Navigant Research Blog

UK Cities Are Embedding Smart City Principles in City Policy

— November 7, 2017

My previous blog summarized five of the Innovation Awards spotlighted in the UK Smart Cities Index 2017, commissioned by Huawei, which assess the 20 leading smart cities in the UK. Those awards focused on five key smart city service areas: transportation, health, energy, education, and public safety. Equally important are the cross-sector strategies and technology investments that enable innovation across these service areas.

Four other Innovation Awards identify key strategic and technical areas where UK cities are making significant contributions to the development of smart city policies and infrastructure:

Sustainability: Cities are making sustainability the heart of city policy, as they recognize the need to reduce their environmental footprint and contribute to the global reduction in greenhouse gas emissions. Peterborough takes the Innovation Award for its environmental focus and commitment to becoming a circular city, as exemplified in the Share Peterborough programme for resource sharing. Also commended are Bristol, European Green Capital in 2016; London, which has launched an ambitious new environmental policy; and Manchester, which has set a goal of being a zero carbon city by 2050.

Internet of Things (IoT): UK cities are looking to establish a large-scale test bed environment that can support a rolling programme of innovation projects. Bristol Is Open continues to lead the way in terms of its scope and ambition and the contribution it is making to the city’s broader plans. Other leading examples include Manchester’s CityVerve IoT demonstrator, Milton Keynes’ MK:Smart, and Cambridge’s new LoRa-based intelligent city platform.

Data and analytics: All the cities included in this report are looking at how to use data to improve services and boost innovation. London continues to be at the forefront on data innovation with its London Office of Data Analytics and a new Chief Digital Officer accelerating the use of data to improve services across the capital. Leeds also deserves mention as one of the pioneers for open data in the UK with Data Mill North, just one of several data-focused initiatives in the city.

Strategy: The successful adoption of new technologies to improve city services requires cities to rethink the way they design, manage, and operate city services in the digital age. All the leading cities are taking a fresh view on the impact of technology on city policy making, planning, and service design. The Innovation Award goes to Aberdeen for its new Target Operating Model, which seeks to embed smart city thinking into city planning, service design, and infrastructure investment. This will be enabled by new approaches to the provision of digital infrastructure and services.

The 10th Innovation Award is for City Partner and reflects the importance of central government and other agencies in fostering collaboration between cities and supporting follower cities as they develop smart city initiatives. The Future Cities Catapult is having a strong influence across the country by helping cities initiate smart city programmes, share ideas and insight, develop common standards, and accelerate innovation in areas like smart planning.

These Innovation Awards demonstrate the range of activity occurring across UK cities. In my next blog, I will examine some of broader insights to be drawn from Navigant Research’s efforts for the report and its conversations with city leaders.

 

Bristol Claims Top Spot as UK Cities Step Up Innovation Programmes

— November 3, 2017

The UK Smart Cities Index 2017, commissioned by Huawei, provides a timely review of the progress of smart cities in the UK and offers insights for urban innovation projects around the world. Bristol gains the top spot in the new index, a reflection of the city’s continued investment in programmes such as Bristol Is Open and the growing integration between innovation projects with the city’s operations. The city exemplifies the way smart city concepts are gradually being embedded at the heart of city policy. While Bristol edges ahead of London this year, the UK capital is also showing a strong commitment to driving smart city innovation, notably with the recent appointment of a new Chief Digital Officer. Following the two Leaders is a strong group of Contenders led by Manchester, Leeds, Birmingham, Milton Keynes, Glasgow, and Nottingham.

Innovation Highlights

The scope of work being done across the UK is highlighted in the report in a series of Innovation Awards that showcase leadership in 10 areas. The first five awards focus on specific areas of city services:

Transportation: Many UK cities are looking at technologies to reduce congestion and transport-related emissions, and Milton Keynes stands out for its range of projects and its close alignment with the city’s broader strategy for growth. Its initiatives include mobility apps, EV and automated vehicles, and a new citywide intelligent traffic light management system.

Health: Supporting aging populations and reducing health inequalities, notably in terms of differences in life expectation between communities, are high priorities. Leeds is a leader among UK cities in exploring the possibilities of more integrated approaches to health and social care, the role of technologies in supporting people throughout their lives, and the importance of data in improving health outcomes.

