Investment in the smart technologies revolutionizing urban mobility, energy, buildings and governance will give birth to a multi-trillion-dollar market in under a decade.
These smart technologies will transform the quality of life for urban citizens and the operational success of businesses.
But, before cities and global businesses can realise these benefits, they need to get right with data. That means not only centralizing and normalizing the data they already own. They must learn to ingest and analyze data from many more sources while they build data platforms and learn to collaborate among city agencies and with the private sector.
With a proliferation of new use cases, investment and urban-tech start-ups, the smart-city technology ecosystem needs to embrace a new era of openness and collaboration.
JUMPING THE BARRIERS
Cities face five barriers to becoming smarter—or to using data at all. Because of this, their data engagements, whether internal or with consultants, must be approached and managed differently. The barriers are:
- City hiring regulations and practices
- Funding innovation
- City politics
- Processes focused on procurement rather than monetization
- Citizen concerns about privacy
You never know where or how you’ll innovate—and few cities have a line item in their budget for it. Finding the money for unproven projects can be tough. Brian Elms, Peak Academy’s founder, applied for and received $500,000 a year for two years from the Denver Innovation Fund, with a promise to close the academy if it didn’t work.
Careful and continual measurement proved that the academy saw a $3 return for every dollar spent in the first year, growing to a $5.30 return per dollar spent in year two. Today, it has eight budgeted positions and an annual operating budget of $1 million a year from city funds, producing an average annual savings of $5 million.
The City of Columbus won $40 million from USDOT and another $10 million from Paul G. Allen Philanthropies. That allowed it to begin building its data platform, called Smart Columbus Operating System. It’s expected to be the central data layer for all future Smart Columbus projects.
But the city realizes that’s only the start: It will need further funding to operationalize its smart city initiative for the long term, according to Brandi Braun, Deputy Chief Innovation Officer, City of Columbus.
Part of the brief for the Smart City Challenge was to create something that could be used by other cities; moreover, says Braun, to be truly effective, “It’s a region-wide thing that has to happen across functions and sectors.”
The city is talking to all its partners in the private and public sector, she says, to incorporate smart-city initiatives into long-term plans and budgets.
Some vendors are willing to ease the problem of capex costs with options such as performance management contracting. For example, the City of Orem, Utah, partnered with Siemens to finance upgrades to its street lighting system; modifications to building automation systems in public buildings; and improvements to building envelopes under an energy savings performance contract.
The infrastructure improvements are expected to create savings of $11.4 million over 15 years.
Says Martin Powell, head of urban development within Siemens Global Centre of Competence for Cities, “Once you can see the data, you can improve the efficiency of just about any system by upwards of 30 percent. This is what cities are currently leaving on table until they connect their infrastructures.”
Procurement policies and processes
Traditional city processes can hinder finding the best solution—or even a good one, according to Michael Lake, CEO of Leading Cities. The issues he identifies include:
- Opaque RFPs: “When a tender is released, the assumption is that every potential respondent will be aware of it,” Lake says. “But some of the world’s best solutions may never know it was released.”
- Focus on low cost: Sometimes, regulations may require offering a project to the lowest bidder. In the case of smart-city projects, spending a bit more may lead to a tremendous increase in value. Moreover, there are not as many established brand names for some smart-city applications, which makes it difficult to choose among vendors.
- Resistance of IT staff to software changes: “Cities have some talented people who are fabulous at doing their jobs,” Lake says. “But after you become expert in doing something the same way for years, it becomes difficult to see other ways of doing it.”
- CIOs are not end decision-makers: Whether that person goes by the title of CIO or something else, he or she is charged with identifying the best solution. But that solution must be “sold” to an agency or executive. For example, Lake says, “They can look at a trash collection optimization package that would reduce the number of trucks needed or reduce amount of fuel used. But ultimately, that CTO must convince the head of the dept of public works that whatever money was set in the budget is best spent on a software package instead of new trucks. It’s always a difficult sell.”
- Privacy concerns:If cities are to truly take advantage of data, their citizens must trust that it won’t be misused. Citizens don’t always agree on what uses are okay—especially since cities are in the position of trying to become data-centric without a clear roadmap about how data can be or should be used.
BUILDING THE FUTURE CITY ON DATA
City officials and vendors alike have signed on to the open data approach. An easy exchange of data via APIs and/or data marketplaces, along with the ability to easily add partners to the ecosystem, are critical components of any smart-city platform.
