Are utilities ready to play their role in smart cities?

Given there is now a worldwide understanding it is the cities that will lead many of the major developments in smart energy, smart transport, smart communications and so on, it is important to look at the reality of the push for smart cities.

In general it can be said many of the smart city developments we have seen throughout the last decade have been developed in isolation, rather than within a holistic overall strategy. That is not a criticism – more of an observation. At the same time, those who started early might have stumbled initially, but they are now well-advanced and ahead of the pack. But all councils and municipalities that are now embarking on smart cities will have to do so based on a sound strategic plan.

If we look at cities that have been involved in the early developments we can make some of the following observations:

Municipality broadband networks – well more than 100 of them in the US and a similar number in Europe – were simply based on providing telecoms access as an alternative to the incumbent players who refused to provide first-class broadband. While there are good reports this has been beneficial for the local citizens, very few other social and economic benefits were derived from these infrastructure projects. These projects did not have a holistic smart city vision at their heart – did not look for opportunities where the infrastructure could be used for other sectors (healthcare, education, transport, energy, etc). While in the US most of the municipality networks have been, and still are being, installed by the local electricity companies, these companies have at least used the telecoms infrastructure for their own purposes as well (e.g. smart meters), however, still not with the holistic view that we nowadays take in relation to ‘future energy’.

It is only now that cities have begun to realise the infrastructure can be used for all of those other applications; unfortunately it was never taken into account when the municipality network was originally designed. In order to create a smart city literally tens of thousands of sensors linked to all sort of devices, construction elements, buildings, utility assets and so on are needed. This will require an integral design, with wireless networks (LTE, 5G, wi-fi), and a rethink of the use of the fibre network as a backbone network for a smart city.

On the energy side, cities are now actively pursuing renewables, energy efficiencies, battery storage, PVs and EVs, and the utilities simply can’t keep up with this because their ICT networks are not sufficiently up-to-scratch to make that happen. Furthermore, it is extremely hard for them to develop the appropriate new business models, making sure they get a return on their investments while at the same time maintaining the ageing infrastructure which is attracting less and less revenue.

These problems are worldwide and, to date, no one has come up with a good solution. It is, however, interesting to see in some of the developing countries they are deciding against big grids and are simply building distributed systems only. They did the same thing in telecoms. They didn’t build fixed networks, concentrating instead on mobile, and in the case of Africa went from 4 per cent telephone penetration to today’s 70 per cent-plus within a decade. This is now stimulating investments in fibre-based backbone networks, and while it is hard to replicate this in developed economies we might at least be able to learn something from it.

However, those who haven’t even embarked on implementing intelligence and automation into their networks will be facing an uphill battle. For example, many utilities are still in that very early stage where they have hardly any visibility on what is happening in their network, and so are in no position to start talking to city authorities on how they can play a role in the development of a smart city. This is the case in New York City, where the local government has an excellent plan (NY Rev), but the question is whether their new energy vision can in fact be implemented. While they have the political leadership the current situation ‘on the ground’ is such that there are no easy solutions to put that plan into action.

There are also few or no incentives for the existing players to invest in new technologies without a clear understanding of what the return will be on their investment. Furthermore, there are conflicts of interest within the industry and around the possible business models aimed at bringing in new players and new investments, as the business model for that is not clear at all.

The new vision also challenges current and recently established policies and regulations and, while intuitively competition is a good thing, at the same time some parts of the economy are simply too difficult to open up, as in the end it is in the national interest to have a reliable national electricity system. So far, nobody has solved this one.

However, others are already further advanced and are actually among the leaders in the smart city movement, seeing it as a new business opportunity. They are very much learning on the job and no doubt many mistakes will be made, but one thing is certain – these will be the winners and the survivors.

We also see cities making desperate pleas for FTTH networks. The telcos are using their monopolistic powers to stop that from happening, and in the US the dysfunctional political system in that country allows this. There is also a rethink now taking place among municipalities – moving their strategy away from providing an alternative telecoms service to looking at a broader use of new gigabit networks for the full smart city concept. But, here again, these new strategies are still in the early stages, with no real examples so far of cities that have developed the concept in a holistic way.

Another issue that needs to be addressed is city politics. Smart city policies need to be bipartisan. It is no use having the long-term plans in place if they are going to be demolished by short-term politics when a new council is elected. We have seen instances of this in cities that are paraded as shining examples of smart cities, such as Barcelona and Chattanooga. Again, the key to success is to put up a sound holistic strategic plan before you embark on smart city projects.

Finally, it is critical to address the financial issues. If cities are indeed becoming key in the implementation of, for example, the Paris Accords on climate change or the federal policies on clean energy, innovation, new job creation, renewables and so on, they also need to have access to the funds to do so, and to date this issue is nowhere near being resolved, certainly not in the western economies. Countries such as China, Singapore, Korea and Japan, as well as the Scandinavian countries, have far better collaboration in place between federal and city governments and the local industries involved in building smart cities. There are lessons to be learned here.

On a more positive note, at this stage all parties involved – cities, telcos, utilities and the broader industry – are increasingly coming to the understanding they will have to collaborate in order to develop the smart cities that are needed to face the challenges of the future, be it creating new jobs in the sharing and networked economy, addressing traffic congestion and pollution, climate and environmental issues, energy efficiency, and generally creating liveable cities for its citizens and its businesses.

Article by Australian Smart Communities Association executive director Paul Budde