"It has become more important to make cities not only ‘green’, but also efficient. As a result, we are now seeing some early examples of what I would describe as eco-friendly cities"
Frost ; Sullivan research ‘Strategic Opportunity Analysis of the Global Smart City Market’ estimates a combined market potential of this size globally for the smart city market in segments of energy, transportation, healthcare, building, infrastructure, and governance.
If one compares that to GDP of nations in 2014, it will sit above the GDP of Spain, thus making it the 12th largest GDP in the world.
The research by Frost Sullivan sets the stage for visionary thinking by identifying and analyzing one of the significant Mega Trends: Smart is the New Green. 'Smart' as a value proposition has been increasingly replacing 'Green' concepts. This presentation would highlight examples of projects, companies and technologies that will invade and change the smart city space globally in the next decade. It also provides information on the total addressable smart city market size opportunity and discusses smart city business models, funding mechanisms, and stakeholder analysis. It also provides an analysis of macro-to-micro implications of smart cities on various industries in driving convergence of competition.
Charles Dickens portrayed the 18th century as a tale of two cities; the 21st century, though, will be a tale of Smart Cities. Towards the end of the last decade, our planet achieved two remarkable feats. First, our human population crossed the seven billion mark and for the first time in history, 50 percent of the world’s population was living in urban areas. This is expected to accelerate to 60 percent before 2025, globally; with the Western, developed world reaching an 80 percent urbanization level during this time frame. Urbanization has become so important that it has elevated some cities, like Brussels, Seoul, Bogota, and many more, to be even more important than the countries themselves contributing to over 40 percent of the country’s GDP. Interestingly, the UK has already demonstrated its efforts in focusing on this Mega Trend of urbanization and city as growth hubs with the creation of a new ministry role called the “minister for cities.” This minister is tasked with unlocking the economic potential of cities, thus giving them more empowerment and freedom to do so.
As we further congregate in cities, it has become more important to make cities not only ‘green’, but also efficient. As a result, we are now seeing some early examples of what I would describe as eco-friendly cities. There are several cities that are focusing on specific aspects that help it run efficiently, such as on their transport, energy and waste management. In example, implementation of smart grids is being pushed heavily for smart energy management. Major energy companies like GE are building and operating smart grids for cities such as Atlanta for a monthly fee through a cloud platform.
While smart energy is essential, it is not the only aspect of a Smart City. A more coherent view of what exactly a Smart City is was made by my team at Frost & Sullivan, who scanned through numerous Smart City projects and initiatives currently undertaken globally and found some key parallels among them. We identified eight key aspects that define a Smart City: smart governance, smart energy, smart building, smart mobility, smart infrastructure, smart technology, smart healthcare and smart citizen.
It took us some effort to narrow down the definition (as none existed) and we eventually defined Smart Cities are those that have least five out of the eight “smart” parameters listed above. Those cities that are only implementing a couple of these are what we define as eco-friendly cities, like Nice in France. There are several Smart City projects out there like Masdar, but these are too small in our definition to be termed as an actual city.
Among the 26 Smart Cities identified, Amsterdam has been one of the most forthcoming in implementing smart and intelligent systems in most of the above parameters; executing projects in energy, mobility and governance, among others. But the most interesting aspect of Amsterdam is that it has created a formal channel and mechanism through which such projects can be catalyzed, funded and implemented. Amsterdam City Project follows a 50:50 public-private model jointly funded by the EU, city government, and private participants.
Frost & Sullivan research estimates a combined market potential of $1.5 trillion globally for the smart city market in segments of energy, transportation, healthcare, building, infrastructure, and governance. If one compares that to GDP of nations in 2014, it will sit above the GDP of Spain, thus making it the 12th largest GDP in the world. Yet, while the potential is huge, the challenge faced is finding funding and developing the right business model, as many cities in the Western world do not have the finances available to take on some mammoth-sized projects. As such, four main models that will be used, through which companies will engage with city authorities and utilities to tap into this market will be used: Build Own Operate (BOO), Build Operate Transfer (BOT), Build Operate Manage (BOM) and Open Business Model (OBM).
Of these, the open business model is expected to foster the most innovation due to the level of flexibility and scalability such platforms offer. This is where, the city planner allows any qualified company or business organization to build city infrastructure and provide city services. The city planner, however, will impose some regulatory obligations.
