Investing in Smart Cities

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1 Investing in Smart Cities The European Investment Bank (EIB) is the financial arm of the European Union (EU) and is owned by its 28 Member States. Founded in 1958, it operates in the 28 EU Member States and more than 130 other countries. The EIB primarily finances projects in the EU, EFTA, Candidate and Potential Candidate Countries. Outside the EU, it supports projects that contribute to economic development in countries that have signed association or cooperation agreements with the EU or its Member States. The EIB is the largest supranational borrower and lender in the world and the only international financial institution politically accountable to EU policymakers and institutions. The projects funded by the EIB in the field of smart cities are Integrated through multi-sectoral urban planning and joined up investment strategies Innovative through the application of smart technology and innovative management approaches, and Inclusive through stakeholder participation and sound governance in project design and implementation.

2 Smart cities and EIB investment All over the world, the urban population has grown rapidly as urbanisation has accompanied economic growth. Cities have played an increasingly leading role in the global economy over the last few decades, often with adverse environmental and social consequences. Transforming cities and making them smarter and more sustainable are important goals of the EIB s investment approach in the urban sector. Over the last five years ( ), the EIB has provided finance totalling almost EUR 56 billion as well as technical assistance to support these goals in a large number of cities. These investments have helped many urban areas deliver significant improvements in terms of infrastructure development, intelligent and sustainable mobility, better water and waste management systems, and improved e-government and other municipal services and facilities. This has contributed to a significant rise in living standards as well as underpinning economic growth and employment generation. However, many cities still face environmental, social and economic challenges which influence the everyday lives of millions. For example, it is estimated that cities generate 75% of CO 2 emissions and account for 80% of energy demand and more than 75% of the use of natural resources. A key objective of the EIB is therefore to provide financial and technical support for the development of smarter cities that address the multiple challenges of resource management, resilience and environmental protection prompted by their growth. Examples of smart projects range from the deployment of electric vehicle charging infrastructure to smart LED street lighting, from smart meters to district heating, and from key public facilities acting as agents for change to sustainable eco-districts. The common objective of EIB projects is to make cities more intelligent in the way they use resources, more resilient to climate change and other risks, and more sustainable and inclusive in the way they provide citizens with public services. Investments are promoted through a mix of lending, blending and advising since EIB loans can be blended with EU or national grant funding, and our experts advise on project design. The EIB lends directly for larger projects, and also through intermediaries and financial instruments set up in cooperation with municipal authorities and the private sector for smaller and medium-sized projects. The EIB also provides support through ELENA, a facility for advising European municipalities on how to design investments to enhance energy efficiency and meet their commitments under Sustainable Energy Action Plans developed in line with the Covenant of Mayors. 2 Investing in Smart Cities

3 Investing in Smart Cities Investing in smarter infrastructure The development of smart infrastructure is a key component of our current lending priorities for urban areas. Projects financed by the EIB encourage the innovative use of emerging technologies in ICT systems, smart materials and other technologies applied to construction and infrastructure. Urban investments are assessed to confirm their consistency with a sound integrated planning and management approach for both the public and private sectors. Besides equipping sites for SME and industrial development, investments in urban infrastructure and services generate significant employment in their own right, and this sector is typically one of the biggest employers. Examples of projects financed by the EIB include conversion of urban brownfield sites into new dense mixed-use development zones (e.g. smart districts or ecodistricts). Other investments focus on a specific sub-sector such as energy efficiency e.g. smart building components for life-cycle adaptive design or near-passive energy municipal buildings but also smart management processes and infrastructure at city level e.g. geothermal district heating network, low energy consumption street lighting and maximum use of natural light via building orientation. Belfius smart cities and sustainable development The EIB is lending to the Belgian bank Belfius to support its Smart Cities and Sustainable Development programme, which offers financing to municipalities, provinces, inter-municipal associations, utility companies, and private companies through public-private partnerships. The investment schemes financed under this project cover three main areas: (i) Sustainable urban development, in particular eco-district development, district heating and brownfield redevelopment; (ii) Renewable energy and energy efficiency, in particular solar, wind, biomass, efficient co-generation, energyefficiency building renovation, and efficient public lighting; and (iii) Sustainable mobility, aimed at reducing traffic congestion, promoting sustainable transport modes, improving road safety, encouraging cleaner means of urban transport (e.g. electric vehicles) and upgrading traffic management systems. Investing in Smart Cities 3

