Smart Cities Stakeholder Platform. 10 Year Rolling Agenda

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1 Smart Cities Stakeholder Platform 10 Year Rolling Agenda

2 10 YEAR ROLLING AGENDA from the Smart Cities Stakeholder Platform s Roadmap Group (December 2013) Final Compiled by Christian Egenhofer and Özcan Saritas, Co-Chairs of the Roadmap Group With many inputs and challenges by the members of the Roadmap Group, who deserve to be considered as the authors

3 Acknowledgements With contributions from the Project Consortium: Monica Alessi, Veronika Cerna, Syzte Dijkstra, Gabriele Jauernig, Stefan Klug, Eppe Luken, Jorge Núñez Ferrer, Ana Petrovska, Joe Ravetz, Wolfgang Schade. This document would not have been possible without the many inputs from Members of the Roadmap Group 1, and the major contributions from the Finance Group s Strategy, EU Funds and Finance topic group members that collaborated over many months to develop the Smart City guidance documents. 2 The Finance Group was divided into three sub-groups and a core of members listed below prepared the following documents: Strategy Group Group Leader: Anya Margaret Ogorkiewicz (The Keryx Group) Integrated Action Plan - Report Process & Guidelines for Smart Cities Contributors: Gordon Falconer (CISCO) (coordinator), Valerie Bahr (Steinbeis Europe), Virginia.Bombelli (KOBA), Ana Faria (Energaia), Luisa Marsal (Universitat de Girona), Reinhard Schütz (AIT), Anya Margaret Ogorkiewicz (The Keryx Group) Public Procurement for Smart Cities Contributors: Marc Atherton (coordinator), Maria Galindo (City of Barcelona), George Niland (EUROCITIES), Jose Ignacio Hormaeche (Basque Energy Board), Joan Battle (City of Barcelona) Finance Group Group Leader: Jorge Núñez Ferrer (CEPS) Financing models for Smart Cities Contributors: Sergio Olivero (SiTI), Keti Medarova-Bergstorm (IEEP), Jorge Núñez Ferrer EU Structural Funds Group Group Leader: Simona Costa (Liguria Regional Office Brussels) Using EU Funding Mechanisms for Smart Cities Contributors: Simona Costa (Liguria Regional Office Brussels), Calin Chira (Romanian Association of Municipalities), Elena Deambrogio (City of Turin), Merilin Horatz (European Commission), Pirita Lindholm (Climate Allience), Dorthe Nielsen (Eurocities), Emina Pasic (Swedish Energy Agency), Rakesh Bhana (European Investment Bank) 1 A full list of Members of the Roadmap Group can be found in Annex III. 2 The guidance documents can be found in the publications page of the Smart Cities Stakeholder Platform website (eu-smartcities.eu/publications) and the teams in the Finance Group webpage (eusmartcities.eu/finance_coordination).

4 TABLE OF CONTENTS 1. Introduction The Smart City as a Catalyst for New Governance and Finance Models Technology Integration Works: Some Examples from the Platform Cities Need Space for Pilots and Test Beds Lighthouse Projects Allow Space for Experiments through More Open Calls Smart Cities Require Smarter Targets Priority Actions for Smart Cities Markets Creating the Market Enlarging the Market Greening the Market Enablers Smart Integrated City Planning and Innovative Governance Finance Open Data/Standards/Interoperability Training Engaging Stakeholders Annex I. Guidance Documents by the Stakeholder Platform Using EU Funding Mechanisms for Smart Cities Financing Models for Smart Cities Urban Integrated Action Plan - Report Process & Guidelines Public Procurement for Smart Cities Annex II. EU and Local Government Organisations Targets and Actions in Support for the Smart City ANNEX III. Members of the Roadmap Group... 23