Alex Grizhnevich, process automation and IoT consultant for ScienceSoft proposes a three-dimensional architecture concept:
- IoT-based smart city-platform
- Service management solution
- Citizen portal
And he’s created a shopping list for a basic smart-city platform:
- The network of smart things for gathering data.
- Field gateways for facilitating data gathering and compression.
- Cloud gateway for ensuring secure data transmission.
- Streaming data processor for aggregating numerous data streams and distributing them to a data lake and control applications.
- Data lake for storing data the value of which is yet to be defined.
- Data warehouse for storing cleansed and structured data.
- Data analytics tools for analyzing and visualizing data collected by sensors.
- Machine learning for automating city services based on long-term data analysis and finding ways to improve the performance of control applications.
- Control applications for sending commands to the things’ actuators.
- User applications for connecting smart things and citizens.
Says Grizhnevich, “Whatever out-of-the-box smart city platforms exist out there, they are not widely sold and have not proven their reliability in the market.” Even when vendors offer all the necessary components, they still need to be customized and integrated, he adds.
This white paper was produced in association with IMPACT>CITIES (Las Vegas, Dec 4-5, 2018).
This brand-new event will connect leaders from cities, investors, global enterprises and tech companies to tackle the here and now opportunities of building smart cities; incl. urban data economy, investment, mobility, energy and IoT infrastructure.
IMPACT>CITIES will unite innovation with investment. It’s where the business of urban tech gets done.
UK might need negative rates if recovery disappoints – BoE’s Vlieghe
By David Milliken and William Schomberg
LONDON (Reuters) – The Bank of England might need to cut interest rates below zero later this year or in 2022 if a recovery in the economy disappoints, especially if there is persistent unemployment, policymaker Gertjan Vlieghe said on Friday.
Vlieghe said he thought the likeliest scenario was that the economy would recover strongly as forecast by the central bank earlier this month, meaning a further loosening of monetary policy would not be needed.
Data published on Friday suggested the economy had stabilised after a new COVID-19 lockdown hit retailers last month, while businesses and consumers are hopeful a fast vaccination campaign will spur a recovery.
Vlieghe said in a speech published by the BoE that there was a risk of lasting job market weakness hurting wages and prices.
“In such a scenario, I judge more monetary stimulus would be appropriate, and I would favour a negative Bank Rate as the tool to implement the stimulus,” he said.
“The time to implement it would be whenever the data, or the balance of risks around it, suggest that the recovery is falling short of fully eliminating economic slack, which might be later this year or into next year,” he added.
Vlieghe’s comments are similar to those of fellow policymaker Michael Saunders, who said on Thursday negative rates could be the BoE’s best tool in future.
Earlier this month the BoE gave British financial institutions six months to get ready for the possible introduction of negative interest rates, though it stressed that no decision had been taken on whether to implement them.
Investors saw the move as reducing the likelihood of the BoE following other central banks and adopting negative rates.
Some senior BoE policymakers, such as Deputy Governor Dave Ramsden, believe that adding to the central bank’s 875 billion pounds ($1.22 trillion) of government bond purchases remains the best way of boosting the economy if needed.
Vlieghe underscored the scale of the hit to Britain’s economy and said it was clear the country was not experiencing a V-shaped recovery, adding it was more like “something between a swoosh-shaped recovery and a W-shaped recovery.”
“I want to emphasise how far we still have to travel in this recovery,” he said, adding that it was “highly uncertain” how much of the pent-up savings amassed by households during the lockdowns would be spent.
By contrast, last week the BoE’s chief economist, Andy Haldane, likened the economy to a “coiled spring.”
Vlieghe also warned against raising interest rates if the economy appeared to be outperforming expectations.
“It is perfectly possible that we have a short period of pent up demand, after which demand eases back again,” he said.
Higher interest rates were unlikely to be appropriate until 2023 or 2024, he said.
($1 = 0.7146 pounds)
(Reporting by David Milliken; Editing by William Schomberg)
UK economy shows signs of stabilisation after new lockdown hit
By William Schomberg and David Milliken
LONDON (Reuters) – Britain’s economy has stabilised after a new COVID-19 lockdown last month hit retailers, and business and consumers are hopeful the vaccination campaign will spur a recovery, data showed on Friday.
The IHS Markit/CIPS flash composite Purchasing Managers’ Index, a survey of businesses, suggested the economy was barely shrinking in the first half of February as companies adjusted to the latest restrictions.
