Navigant Research Blog

Safer, Stronger, and Brighter Streets through Lighting Controls

— October 6, 2016

SmartCityWhat impact do street lights have on a city’s populace? According to Washington, DC Mayor Muriel Bowser, street lights make the city’s streets “safer, stronger, and brighter.” This is the justification being used for the launch of a new service that allows residents of the district to report street light outages via text message. The challenge with city street lights is that they have a greater impact on how citizens feel than on more quantifiable measures.

The conventional wisdom says that brightly lit streets reduce crime and traffic collisions. Yet, a 2015 study published by the Journal of Epidemiology and Community Health found little evidence of harmful effects of reduced levels of street lighting on road collisions or crime in England and Wales. Researchers analyzed 14 years of data from 62 local authorities that implemented strategies such as switching lights off permanently, reducing the number of hours that lamps are switched on at night, dimming lights, and replacing traditional orange lamps with energy efficient white light LED lamps. Empirically, permanently switching off lights did not lead to an increase in crime or car crashes.

But it is too simplistic to conclude that better street lighting has no impact on a community. Another study, this one published in Safety Science, found that well-lit streets make pedestrians feel safer. Politicians, the ones who often shape street lighting decisions, get elected by what the electorate feels to be true, not what actually is true. Moreover, advanced control of street lights can reduce energy and save money.

Where DC Gets It Wrong

Washington, DC’s street light outage monitoring plan relies on residents reporting which of the city’s 70,000 street lights are out. At one point, crowdsourcing a problem like this was innovative; the ubiquity of smartphones and other connected devices only recently permitted such engagement. But, as noted in Navigant Research’s Outdoor Lighting Systems report, adding controls and communication networks to street lights enables municipalities to reduce energy consumption and make monitoring and management more efficient.

The City of Oslo, Norway faced the same challenge in 2010 (back when crowdsourcing was still a thing). The city relied on reports from residents to identify street light failures for its 55,000 street lights. Oslo wanted to make repair crews more efficient and also be able to reduce light levels as needed. In response, the city connected its street lighting into a single remotely accessible network that allows monitoring and control of light levels through Internet-based applications. The move reduced energy use by 62% while also reducing lamp downtime.


Smart Cities Week Highlights the Market’s Transition from Technology to People

— October 6, 2016

CarsharingA key theme reiterated at Smart Cities Week in Washington, DC was the recent evolution of the smart cities market to focus prospective projects more on people and how they would be affected by new technology, rather than the technology itself. As stated in one of my previous blogs, one of the keys to Columbus, Ohio winning the US Department of Transportation’s (DOT’s) Smart City Challenge and beating out the better-known technology centers of San Francisco, Austin, and Denver was the city’s ability to demonstrate that its plan would result in increasing poor residents’ access to new transportation options.

Keynote speakers at the conference also discussed the White House’s recent announcement that it will be providing an additional $80 million for smart city projects in response to the enormous interest that the DOT Smart City Challenge received. The majority of the new funding is expected to go toward the National Science Foundation.

Transportation and Economic Opportunity

Transportation as a connection to social inclusion was another key focus area of Smart Cities Week. US Transportation Secretary Anthony Foxx stated, “We have an opportunity … This is the first time in the history of our nation that we have a chance to build a transportation ecosystem that isn’t weighed down by exclusions, but is built on inclusion.” Again using Columbus as an example, the city is developing an app that would enable residents to pay for a multitude of transportation options (i.e., public transit, ride-hailing, and carsharing) through universal fare cards, with kiosks being set up in poorer communities to allow residents without smartphones or bank accounts to still have access to mobility services. Connecting to the socioeconomic challenges of cities is an important element in gaining citizen support for smart city programs.

City Infrastructure Under Transformation

As cities around the world continue to reach a boiling point in terms of traffic congestion and a lack of parking availability, smart city solutions have the potential to completely transform city infrastructure, improving quality of life and increasing the efficiency of cities. Low-cost autonomous ride-hailing programs could remove much of the need for excessive personal vehicles on the road and alleviate ubiquitous on-street parking. New spaces for walking and bicycling would be opened up, transforming the city into a more inclusive space, with low-cost transportation options for all residents.