5 1. INTRODUCTION This document is the final version of the 10 Years Rolling Agenda ( Agenda ) prepared by the Smart Cities Stakeholder Platform 3. It is an extended version of the KEY MESSAGES to the HIGH-LEVEL GROUP ( Key Messages ) of May 2013 that the Smart Cities Stakeholder Platform has submitted and published on the website. 4 A Draft for comments was presented at the Smart Cities Stakeholder Platform s Annual Conference in Budapest, which was held on 5 and 6 June The objective of the Agenda is to present stakeholders ideas, forming a practical vision of the Smart Cities Stakeholder Platform on how to move forward in accelerating the deployment and integration of technologies that are required to transform European cities and communities into smarter cities and communities. This Agenda is principally addressed to the High-Level Group of the Smart Cities and Communities European Innovation Partnership (EIP) and to the European Commission. The Agenda will provide a bottom-up contribution to policy formulation and implementation. In parallel, parts of this Agenda are directed to cities and communities to assist their day-to-day work in deploying smart cities and communities technologies. The name Agenda has been chosen to emphasise that the Platform s recommendations first and foremost are meant to highlight the issues to be taken into account when transforming into a smart or smarter city. The Agenda concentrates its recommendations on the areas where there is consensus. Based on a bottom-up process, it necessarily cannot address all issues of relevance to the Smart City. Nevertheless, the Agenda makes concrete and actionable recommendations. It has managed to list a great number of specific recommendations. Both Key Messages and Agenda are based on discussions held during three meetings of the Smart Cities Stakeholder Roadmap Group 5 from January to May 2013, as well as Technical and Finance Working Group meetings and internal discussions within the Smart Cities Stakeholder Platform s Consortium since the launch of the Platform in June A great number of stakeholders from the Roadmap Group but also the Platform at large have provided input to this document by various means; personal communications, e- mails, presentations and comments during the Roadmap Group or other Platform meetings, input during various teleconferences and online meetings, comments on outlines and drafts, background material and drafting of specific texts. 3 The Smart Cities Stakeholder Platform initiated by the European Commission (http://eusmartcities.eu/) is a physical as well as web-based Platform open to anyone who registers on it. Focus is on identifying and spreading relevant information required by practitioners on technology needs and solutions. The backbone consists of contributions by stakeholders in a bottom-up manner, i.e. owned by the stakeholders. The Platform is one of the two governance bodies of the Smart Cities and Communities EIP The Roadmap Group formulated a 10 Year Rolling Agenda (Agenda). The Agenda is principally addressed to the High-Level Group (and to the European Commission) to assist policy formulation and implementation. The Roadmap Group met physically to discuss the outline and content of the Agenda while in parallel has created a virtual space where all the members of the Platform could contribute to the Agenda by means of comments or drafting inputs. The Draft Agenda v1.0 was subject to open web-based consultation starting with the Annual Conference in Budapest so that all stakeholders can contribute. 4

6 2. THE SMART CITY AS A CATALYST FOR NEW GOVERNANCE AND FINANCE MODELS The objective of Smart Cities is to accelerate investment and the rate of innovation in cities in Europe with the aim of achieving social, economic and environmental objectives. Smart Cities are meant to: Increase the quality of life of city-dwellers; Enhance the efficiency and competitiveness of the local and EU economy; Move towards the sustainability of cities by improving resource efficiency and meeting emission reduction targets. At the core of this objective is the integration of new and smarter technologies for example in energy, buildings, transport and ICT. Traditionally isolated infrastructures are evolving into highly integrated systems on various scales so as to become smarter : residential and commercial; district, city and community; and regional and national. The development of new integrated solutions is at the core of the Platform. The result of this work is presented in section 3. Interest in Smart Cities has triggered plenty of theoretical and technology-led discussions, but not enough progress has been made in implementation. Factors hindering the adoption of Smart City solutions are: Lack of scaling up/replicability of new and smart technologies; Technology is not well-understood across city sectors; Existing governance, financing and procurement models are ill-suited for technology integration. To help accelerate the transition towards a new development model it will be necessary to strengthen enablers while simultaneously removing barriers. Thereby, the Smart City can become a catalyst for a new paradigm of economic and social development including urban governance, finance and business models. The Smart Cities Stakeholder Platform s Roadmap Group has organised these into two distinct categories: Markets and Enablers. Priorities should be: Markets Enablers Creating markets by assisting the adoption of innovations; Expanding markets by assisting deployment and penetration; Greening markets through more effective and efficient procurement. Smart integrated city planning; Finance; Open data/standards/interoperability; Training; Engaging stakeholders. These are addressed in section 6. 5

7 3. TECHNOLOGY INTEGRATION WORKS: SOME EXAMPLES FROM THE PLATFORM The integration and deployment potential of various technologies was explored via a bottom-up process linking each proposed solution to a Technical Working Group, which has yielded over 150 ideas to date - called Solution Proposals (SPs). These range from innovative technologies or processes to piloted innovations that cities can deploy. The Solution Proposals (SPs) were evaluated and ranked by stakeholders for their deployment potential; the highest ranked SPs were clustered and enhanced into Keys to Innovation Integrated Solutions (KIs). Selected technologies revolved around the integration of renewable energy sources, district energy aggregation and power matching, integration of combined heat and power systems (CHP) with heat pumps, smart buildings, smart (innovative) materials, smart grids, smart thermal grids, plug-in electric vehicles (individually owned and fleets) and inter-modal transport as well as the management of smart and cooperative traffic flows and logistics, etc. The following Keys to Innovation Integrated Solutions (KIs) have been collected and refined by the Platform: Advanced Materials for Energy Efficient Buildings: High performance materials (foams, reflective coatings, vacuum panels, phase change materials) enabling high insulation performance (heating, cooling) and adaptable to different types of buildings. These are particularly suitable for the renovation of old buildings and can lead to a reduction of up to 70% in the consumption of primary energy for a building s heating and cooling needs. Heat Pump and Micro-CHP as Complementary Boiler Alternatives: Dwellings and buildings in towns are supplied with either heat pumps or micro-chp in such a way that, at the level of streets or districts, electricity can be exchanged between both systems at times of high heat demand, thereby avoiding a large burden on the local grid and electricity production facilities. The characteristics of both heat pump and micro-chp are optimised, taking the exchange of electricity into account. ICT Stack for Energy Management: Ubiquitous wireless sensors deliver data which is mined with advanced machine-learning methods to gain an understanding of how energy is being used by occupants and systems. Personalised feedback of this information to stakeholders empowers them to reduce energy use. Smart Reno-Up: Smart Renovation of Utility Patrimonium ( Smart Renovation and Retrofit of Buildings and Services ): New modular retrofit solutions in planning, design, technology, construction, operation and use of non-residential buildings. Zero-Energy Buildings with Low-Exergy Storage: A low-exergy system where the temperature of energy produced, distributed, stored and delivered for thermal purposes are as close as possible to that of the requested heating and cooling media. Virtual Power Plant: A virtual power plant manages energy systems in a residential area, district or city with efficient heating by coordinating heat pumps, solar PV panels, loading facilities for electrical cars and wind turbines. It helps keep supply and demand well balanced, and stimulates cost-effective and energy efficient behaviour. Smart Thermal Grids: Smart thermal grids harvest renewable energy sources and waste heat and are spatially integrated in the whole urban 6

