to supply about 90% of its electricity throughout 2015.

Hydro: Helpful but Unnecessary

Nevertheless, regions without access to hydropower are able to both economically and technically transition to renewables, according to researchers and engineers from Stanford University and University of California, Berkeley. The universities developed a state-by-state plan under The Solutions Project that shows how each state could convert to 100% renewable energy by 2050. Using Colorado as a non-hydroelectricity-intensive system example, the state would need to get the vast majority of its electricity from wind and solar, specifically 55% of its electricity from wind power and 40.8% from a variety of solar applications (including 15% from concentrating solar power [CSP] plants, 17.6% from solar PV plants, 4.2% from residential rooftop PV, and 4% from commercial/government rooftop PV). Geothermal (3%) and a very small amount of hydroelectric (1.2%) would constitute the remainder under the plan.

According to the study, transitioning Colorado’s energy resources in this way would create over 70,000 construction and operation jobs, save $7.4 billion in avoided health costs per year, and would provide annual energy cost savings of $312 per person in 2050. The Solutions Projects seems to demonstrate that even in states with little or no hydroelectric electricity supply, it is still technically and economically feasible to transition to 100% renewable energy.

Economic Opportunity, Not Sacrifice

Of the 96 cities that have pledged to decarbonize their electricity supply, 86% believe taking action on climate change presents an economic opportunity. According to the 2015 Smart Energy for Smart Cities report from Navigant Research, that economic opportunity will be substantial; the global smart energy for smart cities technology market is expected to grow from $7.3 billion in revenue in 2015 to $20.9 billion in 2024.


India’s 100 Smart Cities Program Spurs Investment and Criticism

— October 28, 2015

Narendra Modi, India’s new prime minister, has embraced technology more so than any of his predecessors. With 15.7 million followers on Twitter (I was happy when I reached 100) and more than 30 million Facebook followers, the global leader recently made an imprint on the high-tech epicenter of Silicon Valley, visiting a number of companies there last month to talk about how technology can help India face difficult social, economic, and environmental issues. His 100 Smart Cities program is a landmark of this philosophy, aspiring to develop new urban spaces to support overwhelming population growth, adapt to climate change, and create a modern economy. But many have asked if this program really has the capability of supporting these development needs, and if it is instead channeling funds away from areas that desperately need support.

Modi introduced his program in June of 2015, just a month after taking office, pledging a short term investment of $1.2 billion for the planning of projects across the country to be completed over the course of 7 years. Other countries such as Japan, the United Kingdom, Singapore, and the United Arab Emirates have also promised billions in investments. Indian cities planned for upgrades and development are predominantly located in the economic corridor between Delhi and Mumbai, as well as in Special Investment Regions and Special Economic Zones where there are fewer restrictions upon international business and investment.

The program’s flagship city of Dholera, located in Modi’s home state of Gujarat, has been in planning mode since 2009 and is currently under construction, with completion expected in 2020. Plans for the megacity include a modernized smart grid infrastructure that supports high levels of renewables and a citywide communications infrastructure and smart city platform that supports both public and private sectors.

Challenges Loom

But aside from Modi’s smart city plan is the fact that much of India will still remain severely underdeveloped. A number of Indian and international development groups have spoken out about the negative impacts of developing isolated super cities while the rest of the country remains underdeveloped and without adequate public infrastructure and access to utilities. Large parts of the country still need to be electrified, and many that are suffer from as much as 40% capacity losses from theft. This has led to a troubled financial state for many of India’s utilities, which are expected to struggle to balance these issues and attract financial support for smart infrastructure investment.

Developing smart cities as a top-down initiative leaves room to overlook the ground-up steps required to effectively meld together technology and community interests. Without citizen participation as an integral part of planning, even if citizens have access to smart city infrastructure to some degree, what are the chances that it will be relevant to them? This is a concern particularly with the country’s poorest citizens, which remain a majority of the population in the country, and may face loss of farmland in areas where smart cities are scheduled to be developed on top of it. Additionally, a large part of this population is dispersed among the outskirts of many cities—how can centralized smart infrastructure provide support to those that can’t easily access it? Modi’s planning, as big and impressive as it sounds, still has some issues to address in order for it to enable economic growth for all of India’s citizens.


Security Concerns Pose Risk to IoT Market Expansion

— October 26, 2015

If the Internet itself is not fully secure, then it stands to reason that the Internet of Things (IoT) cannot possibly be fully secure either. Whether it’s refrigerators, cars, thermostats, or even your food (the Guardian reported that even your steak may have come from a connected cow), the IoT is becoming a ubiquitous feature of modern life with inherent security risks. The addition of billions of devices that communicate through Internet-connected IT infrastructure while using various types of hardware is likely to create a challenging market to safeguard in the years to come.

While there are few risks to having data collected on cows, some IoT devices do raise some security concerns for human beings. Devices such as GPS-connected running shirts (that hackers can use to know when you’re not home) and face recognition smart locks (which can be tricked by being shown digital photographs) are particularly prone to hacking breaches.

The IoT in Smart Cities

Smart city technologies with IoT capability—such as smart parking systems, which use sensors to guide drivers to open parking spaces, or traffic management systems, which help government organizations synchronize traffic lights for optimal traffic flows—also exist simply to improve the quality of life for city residents (in this case reducing traffic congestion and pollution). However, there are some legitimate security concerns with these technologies that need to be addressed as well. Using traffic management systems as an example, security researchers at the University of Michigan were able to hack nearly 100 wireless networked traffic lights by using only a laptop and wireless card. If hackers can easily and quickly cause mass disarray through traffic light manipulation—by, say, changing all the lights in a particular intersection to be green—it’s not unreasonable to foresee public distrust of smart city IoT technology.

Nevertheless, not all IoT devices are easily hackable, and some are providing invaluable security features to society. In fact, cameras and the IoT are helping to make life much safer for those who have encounters with the police or are near a crime scene. The introduction of body cameras on police in Rialto, California resulted in complaints against officers dropping by nearly 90% in 2012 compared to 2011, and use of force by officers dropped by 60%. Additionally, IoT-connected sensors in Denver, Colorado can pinpoint the location of gunshots by triangulating sound, allowing officers to be more quickly deployed to a crime scene.

Security Issues Need to Be Addressed

If the IoT market is going to expand as quickly as many analysts believe, the issues surrounding security need to be addressed early on—not after significant breaches that will likely result in a huge loss of public trust in IoT technology. Conducting privacy and security risk assessments, minimizing the type of data that is collected, and testing advanced security measures before rather than after product launch are all ways that companies and governments can ensure a high level of security for IoT devices while also respecting a reasonable level of privacy for citizens.


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