Is the Smart City Market Entering an Acquisition Phase?

— September 19, 2016

Intelligent BuildingIn my last blog, I wrote about how the smart city market is at an important point in its evolution. In that blog, I focused on the changing priorities for smart city projects. Another side to this evolution is the changing market dynamics as suppliers refine their approach to the market and look to extend their capabilities. The most recent Navigant Research Leaderboard Report on smart city suppliers shows the continuing evolution in strategy and offerings among key players in the market.

One important indicator of the maturity of any technology market is the level and focus of merger and acquisition (M&A) activity. It is a sign of the relative immaturity and uncertainty associated with smart cities as a market that there has been little activity in recent years. But there are indications this is changing.

Internet of Things Focus

The acquisition of sensor network company Sensity by telecoms giant Verizon is the latest example—and one of the most significant. Sensity provides sensors and network controls for street lighting systems and has been targeting the emerging market for city platforms. For Verizon, the move marks a step up in its Internet of Things (IoT) and smart cities strategy and gives it the ability to offer a range of city solutions beyond intelligent street lighting, such as traffic management, smart parking, security, and air quality monitoring. It also increases Verizon’s attractiveness as a partner in the complex ecosystem of smart city and IoT suppliers. The alignment with the company’s broader IoT strategy is important to this acquisition, as well. Indeed, the growing focus on IoT capabilities across the technology industry is one of the main reasons why the smart city acquisition picture is changing. Cisco’s $1.4 billion acquisition of IoT platform provider Jasper Technologies in early 2016 can be seen as part of the same pattern. While enhancing their ability to play a bigger role in the IoT space, Verizon and Cisco are also developing strong smart city platforms. Moves from other big players for sensor technology and IoT platform providers are likely to be on the cards.

Analytics Companies

It is not only IoT technologies that are being acquired; analytics companies are also on the shopping list. Urban Engines, a specialist in the use of advanced analytics for the Internet of Moving Things, has announced that it is to become part of Google Maps. Founded by former Google employees, this may be more of a homecoming than an acquisition. However, it suggests that some of the more niche analytics providers in the smart city space will eventually find their home as part of a broader platform offering from bigger players.

Application-Specific Solutions

The third area of the market that we can expect to see more M&A activity is in application-specific solutions. This is an area with a greater history of activity. IBM, for example, has been adding to its roster of government solutions for a number of years in areas like intelligence and social care. But there has been less activity in new application areas. One exception is Silver Springs Networks’ move to strengthen its hand with the acquisition of street lighting software specialist Streetlight.Vision. If acquisition activity is stepping up across the market, the next phase could see more activity in other emerging solution areas such as smart parking and smart waste, for example.

These important developments will add spice to the conversation at Smart Cities Week in Washington, DC next week. I will be attending with other colleagues from Navigant Research and look forward to discussing these and other issues. Let me know if you would like to meet up at the event.


Europe’s Energy Transition Megatrends and Tipping Points, Part VI: New Entrants and Converging Industries

— September 6, 2016

SmartCityJan Vrins coauthored this post.

In our initial blog on Europe’s energy transition, we discussed seven megatrends that are fundamentally changing how we produce and use power. This blog discusses how converging industries and new entrants are changing our industry, specifically focusing on smart cities as a key area where this convergence and disruption is occurring at an accelerated pace. Finally, we will discuss what this means for the many market players that want to participate and survive in the Energy Cloud.

Our latest white paper describes how changing customer needs, evolving policy and regulation, and accelerating technology innovation and integration drives a more sophisticated two-way grid platform and a rapidly evolving ecosystem. Smart cities—dynamic, localised platforms that recombine technologies and services around energy, transportation, and data communication—provide fertile testing grounds for the industry incumbents and disruptors going after the nearly $1.3 trillion of forecasted new annual industry revenue by 2030 globally.

What’s Happening?

Europe’s focus on the interdependent goals of creating a low-carbon economy, ensuring energy security, and enabling competitive energy markets make it a test bed for many of the developments associated with the energy transition. This is reflected in the European market’s attraction for players across the energy value chain, including many new entrants who see an opportunity to disrupt the traditional utility industry and take market share away from incumbent utilities.