8 energy system. They interact with other urban infrastructure making it possible to balance thermal and electrical energy and to adapt to changing circumstances in supply and demand in the short, medium and long term. They facilitate participation of end-users, for instance by supplying heating or cooling back into the network. Smart Integrated Energy Governance: Integrated energy management and governance that supports cities for setting up coordinating measures to improve energy efficiency. The governance system creates economic value for both cities and businesses by integrating distributed renewable energy power plants in both urban and rural areas. Smart Grid Systems: Smart grids enable the integration of small distributed thermal and electrical energy resources in the urban network. They increase customer awareness, provide real-time optimisation of energy flows at the urban level, enable interdependence and facilitate a multi-services approach, linking the electricity carrier and other infrastructure. This KI sets out innovative solutions or increasing the hosting capacity of the network and strengthening the security of supply in the urban area. It makes it possible to avoid additional investments to cover peak load demand, while increasing network stability and reliability through better monitoring of network operating conditions. E-Mobility and Power Matching: The aim of this KI is to match transport demand and supply on the one hand (by promoting electric vehicles or bicycles), and electricity demand for e-mobility and power supply capacity at the right place and time (by promoting smart charging stations and connections with smart grids) on the other hand. Cooperative Intelligent Transport Systems and Services (C-ITS): C-ITS are based on the principle that all cooperative parties (ITS spots, i.e. vehicles, road side units) locally exchange information between each other. From an industrial point of view, this means to increase the electronic dimension of vehicles and the interaction of drivers, passengers and pedestrians with urban infrastructures beyond the road transport system. Starting from 2015/16 this technology will enable foresighted driving and self-organisation at local level, i.e. up-to-date traffic information, improved road safety and traffic fluidity by traffic homogenisation. Enabling Seamless Multimodality for End Users: The core of new multimodal urban mobility concepts is to combine public transport with other motorised and non-motorised modes as well as with new concepts of vehicle ownership. Obstacles include insufficient information and data, separate responsibilities and parallel and unconnected systems each with their own entry barriers. Several Solution Proposals within this KI use ICTbased approaches such as mobile personal mobility assistance, web-based multimodal information platforms, smart bicycle parking facilities and urban traffic control systems. Smart Management of Traffic Flows and Logistics: Within the overall aim of increasing multimodality this KI involves multi-agency interaction, linking individual mobility with public transport services. It focuses both on technical requirements of data exchange and new governance structures, in order to reach changes in mobility behaviour. The improved knowledge of various logistic flows and the optimisation of transport resources enable the development of new business models. This KI is based on data exchange within an integrated city management system, using global information on multimodal options, optimised logistics and stakeholder assistance, and vehicle technologies to reduce negative environmental effects. There are reasonable expectations that some KIs will be bankable and therefore implemented. Note also that the Platform will continue and further KIs will be collected and refined. 7

