Smart cities From earthen walls to smart grids

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1 Smart cities From earthen walls to smart grids October 2012

2 Background In ancient times, a "Smart City" included sets of earthen walls designed to protect property from flaming arrows; intricate use of moats, walls and portcullises to protect inhabitants from marauding invaders; and cisterns of stored rainwater to provide a safe drinking water supply during long periods of siege. Cities built with these features were the original sustainable cities, designed with the "triple bottom line" intent to protect people, planet and profit. Over time, the concept of Smart Cities evolved - cities were placed on trade routes to maximize commercial opportunities and urban wealth; cities were placed near rivers used to generate energy for grinding wheat and other agricultural products; cities were placed near coastlines to facilitate trade across seas; city planners developed sanitary systems to move human and other waste away from populations; and libraries and schools were established to share knowledge and to educate younger generations. In the 20th century, the focus of Smart Cities moved from developing infrastructure designed to protect human health and safety (or a "compliance focus") to more interest in operational efficiency. Smart Cities were designed with efficiency in mind - mass transportation systems to efficiently move city-goers from one neighborhood to another; water treatment plants intended to provide sufficient potable water; wastewater treatment plants to treat human waste; and multiple storied buildings to more efficiently use limited real estate. Smart Cities allowed greater numbers of inhabitants to more efficiently live, work and play in cities' limited real estate. Efficient or Smart Cities became more desirable places to live and populations, wealth and opportunities increased accordingly. In the 21st century, Smart Cities have been using technology to make cities more sustainable, more attractive, and adaptable to landscape level changes. City leaders initially focused on implementing technological changes (e.g., moving from traditional incandescent light bulbs, to compact fluorescent bulbs, to newer LED and halogen light technologies). However, they are now implementing a number of behavioral changes (e.g. adopting congestion funding to decrease the number of vehicles entering into the cities, to launching new models for vehicle ownership and sharing, such as Zipcar and Citi Bikes in New York City). These examples not only reduce congestion but lower the total cost of ownership and use, as shared vehicles don't require garaging, reduce insurance premiums, provide additional flexibility of use and promote healthier lifestyles.

3 Adopting technology is smart According to the Cities of Opportunity 2011 report 1, Smart Cities are increasingly differentiating themselves by highlighting their technological readiness and leadership using various criteria (e.g., Internet access in schools and broadband quality). Technology readiness Forward thinking nations and the top cities within them have had the resources and foresight to make high tech plans, put them into action, and attract big populations of tech-heads and related investors; notably including New York, Seoul, Stockholm, San Francisco, Chicago, Singapore and Hong Kong. New York, home to more than 10% of the nation s financial technology workers, tops the list overall in technology infrastructure and measures of the city s potential to nurture a high-tech future. Smart Cities increasingly rely on high technology to demonstrate their value proposition: 1 Partnership for New York City and PricewaterhouseCoopers, "Cities of Opportunity 2011", 2011.

4 But Smart Cities must continue to evolve and to adapt to even more complex landscape-level changes. Leading Smart Cities like New York are starting to understand that the surrounding landscape is changing and that earlier assumptions like the height of surrounding seas, the frequency and magnitude of storm events, and access to clean water and safe food may require adaptation strategies. While New York City is assessing infrastructure potentially subject to flooding due to more extreme storm events and rising sea levels, the city is building a 60 mile third tunnel at a cost of more than $6 billion to protect clean water coming from the Catskills 2. However, this may not be enough. A recent New York Times article noted that despite the high marks awarded to officials for environmental awareness, New York may not be acting quickly enough to tackle the city's significant flood risks. Severe flooding there could shut down the city's financial district, weaken its transportation infrastructure, and force mass evacuations. The article cited New York's response to Hurricane Irene last year, in which the city closed the subways and evacuated nearly 400,000 people, as evidence of how far New York must still go to truly prepare itself for the climate risks it faces 3. These two actions - building a third water tunnel and commissioning exhaustive research on the challenge of climate change (e.g., expanding wetlands to accommodate surging tides, installing green roofs to absorb rainwater and prodding property owners to move boilers out of flood-prone basements) - are intended to make New York City more resilient to an increasing number of drought and severe weather events and to develop the next generation of Smart Cities. Taking a holistic view of cities At PwC, we believe that Smart Cities arise when the different components of a city's "living experience," such as housing, transportation, and health and education, are examined together, as parts of a larger overall unit. Historically, cities have taken action on these components by tackling them individually. Smart Cities recognize that these components are enmeshed in networks - mobility networks, social networks, etc. - and tackle urban challenges holistically. We are committed to helping these leaders understand their challenges and design integrated solutions to them. 2 "Wonders of the World databank - New York Third Water Tunnel", assessed September 16, Navarro, Mireya, "New York Is Lagging as Seas and Risks Rise, Critics Warn", The New York Times, September 11, 2012, page A1.