The role of energy companies, including utilities, network operators, and oil & gas companies, is being transformed by a series of fundamental shifts, including the following:

  • Energy consumption and GDP growth: Although population and GDP growth (at a slower pace) drive growing energy demand, the trend line between GDP and energy consumption growth has been broken in absolute terms in EU countries. Primary energy consumption in the EU countries was almost the same in 2013 as in 1990 according to the European Environment Agency (albeit partly as a result of economic recession). This dynamic puts pressure on all players in the energy sector. Utilities with no or limited customer growth see their overall revenue declining. Utilities that still see customer growth are reporting that demand (and revenue) is not growing at the same pace. This is creating an unsustainable situation: utilities with flat or declining revenue yet growing costs to serve their customers and maintain the grid.
  • Impacts of climate change: In an earlier blog, we discussed the impacts of the growing number of policies and regulations to reduce carbon emissions. It is clear that this impact is being felt, as Europe is on target to meet its 2020 goals for renewable energy and carbon emissions reductions. However, member states now face the challenge of meeting more challenging new targets if they are to make progress towards the grand goal of making Europe a low-carbon economy by 2050. In the meantime, cities and large corporations are not waiting—they are setting their own sustainability targets and investing in programs that reduce their carbon footprint. Power generators, network operators, and energy retailers are all active in this transformation but also face significant, and in many cases unknown, challenges as they try to understand the new demands placed on their businesses and operations.
  • Big power to small energy and the rise of the prosumer: Commercial, industrial, public sector, and residential energy consumers are all becoming more actively engaged in energy management and energy generation. More and more customers are choosing to install distributed energy resources (DER) on their premises. DER solutions include distributed generation, demand response, energy efficiency, distributed storage, microgrids, and EVs. Europe is expected to have the greatest percentage of new DER capacity deployed compared to centralised generation throughout the next decade. New energy retailers are also taking advantage of these changes and the development of smart energy applications and online service models to provide more innovative and lower-cost solutions for customers. These new entrants are further challenging the established position and profitability of the incumbent players.

How Industry Giants Are Responding

As a consequence of these changes, electricity utilities are under pressure. As revenue declines, costs are increasing due to needed investments to provide safe, reliable, and affordable power while also supporting an emerging, cleaner, and more distributed and intelligent grid that is required to provide needed flexibility. Therefore, utilities are looking for new revenue streams and thinking through new business models that will create shareholder value going forward. Oil & gas companies, under additional pressure because of the continued low oil price, are looking for ways to survive by taking out costs, reducing their upstream capital investments, and shutting down unprofitable assets. However, their long-term future also requires them to find new opportunities to grow revenue and shareholder value in new energy businesses.

Both utilities and oil & gas companies are looking to turn the challenges of the energy transition into their advantage through entry into new markets and the delivery of new energy platforms and services. Total’s Chairman and CEO Patrick Pouyanné has stated that the company’s goal “is to be in the top three global solar power companies, expand electricity trading and energy storage and be a leader in biofuels.” Meanwhile, French energy giant, Engie (formerly GDF Suez) has been investing heavily in renewables and storage technologies, developing its energy services business, and establishing its Cities of Tomorrow programme to target the growing smart cities market.

European utilities have also been embracing DER and developing alternative business models to capitalise on new technologies and the changing resource mix. This is especially true in Germany, where there are high levels of DER, and utilities like RWE and E.ON have begun transforming their business into a more capital-light, DER-based model by shedding centralised generation assets and positioning themselves as enablers and integrators of new DER resources. For example, RWE has invested in and formed a rooftop solar partnership with German solar developer Conergy and is white labelling Sonnenbatterie’s behind-the-meter battery systems for solar-equipped German homes. As DER penetration in Europe accelerates, we see more value in moving from generation to distribution and beyond the meter.

Energy market incumbents are developing strategies to position themselves as the leading force in creating the new order. At the same time, other players—from giants in the transport, IT, telecommunications, and engineering sectors to energy service and technology startups—are looking to increase their share of these emerging opportunities. For example, Europe is seeing the emergence of a new class of DER aggregators aiming to take advantage of these new technologies and the utilities’ evolving business models. LichtBlick, Caterva, Next Kraftwerke, and Ampard are just a few of the companies establishing virtual power plant business models to provide additional value from the integration of DER into the European grid. Many other, much larger players also see the potential in brokering the new relationships emerging between energy companies and their end customers.