9 Full details regarding the Keys to Innovation Integrated Solutions (KIs) can be found at: 4. CITIES NEED SPACE FOR PILOTS AND TEST BEDS The transformation towards the Smart City will not be a linear development, but based in many cases on trial and error. Cities will therefore require space to experiment, to learn from their successes and failures and, more generally, to gain experience. Lighthouse Projects as well as EU-funded large scale demonstration projects will play a major role here. The Smart Cities Stakeholder Platform has drafted a number of documents to help and guide the planning, financing and procurement process of cities, which are presented in Annex I. 4.1 Lighthouse Projects Europe holds the necessary competences to develop, build and manage the next generation of infrastructure. Lighthouse Projects are well placed to tackle the issues at the intersection of energy, transport, buildings and ICT, and to learn from them. The practical experience of these Lighthouse Projects will help increase the efficiency of the full deployment of enabling technologies. They can increase the chances for deployment of Smart Cities technologies because they foster their implementation capacity. Lighthouse Projects facilitate trials of new integrated technologies in real urban conditions with appropriate approach to the liabilities of the implementation of innovative solutions. This includes working with citizens to test smart technologies and explore their user-friendliness, incorporating new ideas and learning from feedback to inform the design of Smart Cities solutions, and encouraging the wider deployment of technologies. They also demonstrate the industry s capacity to successfully cope with Smart City challenges as well as test the uncertainties associated with the development of innovative technologies. If successful, the technologies developed or applied in Europe will spread to cities in different parts of the world. Lighthouse Projects are also an opportunity for all stakeholders to test financial models and financial feasibility. On a practical level, Lighthouse Projects can also serve to: Experiment with new finance and business models; Identify regulatory constraints and liabilities, and better understand costs and benefits of regulations that have an impact on the sustainability of cities and quality of life; Test new models of cooperation or businesses with a wide range of stakeholders, including consumers; Pave the way for a better standardization of solutions; Highlight training and education needs. 4.2 Allow Space for Experiments through More Open Calls It is important to accept failure. Both success and failure allow to learn from experiences. Platform members have indicated the important role that projects such as Transform (urbantransform.eu/partners/) can play in providing a space for cities and other stakeholders to experiment. 8

10 This is why the EU should abstain from overly prescriptive Calls for Proposals under Horizon 2020 or elsewhere. There may be many solutions to Smart City problems and only experience will tell which of the technology, governance and finance models are best suited to successfully tackle the challenges associated with the new development model. The Smart Cities Stakeholder Platform therefore suggests to the European Commission to make Calls for Proposals as open as possible, i.e. based on needs and performance in general rather than on prescribed technologies. This however will require a different way of organising the Calls and evaluating Proposals. A message that the Platform has received has been that the European Commission should make clearer what roles it wants cities and industry to play, respectively in the Proposals that it will receive from its Calls, i.e. does the Commission want cities or industry to lead? 5. SMART CITIES REQUIRE SMARTER TARGETS Ambitions related to the Smart Cities and Communities EIP are very high. Many cities, local governments and their associations have formulated challenging objectives. Countless local governments have set themselves quantified targets. Annex II provides an overview of EU and local government organisations targets and actions in support of the Smart City. Targets can be a catalyst for change both for policy-makers and for industry and other stakeholders. At the same time, targets offer an opportunity to monitor progress made by cities and communities or other stakeholders, and to see whether governments have kept their promises. This is why the Smart Cities Stakeholder Platform proposes to set a number of practical and operational targets based on Key Performance Indicators (KPIs). In order for Smart Targets to work, these must be: Set for all stakeholders: governments, industries, businesses, cities and citizens as part of the active stakeholder community; Addressed to one stakeholder group or sector at a time to assign clear responsibility ; Easy to monitor with a high level of visibility (and transparency); Achievable; Timely, addressing a current topic; Connected to the replication potential across cities; Relevant, e.g. being directly linked to either barriers (that inhibit technology deployment or investment for the Smart City) or enhance evidently investment. Once the parameters of these clearly defined quantifiable targets are established, the targets should be worked into the Sustainable Energy Action Plans (SEAP) 6 system. This would align all SEAPs along common parameters and dates. Targets must be formulated in such a way that they are relevant for (city/community) frontrunners and laggards alike, which in many cases will point to relative targets (e.g. improvement rates). 6 A Sustainable Energy Action Plan (SEAP) is the document in which Covenant of Mayors (www.eumayors.eu) signatories outline how they intend to reach their CO 2 reduction target by It defines the activities and measures set up to achieve the targets, together with time frames and assigned responsibilities. Source: Covenant of Mayors website: 9

11 The Platform s 10 Year Rolling Agenda proposes the following targets: In order to create incentives for Smart Cities to go forward, the European Union should formulate ambitious emission reduction targets especially for In order to make GHG reduction or energy efficiency improvement targets comparable, transparent and visible, the Platform proposes that all targets by cities and communities should be based on the same base year, e.g The European Commission should provide guidance of how to express and measure (a limited set of) quantifiable targets, 7 to give meaning to smart and therefore facilitate the implementation of projects. This would also allow the EU to set numerical targets for different performance the EU wants to reach in 2020, 2030 and so on. For the Programming Period, all Member States should develop a strategy for the Structural Funds incorporating the needs for Smart Cities, for example by increasing the synergies between national funding, EU Structural Funds and centrally managed EU instruments, such as Horizon 2020 and COSME. As a result of delays in the publication of detailed rules for EU funds, there is a risk not only that EU programmes start late, but that their quality is compromised due to the lack of proper planning time. The European Commission and Member States should commit to monitor the performance of the programmes and review the EU budget instruments and programmes at mid-term to redirect the EU funds as needed in line with Europe 2020 objectives. Due to the importance of cities for a successful decarbonisation of the economy, the monitoring and review should pay particular attention to the investments into Smart Cities and their interlinks with the surrounding regions (including cross-border interactions). The EU and Member States should commit to spending of at least 3% of all public procurement supporting innovations, which should include environmental and resource footprint reduction and possibly smartness as a selection criterion, similar to Art. 6 of the Energy Efficiency Directive. As a starting point, the European Commission may provide guidance on how to incorporate the Smart City into the voluntary Green Public Procurement. EU Member States should incorporate the Smart City into their national roadmaps, i.e. under the EU Build Up Skills Initiative, particularly those Member States, which were hit the hardest by the burst of the property bubble. EU Member States should incorporate smartness into their long-term strategy for mobilising investment in renovation of the national stock of residential and commercial buildings under Art. 4 of the Energy Efficiency Directive. The European Commission and Member States should ensure that consumers have the possibility to the largest extent possible to contract services and be able to switch contracts easily, to allow consumers to choose between different services and service providers. Existing institutions in Member States, which provide cost information on common elements of refurbishment contracting, should also include cost figures for innovative solutions with a life cycle cost element and Life Cycle Analysis (LCA) values, for example by 2015, to allow architects, builders 7 E.g. a level of energy consumption per capita (with a strong target on energy efficiency of buildings new or retrofitted), a target level of emissions in transport and a set of targets on education, skills and access to services. 10