4 Promoting smarter mobility In many urban areas, increasing demand for mobility has created an unsustainable situation: severe congestion, poor air quality, noise emissions and high levels of CO 2 emissions. As a response to these challenges, the EIB promotes resource-efficient and economically sustainable investments in smart mobility. Our support ranges from the construction, extension or rehabilitation of public transport infrastructure (such as railway, light rail, metro and tramway systems and rolling stock) to the promotion of cycling and pedestrian networks, as well as intelligent traffic management and information systems. Moreover, we promote cleaner and safer vehicles by increasingly focusing lending on research and development in the area of energy efficiency and lower emissions. Recent projects financed by the EIB in the transport sector have brought large benefits in terms of time savings (100 million hours per year). In addition, by reducing traffic congestion and network overcrowding, our projects aim to foster productivity and competitiveness both key ingredients of local economic development. Due to the complexity of urban mobility and the environmental and financial challenges ahead, we provide direct and indirect support to local authorities Smarter mobility in Barcelona The EIB has been supporting the impro vement of the public transport system in Barcelona since 1995, financing a broad range of investments such as: Expansion of the existing underground network Acquisition of new rolling stock Innovative ticketing and fare system based on a contactless single mobility card for all regional public transport modes (through a PPP). Together with the European Commission, through the ELENA facility, we have also fostered an innovative bus fleet renewal programme including the retrofitting of some 200 existing buses to create hybrid buses. Expected energy savings amount to 60 GWh over the three-year project period. to develop sustainable urban mobility plans (SUMPs). In Europe, for example, medium-sized and large metropolitan areas have promoted sustainable mobility and a modal switch through this integrated approach. Smart mobility investments provided for in their SUMPs and financed by the EIB include an electric car sharing system in Paris (Autolib) and the Cycle Superhighway programme in London. 4 Investing in Smart Cities

5 Investing in Smart Cities Financing smart energy Hitting the EU s 2020 energy efficiency and renewable targets will not be possible without more innovation and intelligence in the energy infrastructure field, especially through the use of information and communication technologies. The promotion of smarter energy infrastructure will make networks more flexible and efficient. Moreover, smart energy infrastructure will foster transparency and enable consumers to better control appliances in their homes to save energy, facilitate domestic generation and reduce costs. In line with this approach, the EIB finances projects that contribute to ensuring long-term energy savings and the integration of renewable energy sources as well as a more secure energy supply. Electricity networks with advanced monitoring and control systems and demandside management functionalities are particularly important to integrate renewable energy sources and distributed generation. They also enhance operational efficiency and reduce energy consumption. The promotion of smart grid projects and the roll-out of smart meters are two of the EIB s current lending priorities in the energy sector. Examples of projects financed by the EIB include the roll-out of smart metering infrastructure and the modernisation and automation of electricity distribution networks. Indirect financing has also been provided through investments in the Green Initiative and the European Energy Efficiency funds, which are financial instruments cosponsored by the European Commission and other stakeholders. Iberdrola network modernisation and smart meters The EIB is supporting the investment programme of Iberdrola Spain s largest energy company and a leading European energy group with a strong international presence aimed at modernising the electricity distribution network in Spain. This programme includes the financing of the Remote Grid Management and Automation System and in particular the roll-out of around 3.2 million smart meters and implementation of supervision and real-time control functionalities in medium voltage networks. The programme is expected to generate energy savings as well as improving the quality of the electricity supply. Investing in Smart Cities 5

6 Improved water security: a smart solution for communities and industries Water security is critical to the attractiveness and growth of urban areas. But a growing and urbanising world population faces water resource scarcity and degradation, ageing or lacking water infrastructure, and poor management of both. Businesses and communities are increasingly aware of water-related risks and their impacts on health, quality of life, competitiveness and the environment. As the largest lender to the global water sector to date, with loans worth over EUR 60 billion supporting more than projects, the EIB can play a key role in the identification of smart solutions for a water secure world. While municipal water services compose the bulk of our water portfolio, we help develop and finance solutions at all stages of the water value chain, including the development of new water resources, their improved management and efficient allocation, pollution reduction, better demand management, reduced water losses, optimised network design and management, increased energy efficiency of water systems, all the way to treated wastewater reuse and the recycling of valuable materials, such as phosphorous. Smart and innovative solutions are key components of a water security strategy. Smart meters to reduce water losses, smart systems helping farmers and companies to optimise water use depending on key process indicators, information systems reducing the vulnerability of municipal areas to water-related risks linked to droughts or floods, all play a part in security for resilient communities and for competitive economic activities. Having made water security a priority, the EIB is supporting project identification, preparation and financing including innovative solutions to leverage private sector finance. The EIB Group is also actively assisting the identification and financing of innovation, as part of its support for the European Innovation Partnership on Water led by the European Commission s DG Environment in close cooperation with DG Research and Innovation. Securing water supply for economic growth in the greater Lisbon area Since 1993, the EIB has supported the investment programme of EPAL the oldest water utility in Portugal in charge of bulk supplies to 2.9 million people in 34 municipalities and direct supply to more than half a million people in the city of Lisbon. With EIB support, EPAL has achieved large improvements in the efficiency of its services, while reinforcing climate resilience, reducing its overall energy consumption and improving security of water supply to its growing service area. This has included the development of a methodology and software application for water loss control Water Optimisation for Network Efficiency (WONE) which enabled EPAL to reduce the amount of non-revenue water by 70% in eight years, saving around 19 million cubic metres of water every year. The Lisbon case also shows that improved security should be as smart as it needs to be, with simple but effective systems working alongside trained staff that are retained within the company. This has generated substantial operational, financial and sustainability benefits. 6 Investing in Smart Cities

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8 Investing in Smart Cities European Investment Bank , boulevard Konrad Adenauer L-2950 Luxembourg U [email protected] EIB 08/2015 QH EN-C ISBN doi: /94870 EIB GraphicTeam EIB Photolibrary, Schelde Landschapspark, TMB, Iberdrola, Aguas de Portugal, Shutterstock