How Smart Cities are Accelerating the Energy Transition

by | Feb 9, 2016

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EricWoods-NavigantCity leaders all over the world have embraced the smart city concept with enthusiasm. They are heralding innovative projects and laying out a vision for how cities can use technology to meet sustainability goals, boost local economies, and improve services. This commitment to changing how cities operate is driving the continued interest in smart cities. The smart city concept is also evolving. There is a growing emphasis on resilience and climate adaption in city strategies; a new focus on making smart city development relevant to citizens and their daily lives; a desire for more data-driven policymaking and operational control; and a recognition of the need for standards to help drive smart city programs to the next stage.

City energy policy is also evolving rapidly as cities become more ambitious and proactive in setting their energy strategy. Cities have played a key role in the development of many of the technologies and new business models associated with the transformation of the energy sector. Some of the most important advanced smart grid demonstrations have involved close partnerships between municipalities and local utilities. Cities are also driving forward smart metering and energy efficiency programs. Navigant Research expects the global market for smart energy solutions for smart cities to grow from $7.3 billion in annual revenue in 2015 to $21 billion by 2024, representing a cumulative investment of almost $140 billion.

These trends are all part of a broader transition in the energy sector that Navigant identifies as the emergence of the Energy Cloud. The Energy Cloud represents the shift away from centralized energy generation and distribution toward a networked and dynamic infrastructure that incorporates demand-side generation technologies and capabilities and renewable energy sources alongside traditional assets. Such a system is characterized by increased complexity and redundancy, allowing for greater choice in the manner in which energy is generated, supplied, and consumed. As a result, commercial, industrial, and residential energy consumers are becoming more actively engaged in energy management and energy generation. Cities are also seizing the opportunities presented by the Energy Cloud and are working with utilities and other stakeholders in the creation of new urban energy systems.

There are five key areas where cities are becoming more influential in shaping the energy sector.

— Accelerating the shift to renewable energy. An area where cities are having a significant impact is in their support for renewable energy. Cities are increasingly proactive in setting targets for their utilities to shift from fossil fuels to renewable energy to help meet carbon emissions targets. Cities are also encouraging residential and commercial energy generation through programs to support solar PV and small wind generation, combined heat and power systems, and other community energy schemes. San Francisco and Vancouver are among a growing number of cities that have committed to a 100% renewable energy target.

— Driving the adoption of smart grid technologies. Support for renewable generation by city authorities increases the pressure on utilities to deliver an infrastructure that can integrate these new resources in a manageable way and accelerates other changes in a city’s energy infrastructure. Cities are the focus of extensive smart grid pilots that are demonstrating the increased control, flexibility, and integration enabled by a digital infrastructure for grid monitoring and management. Chicago, for example, is working with ComEd and its partners to develop a ‘Smart Grid for a Smart Chicago’ that will eventually see 4 million smart meters deployed in addition to upgrades to the city’s electricity network.

— Increasing energy efficiency. Collaboration between city departments and local energy utilities to improve energy efficiency is one of the simplest and most effective measures for reducing the energy footprint of a city. Coordinating programs for energy efficiency improvements is an obvious step and enables cities and utilities to target the most appropriate residents, businesses, and communities for retrofit and rebate programs. Boston, for example, is working closely with local utilities National Grid and NSTAR to reduce its $50 million-plus energy costs and to meet a goal of reducing greenhouse gas emissions 25% by 2020 and 80% by 2050.

–Increasing resilience.Resilience has long been part of the debate about the nature of smart cities, but it is becoming a much more central part of the discussion. Global cities most at risk from coastal flooding include Mumbai, Shanghai, Miami, New York, Tokyo, and Bangkok. Resilience requires an assessment of each city’s complex and interconnected infrastructure and institutional systems that span the physical, economic, institutional, and sociopolitical environment. Electricity networks are at the heart of this complex web of infrastructure interdependencies. A failure in the electricity network can have a dramatic impact on water, sewerage, health, communication, and transportation systems. New York, for example, is looking to increase the use of distributed generation alongside other grid innovations to provide an energy infrastructure better able to cope with future events of that scale.

— Cities and energy markets. One of the most significant trends emerging around smart cities and their energy policies is an increasingly proactive approach to energy management. Cities are becoming active players in their local energy markets, collaborating with their existing utilities where that makes sense but also increasingly willing to challenge and even compete with those providers. In the United Kingdom, for example, a number of cities have set up or are in the process of establishing new city-owned energy companies, and London was the first local government authority to be licensed as an energy supplier. The Energy Cloud offers many new roles for cities, utilities, and other players and we are likely to see new forms of cooperation and competition emerge.

The emerging vision is of a smart city that integrates large- and small-scale energy initiatives, including major infrastructure investments, citywide improvements in energy efficiency, and distributed energy generation. In the process, cities will become clusters of smart energy communities that can exploit the benefits of the new energy systems. Cities will become fully immersed in the complexities and dynamism of the Energy Cloud.

About the Author 

Eric Woods is a research director leading Navigant Research’s coverage of smart cities. He has written numerous reports on the smart city markets and technologies. He has 20 years of experience as an analyst and consultant on new technology trends.

You can download the Executive Summary of Navigant Research’s Smart Energy for Smart Cities report.

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