12 and city authorities to better understand the potential of new and integrated technologies in buildings. Cities and communities should commit to a GHG emissions reduction target expressed for example by the means of an annual energy efficiency improvement (e.g. energy consumption per capita) or renewables deployment (e.g. annual increase of renewable energy) target, and define plans and budgets on how to achieve this target. Cities should build upon the Strategic Energy Action Plans (SEAPs) and progressively incorporate targets for Smart City indicators, with a strong focus on implementation. This would allow cities to better plan for integrated viable solutions. 6. PRIORITY ACTIONS FOR SMART CITIES Developing Smart Cities is not only a process whereby technology providers offer technical solutions and city authorities procure them. Building up Smart Cities requires the development of the right environment and framework conditions for smart solutions to be effectively adopted and used. So, Smart Cities are not built by decree, but need to naturally grow into the urban fabric. Many of the solutions do in fact need the active participation of city dwellers as users, consumers and de facto voters. They can vote out the administration if they feel alienated by the changes, but can also vote with their actions, by not adopting new forms of living and working. Therefore, public authorities at all levels have an important role to play that goes far beyond merely procuring technologies. They can encourage or hinder social innovation, creativity and human interaction, employment and connecting smart citizens. The regulatory framework is crucial, and the way city authorities organise their activities and procurement systems is a key element for the development of a Smart City. They need to act as a partner with citizens, industry, service providers, financiers and end users to build the Smart City. Harnessing the opportunities of new integrated technologies, new finance models and the new value chain of (integrated smart) solutions will require partnership between different stakeholders. For projects to happen, all stakeholders will need to contribute their respective expertise. This requires a new cooperative working environment ( common think tank ) that will need to start within the city administrations but then to spill-over into other areas, notably project investment and management. In brief, Smart Cities are complex and the city dwellers and private sector will have an active role to play, far beyond what is now the case. Essentially, this means that the right markets need to be set up with the right enablers. In order to keep the focus on people and avoid that certain population groups cannot benefit from the services proposed and provided by the Smart City, solutions to the social dimension for example in the steadily increasing fuel poverty in Europe will become very important. For example, there is a risk of exclusion for poorly-skilled communities of a city if compared with those who have a fast, affordable connection with urban infrastructures through ICT-based services and e-applications. The same problem can be extrapolated at a superior level, and somehow cities and locations compete to attract smarter capital, talent and investment. The necessity of establishing incentives to stimulate fast deployment and effective spread-out of smarter technologies in the fields of energy, communications and transport requires the EU s prior attention in the threshold of the new Multi-annual Financial Framework The Platform has therefore identified fifteen priority areas for action, five of these for developing the right market. 11

13 6.1 Markets The development of Smart Cities, the financing of change and the fullest adoption of innovations by city inhabitants, requires an understanding of the market, how it works and in particular how to ensure that citizens buy in. Understanding the market allows for the development of new approaches to infrastructure financing, as well as influencing citizens behaviour through those approaches Creating the Market Market demand for new products or demand from investors and financiers for secure investment opportunities depend on a variety of factors, many of them in the hands of public authorities. Regulatory frameworks and the use of financial instruments to encourage investment in new technologies are important market development tools. There are a number of elements that hinder the development of an active market for innovative solutions: Risk: market demand may not exist due to the perception of risk for solutions that are unproven or not widely deployed. Regulatory barriers: Regulations may hinder or dis-incentivise the introduction of innovative solutions. The public authorities have the means to incentivise the market. The Platform recommends: Action 1: Support for pilot projects through grants and innovative finance to support the demand side and reassure potential investors and bring forward demonstrations. Action 2: Promoting and expanding innovative and pre-commercial procurement Enlarging the Market Even when technologies are proven and successful, many factors may still limit their adoption, such as: long-term returns on investments and upfront costs, lack of an adapted financial mechanism, lack of information, and existing infrastructure bottlenecks. The regulatory frameworks must avoid excluding solutions by being overly prescriptive, such as through technology mandates, standards etc. This can among other be achieved by a cost benefit analysis of the regulation. On the demand side, as above, a number of instruments can be used to foster the replication of successful technologies, from grants to guarantee instruments. Action 3: Expand the use of innovative financial instruments, adapted to the different markets to be developed (energy efficiency, distribution, etc.), in particular the ones that mitigate risks to investors. Action 4: Review the regulatory framework to identify bottlenecks and remove them Greening the Market Over the next decade, as the costs of energy continue to fluctuate and cities strive to increase economic growth while achieving carbon reduction targets, there are likely to be increasing opportunities for the public and private sector to drive investment in smart technologies in the low-carbon and environmental goods and services (LCEGS) sector, also through green public procurement. 12