Energy: As Navigant Research has highlighted, energy is an increasingly important issue for many cities in the UK and elsewhere. Not only is energy policy a key element in any broader sustainability target, it is also closely connected to transport, housing, and health policies. Among several cities driving new energy programmes, Nottingham gains the Innovation Award for its city-owned energy company, foundational energy projects, and new community energy schemes exploring the use of solar and storage solutions.

Education: One of the significant trends identified in the study is the closer relationship developing between local government and the university sector. Among the cities working in new ways with their universities to drive smart city projects are Bristol, Cambridge, and Oxford. But the Innovation Award goes to Newcastle for the role the University of Newcastle has taken in the establishment of Newcastle City Futures and in directing and supporting a range of digital programmes in the city—as well as the establishment of the Science Central facility.

Public Safety: As most UK cities have already deployed extensive closed-circuit TV systems, the focus is now on coordination and the better use of video analysis and other forms of analytics. Glasgow has led the way in the creation of a new city operations centre, the showcase development from its smart city demonstrator award.

Cities are exploring the potential for new technologies in each of these service areas, they also realise the need to join up these programmes through more holistic approaches and the development of common platforms. In my next blog, I will look at the cities leading the way in these areas.

 

Brexit and the Future of Energy in the United Kingdom, Part 2

— July 14, 2016

Bangkok SkylineIn my previous post in this two-part series, I discussed different potential scenarios for the U.K. energy sector after Brexit; here I examine Brexit’s impact on energy investment and energy industry in the country.

Brexit has caused widespread economic uncertainty and market volatility. Though the FTSE100 index has recovered from its initial decline, the pound is still trading well below its pre-election levels. While it’s not an economic disaster, Brexit-related uncertainty will expose the United Kingdom to greater instability when economic shocks do occur. The days of the country being a safe economic haven are over.

The U.K. energy industry relies heavily on capital investment to build large-scale assets—in recent years, this investment has gone into both onshore and offshore wind, the conversion of coal generation to biomass, and grid reinforcement. The United Kingdom is a 16% shareholder of the European Investment Bank (EIB), which provides ultra-low-cost funding to European infrastructure projects. In the 5 years leading up to 2015, the U.K. energy industry received more EIB funds—28% —than any other industry. However, Brexit will make it harder to access EIB funds for new projects. The bank has no provision in its statute for countries leaving the EU; the bank recently told Newsnight that “some U.K. projects, which previously would have stood a good chance, are now less likely to be approved.”

Interconnector Uncertainty

There will also be significant uncertainty regarding the country’s interconnector projects with mainland Europe. The United Kingdom’s participation in the single market provided investors with enough certainty to create a business case for interconnection. Before progressing with these projects, investors will require assurances that the country will be able to access cheap power from its European neighbors when its power prices are high, and vice versa. Future EU-imposed tariffs on the sale of electricity between a post-Brexit United Kingdom and the rest of Europe will kill interconnection projects, as without significant price arbitrage, there is no business case.

A new nuclear power station at Hinkley Point is central to the country’s long-term energy security, given the country’s rapidly decreasing capacity margin as older coal-fired generation plants are decommissioned. However, the country’s credit rating has been cut, along with many of its banks. This will likely raise the cost of capital for these large-scale energy projects, and may sound the death knell for the Hinkley Point project. The French government-owned lead partner EDF was on the verge of pulling out of the project before the Brexit vote; early indications suggest EDF will pull the plug.

Capacity Shortfalls

If Hinkley Point isn’t built, how will the United Kingdom address its falling capacity margin? One way will be to continue with its renewables program. However, the public is as hostile to onshore turbines as it is to European bureaucrats. To date, the United Kingdom has been a guiding light in offshore wind; however, these projects are more expensive per kilowatt of capacity than onshore projects. And with a higher cost of capital and an uncertain commitment to renewables, the country may find it difficult to find investment partners willing to commit to future offshore developments.