5 Smart Cities tackle urban challenges holistically, not in isolation The following list is not comprehensive, but it provides a framework and examples of how companies are partnering with Smart Cities to identify, fund and implement Smart Cities strategies and technologies - so that Smart Cities will continue to prosper and grow. Housing Smart metering and appliances - Smart meters and appliances help homeowners manage their energy demand to avoid peak hour charges, and allow utilities to better understand residential energy consumption. For example, California utility PG&E has rolled out a smart meter program to its customers, which includes a suite of online tools to track hour-by-hour energy consumption and understand how to reduce energy expenses. Mixed-use neighborhoods - Improved design of neighborhoods leads to "beyond housing" outcomes, where inhabitants can live, work, and recreate in a local area that does not require vehicles for transportation. HafenCity in Hamburg, Germany is an in-development mixed-use area built over a former port area. Energy efficient Heating, Ventilation, Air Conditioning (HVAC) - Modern HVAC systems save energy, particularly during summer months, and take advantage of cost-effective insulation techniques.

6 Workplace and retail space Networked systems - Networked systems allow building owners and companies to manage and monitor their energy and resource use. The systems also tie business complexes to city analytics systems, allowing municipal temperature forecasts to inform thermostat settings and relay solar insolation data to utilities to determine energy inputs, among other benefits. Collaborative renewables purchasing - Retailers may collectively enter into renewable energy purchase contracts, monitor group energy use, and negotiate lower prices with developers. On-demand work spaces - Young, mobile entrepreneurs can create and reserve on-demand working locations to collaborate with others and save on rent and maintenance. The San Francisco Bay Area boasts many companies offering flexible work space arrangements, including Citizen Space, NextSpace, and WeWork. Industrial ecology - Industries can co-locate facilities such that the waste products of one may be used as the raw materials for another, or so that energy may be shared through co-generation. For example, Kalundborg Eco-Industrial Park in Denmark enables its tenants to trade waste among one another, forming a "closed-loop" industrial system. Safety and security Re-lamping of public spaces - Public lamp retrofits lead to safer streets at night and energy efficiency gains through LED lights. San Diego is in the midst of a $16M streetlight retrofit that is estimated to save 16M kwh of electricity annually. Networked emergency services - Network technology enables first responders to more quickly and comprehensively respond to emergency situations. Smart utility infrastructure - Smart grid safety benefits for utilities include detecting gas or water leaks before they occur, using distributed energy systems to prevent cascading electricity failures, and improving cybersecurity. Recreation and leisure Parks and urban green spaces - Green spaces promote a more livable city, cleaner air, and recreational spaces for citizens. With the proper technology, these spaces also facilitate the capture of runoff and gray water, and can help mitigate flood and storm water risk. Through the New York City Department of Parks and Recreation, PwC is helping to promote routine maintenance and nurturing of trees. Intelligent stadiums and public venues - Network technology can improve spectator event experiences by managing traffic flow (human and vehicles) and public safety in real time.

7 Urban hydroponic and aeroponic farms - Large complexes can use urban farms to assist in temperature regulation and provide recreational work for citizens growing food that they may then sell or consume. New Orleans announced its first aeroponic farm earlier this year, a test that yields forty pounds of vegetables per week within a closed-loop system. Health and education Energy efficient medical equipment - Efficient medical equipment helps hospitals save on energy use, greenhouse gas emissions and energy costs, and pass those savings on to consumers. Wireless networks - Wireless technology promotes rapid digitization and dissemination of patient information and treatments to facilitate better care with fewer errors. Co-located activities - Dense, mixed-use neighborhoods allow citizens to live and work locally, reducing traffic and air pollution, encouraging walking and bicycling, and improving the health of the city's inhabitants. Transportation Congestion pricing - Congestion pricing allows cities to incentivize the use of public transportation and reduce congestion by charging fees for use of public thoroughfares at peak hours. In 2003, London introduced a congestion charge for traffic entering central London between 7am and 6pm during the workweek, to help alleviate the city's infamous traffic problems. Parking payments by smart phones - Smart phone payments enable users to more easily pay for parking, add money to their meters, and avoid parking tickets. The technology also enables cities to more easily implement demand pricing initiatives for parking. Seattle is rolling out a pay-for-parking smartphone app this year while New York City is in the process of testing its own system. Mass transportation - Mass transit systems ease congestion problems and enable mass movement of citizens at low energy cost. Over the years, Smart Cities have evolved from earthen walls designed to protect property from flaming arrows to cities offering a "living experience" where housing, transportation, health, and education are enmeshed in networks and urban challenges are addressed holistically. PwC is committed to helping city and policy leaders understand the challenges and opportunities in designing Smart Cities and to developing integrated solutions that make cities even smarter in the future.

8 Contacts Rahul Gupta Partner (202) Nick Shufro Director (860) PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the US member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.