14 Smart Cities need to be able to identify and procure the best technical solutions suitable for their communities and businesses while demonstrating the local economic benefit of that procurement. Wherever possible, the procurement process should also be used to increase innovation in sustainability. The process should integrate life cycle costing as a central element of procurement, ensuring the project s net benefits are taken into account in terms of overall economic impact. Action 5: Develop clear methodologies for life cycle costing (including wider social benefits) in public procurement processes in the context of cost-benefit analysis; expand training programmes to increase the skills of administrations in innovative and green public procurement processes. 6.2 Enablers Enablers are conditions necessary for the market to function and expand once created Smart Integrated City Planning and Innovative Governance The development of smarter cities requires smarter planning. Urban planning skills are essential. To successfully develop a Smart City it is necessary to: Understand the city and have a future objective based on the strengths and weaknesses of the city. In particular they need ways to choose solutions that fit all citizens, including the vulnerable ones, and current and future needs. Therefore Smart City planners must have a (very) long-term view in order to cope with the continuously evolving city environment and city dwellers behaviour. It is the only way for cities to move smoothly from existing cities to smarter cities. Define some clear criteria to enable cities to develop their planning, setting a reference baseline year and indicators for the planning process; identify relevant indicators and benchmark them with relevant cities. Develop an integrated approach, which builds on the SEAPs and a clear business plan to achieve reduction targets. This integrated approach has to identify the solutions and the business plan to make them realisable. This means that it should also include the identification of possible innovations, such as the Keys to Innovations identified by the Stakeholder Platform. Engage constructively and in a neutral way with technology and service providers to achieve genuine co-development. Better energy planning in territory, not only city, which are required for integrated solutions. Improve the day to day management of existing systems including communications with citizens and users of urban infrastructures. Good plans are to be followed by good governance of the city, so governance innovation is an intrinsic part of successful planning and implementation. Action 6: Develop clearer guidelines for cities to better plan and expand inter-city cooperation on programming and governance. 13

15 6.2.2 Finance There is no market without financial capacity. Financial systems need to be created: To attract potential investors (i.e. new sources of project finance); To monetise indirect economic benefits, such as energy savings, to finance the investments; To stimulate citizens participation and involvement. New financial mechanisms also create new business models and markets. This can be helped by innovative EU financial instruments, using various forms of public support in particular equity or guarantees, including the creation of smart bond schemes. The EU s equity and debt platform is a potential important provider of such instruments for cities, in particular where the debt crisis has hit municipal credit ratings, effectively cutting them off from financial markets and preventing them from guaranteeing projects. Cities need to get more actively involved in EU financial assistance programming processes. Otherwise the potential support for Smart Cities from EU funding may be lost. Therefore, local governments need to have a stronger role in the design and management of EU funds: Cities need to be consulted by managing authorities, so as to ensure that their needs are taken into account when designing programmes. Action 7: Finance is a key enabler and new finance models need to be developed, such as the creation of Smart City (municipal) project bonds. Action 8: Ensure a greater involvement of local city authorities in the EU funding planning process. Allocate clearer financial envelopes to Smart City projects Open Data/Standards/Interoperability Data collection and management are one of the essential areas for the Smart City. Smart Cities need data to optimise the allocation of resources and to select appropriate measures. Data on energy consumption, transport patterns, priority infrastructure bottlenecks, and current and expected demand trends are essential for a city. There is a need for open data rules, that allow for optimal decision-making by the different stakeholders. Integration of technologies at a systems level (with systems working together) can be difficult. Interoperability of technologies however is important. At present, cities are facing barriers when it comes to improving the interoperability and integration of city systems in order to maximise the release, access, and usability of data to accelerate growth opportunities, particularly for SMEs. Interoperability is important to avoid the lock-in of traditional (non-integrated) technologies. Finally there is a need for appropriate standards which guarantee quality in Smart City development. Action 9: Develop rules for open access to data. Open access means publicly accessible, non-proprietary and transparent data in compliance with national applied rules and regulations. The re-use of data could be further enhanced through privatelyowned companies opening up their data to the government as well. Action 10: Develop standards promoting quality and interoperability. A key element is the continuation of developing standards such as the on-going work in smart grids (Mandate 490): to avoid any overlapping, duplication and eventually conflicting standards; and to allow interoperability between devices applied in smart grids and Smart Cities. 14

