Common barriers to smart cities and energy efficiency

I attended a smart cities seminar at Osborne Clarke on the 27th January. I have to say that I regard much of the talk about smart cities as simply that, talk with a lot of hype and not much reality (see my previous posts on the problems of hype here (http://www.onlyelevenpercent.com/innovation-hype-confusion-perfect-illustration/). Firstly as Alan Kell, a long term smart building and smart city pioneer says, we are really talking about smarter cities. “Smart” isn’t a point in time or a single fixed state. Secondly many of the technologies talked about in the smart cities conversation like energy storage, are either only in their infancy, not yet deployable at scale or depend on some regulatory changes that have yet to happen.
 
Anyway the seminar was based on some research by Osborne Clarke looking at barriers to smart cities. The report seemed to to conclude that finance was a barrier and that we needed some innovative finance. This reminded me of much of the discussion on energy efficiency finance and to my mind is misguided.
 
Simple availability of finance is not a problem in energy efficiency (EE) or smart cities, the problem is the lack of well developed bankable projects at the scale necessary to attract serious levels of investment and cheaper capital. In both EE and smart cities we don’t yet have the capacity (the know-how) to be able to develop large multi-building, city wide projects at scale. That lack of capacity sits on both sides, on the demand side the customers (cities) don’t have enough capacity to know what they want and how to get it (they need to become smarter customers). They are inundated with offers from suppliers, all with their own agenda of selling kit and services. On the supply side there is a lack of capacity to develop large projects, and a shortage of development funding to take concepts through to fully worked-up bankable projects. There is also a lack of clarity over business models for a lot of the smart city concepts.
 
We need capacity building for both the demand and the supply side of the equation. We also need development finance which may have to be public or soft money in the first instance abut ultimately can be paid back out of the implemented projects. We also need standardized ways of developing and documenting processes as well as gaining standardised performance data, something that in EE we are addressing through the Investor Confidence Europe (www.eeperformance.org/europe).
 
Interesting, unattributed comments I liked included the following:

• The DNOs are clear that the Low Carbon Networks programme has demonstrated that demand side activity can be more cost-effective than network upgrading. The issue here is that regulation still only encourages capital going into network upgrading. From the early days of the Electricity Market Reform some of us argued that we needed to change the regulations to incentivize DNOs to invest in demand side activities. Even though the RIIO (Revenues = Incentives + Innovation + Outputs) approach is an improvement it still isn’t sufficient.
• Very few elections change anything but the one in May will in the way that 1945 and 1979 brought in revolutionary changes, the welfare state in 1945 and Thatcherism in1979.
• The EU defines a smart city as a city that has done one smart city project. Smart is not a destination but a continuum.
• Smart city developments require new models of collaboration between cities, government and the private sector.
• The real barrier is the need for new business models. There is plenty of money around for well developed projects.

Thanks to Osborne Clarke for the research and hosting the event. More information can be found at: http://www.smartcities.osborneclarke.com.