The capacity shortfall could be made up with domestic solar, but the ruling Conservative Party has already demonstrated its antipathy to subsidies by slashing the feed-in tariffs for domestic solar. With the threat of a post-Brexit recession, the government is more likely to remove incentives than introduce more generous ones.

What is more likely is a retrenchment from the country’s previous renewables obligations and a refocus on fossil fuel-powered generation—including the extension of the life of coal-fired generation—at least in the short- to medium-term. With historically low gas prices, we could see a resurgence in gas-fired generation. Fracking could also be back on the United Kingdom’s agenda: post-Brexit, the country will be free from the generally anti-fracking European body politic.

Siemens has gone on record about its uncertainty regarding future investment in the U.K. economy; this position is entirely expected. Most companies currently considering investment in the United Kingdom’s energy industry are expected to follow Siemens’ lead and wait until new prime minister Theresa May takes office and provides more clarity on what Brexit means for the country’s energy industry. While we just don’t know the extent of the fallout from Brexit on the U.K. energy sector, we do know that there will be an impact, and that it will most likely be negative—there are few positives to draw from the British public’s decision.

Potential Opportunity

So far, so gloomy. But is there a silver lining to what many see as a very gray cloud? While there is much to be pessimistic about, there are some potential positives to take from Brexit. Amber Rudd, the U.K. Energy Secretary, recently stood by the country’s commitment to address climate change, and suggested the United Kingdom could adopt more ambitious targets for CO2 reduction: 57% reduction from 1992 levels by 2032.

It can’t be disputed that Brexit has increased the risk of losing EDF as a partner for the Hinkley Point nuclear plant. However, this does not mean the project has to end. Brexit could unshackle the United Kingdom from EU regulations on nuclear power and, more importantly, wider procurement rules. The lower-valued pound will make it harder for U.K. companies to pay for goods and services beyond its own borders, but makes it cheaper for foreign companies—for instance, those in the United States or Japan—to make investments. Some may view Brexit uncertainty as an opportunity to enter the U.K. market at a lower cost.

 

Brexit and the Future of Energy in the United Kingdom, Part 1

— July 12, 2016

Energy CloudThe world is still reeling after the United Kingdom’s shock vote to leave the European Union (EU). So what does this mean for the country’s energy policy? And what does this mean for companies seeking to do business in energy in the United Kingdom?

The short answer to the first question is nobody knows, but it will either stay the same or get worse. Only a few short weeks after the world woke up to the reality of Brexit, there is far too much uncertainty to form a considered opinion about the extent to which the United Kingdom’s energy sector will be affected by the vote. However, it is worth taking a step back to assess the different scenarios that may evolve during the Brexit negotiations.

Period of Uncertainty

Until the U.K. government invokes Article 50 and formally notifies the EU about its intent to leave, the United Kingdom remains a full member. Article 50 will not be invoked until the new Prime Minister Theresa May enters Downing Street; however, there may be legal hurdles and a vote by Parliament before Article 50 can be invoked. There may even be a snap general election, further extending the period of uncertainty.

Brexit will either look very similar to the current state of affairs (although the United Kingdom will no longer participate in the European Parliament, it will still enact its laws), or the United Kingdom will cut itself off completely and face many years of trade renegotiations. So what can we expect the impact of Brexit to be on the U.K. energy market?

A Potential New Direction

The United Kingdom’s energy policy has been closely tied to wider EU policy for the last couple of decades. EU policy is heavily influenced by a low-carbon future and a pan-European energy market. The United Kingdom’s renewables, smart meter, and air quality targets were all set by Europe; a full departure from the EU via Brexit would mean the United Kingdom could tear up its commitments and choose its own direction.

Given the impending start of the United Kingdom’s smart meter rollout, this is probably an unstoppable train that has already left the station. However, if Brexit leads to a recession and higher fuel bills, there will likely be pressure on government to delay the smart meter deployment or rescind the legal obligation that forces suppliers to deploy meters. The United Kingdom has lagged behind many European countries in its commitments to improve air quality; a full Brexit from the EU will likely see the country delay further, given a likely shift back to fossil fuel-powered generation.

The short answer to the second question of what Brexit means for companies doing business in energy is “wait and see.” Look for more on this topic in the next post in this two-part series.

 

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