16 6.2.4 Training Training is an essential element of the development of Smart Cities. For public authorities, the development of a Smart City requires governance innovation leading to new processes and models, from financing tools down to a different way to manage the city. Training is essential to help public authorities manage the process and avoid costly mistakes when transforming their city. For the private sector, Smart Cities require new skills and new services. This involves a process of job creation, but also job conversion, that needs to be managed. Training programmes for the conversion of existing businesses and the reintegration of the unemployed are very important. Action 11: Expand training programmes for municipalities on planning, management, stakeholder engagement, financing models and monitoring for Smart Cities. Action 12: Promote training programmes for the private sector to adapt and prepare for the requirements of the new city. Action 13: Expand training for the unemployed to reintegrate them in the economy, with skills relevant for the Smart City Engaging Stakeholders Involving the relevant stakeholders (both public and private) from the start is a prerequisite for success. In most cases, key stakeholders such as municipalities or housing associations, to mention only a few, drive the entire process and to a large extent influence the success of the project. But successful projects need the support of all stakeholders. It is therefore crucial to maintain good cooperation between stakeholders. At the same time, the partnership management entity (be it a public authority, or a private specialised entity) that engages the various stakeholders must leave room for an initiator or a driver to naturally emerge from the group of stakeholders. This driver or initiator varies from project to project. The defining characteristics of a driver are not so much the stakeholder group it belongs to, but its individual/personal engagement in reaching a sustainable future for the community. Interesting experiences have been gained from a number of initiatives, such as CONCERTO and CIVITAS for example. Smart City projects gain from, and often require, active citizen involvement, and not only passive social acceptance. Some projects may attract significant opposition without the strong participation of city dwellers. There is a need for innovation in the framework for public consultation and participation. Action 14: Explore new forms of consultation and organisation promoting the early involvement of business and industry, service providers, banks and financiers in the project. Action 15: Develop ex ante and ex post evaluation mechanisms on stakeholder engagement. 15

17 ANNEX I. GUIDANCE DOCUMENTS BY THE STAKEHOLDER PLATFORM The Finance Group prepared four guidance documents aimed at assisting cities in planning, procuring and financing Smart City innovations. These are open for further development and stakeholders can provide further input. The documents are published on the website and can be downloaded 8 : Using EU Funding Mechanisms for Smart Cities Transforming European cities requires considerable investment. Unfortunately, the debt crisis has had adverse effects on many municipal budgets. Not only are investment requirements large, but cities have neither the means nor the credit rating to find cheap sources of funding. Decreasing tax revenues and austerity measures from the central government risk delaying the decarbonisation of cities, a core requirement for reducing EU greenhouse gas emissions. This will also negatively affect industries in the lowcarbon sector, as well as employment. Ultimately, it will adversely affect the economy, as energy, transport and ICT are core economic sectors. Given the strategic importance of cities, it is important to deploy all possible financial tools to make a low carbon transition possible and affordable. The objective of this guidance document is to provide information on the opportunities that EU funding instruments will provide for the period , and to assist regional authorities in preparing the programming documents. The Cohesion Policy, together with the EU s Competitiveness and Innovation Funds (Horizon 2020, COSME) allow the development of powerful integrated energy, transport and ICT investments. The EIB s financial instruments will be reinforced and will complement the EU budget funds and private investments. The impact, however, will depend on the quality of the programming documents. Without a strategic change in the objectives and planning of national and local authorities the impact of the EU funds will be insufficient. Once the programming period starts, amending weak programs will be difficult. The report will present the new instruments for the period in 2014, as well as guidance on how to integrate Smart City investment in the programming process, taking full advantage of the opportunities to combine regional funding with other sources. Financing Models for Smart Cities The objective of the document is to identify the barriers and potential solutions to financing Smart City innovative solutions, in particular in the areas of energy, transport and ICT initiatives related to reductions in greenhouse gas emissions. This document highlights the barriers to finance Smart City solutions, in particular in the areas of innovative technological solutions. One can summarise the financial challenges as follows: Perception of high risk when investing in innovative solutions and energy efficiency measures; Uncertain energy prices and policy uncertainty on fossil fuel prices; Large volumes of investment required; Long-term delays before reaching maturity/profitability; Limited capacity for public funding: high public deficits in municipalities and incapacity to raise funding from capital markets. To attract the necessary capital for investments, Smart City initiatives need to: Reduce the real and perceived risks of investment; 8 16