Cities at the Heart of the Energy Transition

The continuing interest in developing smart cities is closely aligned to the transformation in the energy market and provides an important example of how the energy landscape is evolving. More than any other region, Europe has recognised the importance of smart city developments to its energy transition programme. Cities are examining the sources and efficiency of their energy to reduce their greenhouse gas emissions and energy costs. In the process, cities are becoming more ambitious and proactive in setting energy strategy. They are seizing opportunities to work with utilities and other stakeholders to create new urban energy systems. The emerging vision is of a smart city with integrated large- and small-scale energy initiatives, including major infrastructure investments, citywide improvements in energy efficiency, and distributed energy generation.

Across the continent, city leaders have been signing up for ambitious carbon emissions targets and are taking an active role in encouraging utilities and other players to support their strategies. Stockholm and Copenhagen have led the way with plans to become carbon-free cities, and many more cities are now following their path. Frustrated at the slowness of the change they are seeing, some cities are even taking matters into their own hands and looking at re-municipalisation of utilities or the creation of new city energy companies. Hamburg, for example, took back control of the city’s energy in 2014. In the United Kingdom, Bristol and Nottingham have established new city-owned energy companies, and the new Mayor of London has made a strong commitment to a new energy policy for the capital.

Utilities are responding to these challenges by working closely with cities and communities to develop new energy models. Alliander, for example, has been a long-standing supporter and investor in the ambitious Amsterdam Smart City programme. E.ON has been working with smart cities in order to test integration of its smart grid solutions that enable more effective energy management and integration of DER. In Malmo, Sweden, the utility and the city signed an agreement to adapt the entire Hyllie district of Malmo to a climate-friendly energy supply. By 2020, the entire district’s electricity, heating, and cooling will be powered exclusively by renewable resources and energy recovery.

Another aspect of Europe’s urban agenda that is having a strong influence on the energy sector is the focus on sustainable transportation. The European Union has put the triple play of energy, transport, and information and communications technology (ICT) at the heart of its innovation programme for cities. Reducing emissions from transportation is the next critical frontier in the decarbonisation of the European economy—electrification of heat and transport pose the most obvious options for sustainable demand growth in the present market. Europe has arguably the strongest level of utility engagement in developing EV charging services. Utilities and energy companies such as Germany’s RWE, Italy’s Distribuzione, Ireland’s ESB, and the Danish utilities SEAS-NVE, SE, NRGi, EnergiMidt, and Energi Fyn have all funded charging deployments or invested in companies that deploy chargers. For example, Danish company CLEVER is owned by the five largest utilities in Denmark and operates a network of several hundred EV supply equipment (EVSE) stations throughout Denmark; the company is now branching out into other geographic markets. Enel has developed an interoperability platform and is aggressively deploying charging stations, with more than 2,000 deployed across Italy.

So What Does This Mean?

The next decade will see a reshaping of the European energy sector to meet the needs and challenges of a low-carbon economy. We have already seen some of the industry’s largest players moving quickly to expand their capabilities and services to meet these new requirements.  As discussed in Part IV of this series, further diversification and mergers and acquisitions are inevitable as players look to gain a footprint in emerging services and exploit new energy technologies.

Energy companies also need to broaden their partnership network, working with those in the public services, transportation, infrastructure, and ICT sectors to deliver the integrated capabilities needed to make the energy transition a reality. They also need to create new relationships with their customers, as they too become partners as much as end consumers. The industry giants of today are using their resources as some of the biggest companies in the world to engineer this energy transformation and to meet future shareholder interests. They will need to continually reinvent themselves and become broader and more adaptable energy companies able to protect existing revenue streams and seize new opportunities. However, not all bets will pay off. We will inevitably see some wrong turns in this process of adaptation and the eventual winners may well be those who learn quickest from their mistakes.

This blog is the sixth in a series discussing how industry megatrends will play out across Europe as well as at the regional and country levels. Stay tuned for our next blog in this series focusing on customer choice and changing customer demands.

Learn more about our clients, projects, solution offerings, and team in our Navigant Energy Practice Overview.


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