The market is also shaping up interestingly in terms of competition and Coapition. Smart City market participants will assume one or more of the four main roles in such engagements – integrators (the end-to-end service provider); network operators (the M2M and connectivity providers); product vendors (hardware and asset providers); and managed service providers (third-party providers overseeing management / operation of smart solutions / services).The chart below describes the different roles and players currently positioning themselves in each role:
The Mega Trend of Smart Cities is set to drive urban development for the next decade and will drive demand for response, storage, multi-energy networks, smart devices, and new business models.
by SARWANT SINGH * Based on Frost & Sullivan’s study on “Strategic Opportunity Analysis of the Global Smart City Market” published in 2013.
- Around 26 global cities and more than 90 sustainable cities are to developed by 2025. Around 50% of these smart cities will be from North America and Europe.
- The smart city market will be valued at $1.565 trillion in 2020. Out of this share, 24.6% of projects is likely to be in the smart governance and smart education segment.
- The need for complex and integrated citywide solutions will drive and foster convergence in the smart city space. Companies will actively partner and converge with other players in the smart city ecosystem to create and offer intelligent services. Convergence between pure-play product vendors, networking companies, and system integrators will create the most smart solutions in the market.
- As cities evolve into clusters of smart communities, the importance of ICT participants will increase as a fresh league of such companies begin to participate in areas, such as smart energy, industrial automation, and building technology that were previously not envisioned by traditional leaders in these spaces. Similarly, utility providers will begin to compete with telecom providers while deploying ICT network within a city.
- Smart cities will be measured on the level of intelligence and integration of infrastructure connecting sectors of healthcare, energy, buildings, transportation, and governance. The construction of this ICT network will have 4 main models: BOO, BOT, BOM, and Open Network.
- The smart energy segment will witness the highest growth rate by 2020. With a CAGR of 25.2%, the market is anticipated to be valued at $248.36 billion, constituting 15.8% of the global smart city market.
- Smart mobility solutions are likely to be in high demand in the next 15 years. Latin America, Middle East and Africa, and Central and Eastern Europe will be the growing segments, at 45.8%, 39.1%, and 31.4%, respectively, by 2025.
- eServices to Citizens, such as ePayments, eExchange, eSharing, etc., will empower citizens with real-time access to personal data and related services. More than 60% of citizens of smart cities will have full access to eServices in the next 10 years.
- All smart city market participants will assume one or more of the four main roles in the ecosystem: integrators (the end-to-end service provider); network operators (the M2M and connectivity providers); product vendors (hardware and asset providers); and managed service providers (third-party providers overseeing management/operation of smart solutions/services).
- The pace of smart city market development will depend on how quickly companies converge and tap into each other's industry value chains. In addition to identifying best partners, the first mover advantage in offering integrated solutions to city governments will also become vital as cities look for centralized operation centres. Cloud-based smart city services, in this context, will become imperative.
KEY PARAMETERS THAT WILL DEFINE A SMART CITY IN 2020
Smart cities are cities built on ‘Smart’ and ‘Intelligent’ solutions and technology that will lead to the adoption of at least 5 of the 8 following Smart Concepts:
- Smart Energy: Digital Management of Energy
- Smart grids
- Smart meters
- Intelligent energy storage
Smart Buildings: Automated Intelligent Buildings
- Building Automation
- Intelligent Buildings: Advanced HVAC, Lighting Equipment
Smart Mobility: Intelligent Mobility
- Advanced traffic management system (ATMS)
- Parking management
- ITS-enabled transportation pricing system
Smart Technology: Seamless Connectivity
- 4G connectivity
- Super broadband
- Free Wi-Fi
- 1Gbps download speeds
Smart Infrastructure: Digital Management of Infrastructure
- Sensor networks
- Digital water and waste management
Smart Governance and Smart Education: Government-on-the-Go
- Disaster management solutions
Smart Healthcare: Intelligent Healthcare Technology
- Use of eHealth and mHealth systems
- Intelligent and connected medical devices
Smart Citizen: Civic Digital Natives
- Use of green mobility options
- Smart lifestyle choices
Smart Security: Next Generation 911
- Simulation modeling and crime protection
- C2 and response