18 Attract long-term finance from specialised institutions (i.e. pension funds); Develop mechanisms to create bankable and sizeable investments with reduced transaction costs; Develop off balance sheet investment systems with private mechanisms (development of single purpose vehicles and PPPs). The document discusses the potential financial mechanisms and models that can be applied to overcome these barriers, e.g. debt and equity mechanism, the use of contractual models, how to integrate socio-economic benefits in the project preparation to estimate the share of public support. The document also details some of the existing best practices and links to further information. Urban Integrated Action Plan - Report Process & Guidelines The objective of this document is to draft guidelines of how a city can approach their Smart City planning taking into consideration the longer term costs and benefits. This involves the impacts on other activities, i.e. the full economic costs and benefit for the city. The document is focusing on the needs of European cities when embarking on a Smart City strategy and in particular on individual projects. It identifies the most important aspects to be taken into account when adopting integrated innovations, such as the ones prepared and identified in the Smart Cities Stakeholder Platform. One of the major challenges when it comes to devising and implementing a Smart City strategy is the complexity of the city itself and of the (decision-making) processes that need to be put in motion to change the status quo. This challenge often materialises in the form of understanding the potential solutions for the city and overcoming very practical barriers that concern the regulatory environment, decision-making processes, and existing governance mechanisms. This guidance document aims at providing preliminary advice on how to initiate Smart City initiatives and break down barriers related to context and process into more analytically manageable components/steps. It also addresses the question of how to develop logical plans that take into account city objectives, impacts and business models when implementing new integrated innovative solutions to cities. Ultimately this will lead to cities finding the right balance between public intervention and private operations. The document is then designed to offer practical solutions and takes the reader through the steps required to develop a solid and realistic Integrated Action Plan (IAP) based on a solid analysis of the city s potential and needs, not only focusing on emission reductions, but also on the socio-economic linkages reinforcing positive feedbacks. It also provides links to other key guidance documents and good practice examples. Public Procurement for Smart Cities The low-carbon and environmental goods and services (LCEGS) sector is a growing part of the EU economy, with the associated economic and social benefits that this brings. This high value sector has potential for exponential growth based on increased global demand for low carbon, resource-efficient goods and services. The public sector will increasingly become a key player in driving investment in smart technologies in the LCEGS sector through public procurement, for example: Retrofitting of public sector building stock; smart energy grids and broadband access; electric vehicle charging infrastructure; installation of heat networks; Onsite renewable energy generation; Involvement in more general climate change adaptation / mitigation. 17

19 Smart Cities need to be able to identify and procure the best technical solution for their communities and businesses whilst demonstrating the local economic benefit of that procurement. Wherever possible, the procurement process should also be used to increase innovation in sustainability. The objective of this guidance document is to assist cities in implementing the most appropriate public procurement mechanisms, while advising the EU and national authorities on potential reforms. The document thus identifies: Existing good public procurement practices in Smart Cities; The common characteristics of exemplary procurement processes; Current barriers to uptake of exemplary procurement processes and potential solutions; offers guidance to the European Commission, city authorities and Member States on how to accelerate the uptake of exemplary procurement processes to optimise investment in the LCEGS sector; and Offers guidance to the European Commission, city authorities and Member States on how businesses in the LCEGS sector can more easily access and respond to tendering opportunities. 18

20 ANNEX II. EU AND LOCAL GOVERNMENT ORGANISATIONS TARGETS AND ACTIONS IN SUPPORT FOR THE SMART CITY The overall climate and energy targets of the EU, known as targets, have been identified in the climate and energy package, formally adopted in These include a 20% reduction in EU greenhouse gas emissions from 1990 levels, raising the share of EU energy consumption produced from renewable resources to 20% and a 20% improvement in the EU s energy efficiency. The climate and energy package can be seen as both a first building block and a corner stone for a new Europe 2020 (economic) growth strategy, which can be described as the mission statement of the EU. Priority of Europe 2020 is smart, sustainable and inclusive growth. It formulates five targets and focuses on seven flagship initiatives (box below). All have a direct link to the Smart City, with most of them at the heart of the Smart City agenda. Some targets in Europe Employment: 75% of the year-olds to be employed R&D: 3% of the EU's GDP to be invested in R&D Manufacturing industries account for 20% of GDP, up from current 16% 10 Climate change and energy sustainability Greenhouse gas emissions 20% (or even 30%, if the conditions are right) lower than % of energy from renewables 20% increase in energy efficiency Education Reducing the rates of early school leaving below 10% At least 40% of year-olds completing third level education Fighting poverty and social exclusion At least 20 million fewer people in or at risk of poverty and social exclusion Flagship initiatives Digital Agenda, Innovation Union, Youth on the Move, Resource Efficiency, Industrial Policy, Agenda for New Skills and Jobs, Platform against Poverty These EU headline initiatives have found their expression in numerous city and local government plans, and some of them are associated with targets. The following have specific targets. Covenant of Mayors The Covenant of Mayors is the mainstream European instrument involving local and regional authorities, voluntarily committing to increasing energy efficiency and use of renewable energy sources on their territories. By their commitment, Covenant signatories aim to achieve an objective of 20% CO2 reduction by 2020 or even exceed COM (2012)

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