A separate survey of households showed consumers at their most confident since the pandemic began.
Britain’s economy had its biggest slump in 300 years in 2020, when it contracted by 10%, and will shrink by 4% in the first three months of 2021, the Bank of England predicts.
The central bank expects a strong subsequent recovery because of the COVID-19 vaccination programme – though policymaker Gertjan Vlieghe said in a speech on Friday that the BoE could need to cut interest rates below zero later this year if unemployment stayed high.
Prime Minister Boris Johnson is due on Monday to announce the next steps in England’s lockdown but has said any easing of restrictions will be gradual.
Official data for January underscored the impact of the latest lockdown on retailers.
Retail sales volumes slumped by 8.2% from December, a much bigger fall than the 2.5% decrease forecast in a Reuters poll of economists, and the second largest on record.
“The only good thing about the current lockdown is that it’s no way near as bad for the economy as the first one,” Paul Dales, an economist at Capital Economics, said.
The smaller fall in retail sales than last April’s 18% plunge reflected growth in online shopping.
BORROWING SURGE SLOWED IN JANUARY
There was some better news for finance minister Rishi Sunak as he prepares to announce Britain’s next annual budget on March 3.
Though public sector borrowing of 8.8 billion pounds ($12.3 billion) was the first January deficit in a decade, it was much less than the 24.5 billion pounds forecast in a Reuters poll.
That took borrowing since the start of the financial year in April to 270.6 billion pounds, reflecting a surge in spending and tax cuts ordered by Sunak.
The figure does not count losses on government-backed loans which could add 30 billion pounds to the shortfall this year, but the deficit is likely to be smaller than official forecasts, the Institute for Fiscal Studies think tank said.
Sunak is expected to extend a costly wage subsidy programme, at least for the hardest-hit sectors, but he said the time for a reckoning would come.
“It’s right that once our economy begins to recover, we should look to return the public finances to a more sustainable footing and I’ll always be honest with the British people about how we will do this,” he said.
Some economists expect higher taxes sooner rather than later.
“Big tax rises eventually will have to be announced, with 2022 likely to be the worst year, so that they will be far from voters’ minds by the time of the next general election in May 2024,” Samuel Tombs, at Pantheon Macroeconomics, said.
Public debt rose to 2.115 trillion pounds, or 97.9% of gross domestic product – a percentage not seen since the early 1960s.
The PMI survey and a separate measure of manufacturing from the Confederation of British Industry, showing factory orders suffering the smallest hit in a year, gave Sunak some cause for optimism.
IHS Markit’s chief business economist, Chris Williamson, said the improvement in business expectations suggested the economy was “poised for recovery.”
However the PMI survey showed factory output in February grew at its slowest rate in nine months. Many firms reported extra costs and disruption to supply chains from new post-Brexit barriers to trade with the European Union since Jan. 1.
Vlieghe warned against over-interpreting any early signs of growth. “It is perfectly possible that we have a short period of pent up demand, after which demand eases back again,” he said.
“We are experiencing something between a swoosh-shaped recovery and a W-shaped recovery. We are clearly not experiencing a V-shaped recovery.”
($1 = 0.7160 pounds)
(Editing by Angus MacSwan and Timothy Heritage)
Oil extends losses as Texas prepares to ramp up output
By Devika Krishna Kumar
NEW YORK (Reuters) – Oil prices fell for a second day on Friday, retreating further from recent highs as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather.
Brent crude futures were down 33 cents, or 0.5%, at $63.60 a barrel by 11:06 a.m. (1606 GMT) U.S. West Texas Intermediate (WTI) crude futures fell 60 cents, or 1%, to $59.92.
This week, both benchmarks had climbed to the highest in more than a year.
“Price pullback thus far appears corrective and is slight within the context of this month’s major upside price acceleration,” said Jim Ritterbusch, president of Ritterbusch and Associates.
Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude production and 21 billion cubic feet of natural gas, analysts estimated.
Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.
Companies were expected to prepare for production restarts on Friday as electric power and water services slowly resume, sources said.
“While much of the selling relates to a gradual resumption of power in the Gulf coast region ahead of a significant temperature warmup, the magnitude of this week’s loss of supply may require further discounting given much uncertainty regarding the extent and possible duration of lost output,” Ritterbusch said.
Oil fell despite a surprise drop in U.S. crude stockpiles in the week to Feb. 12, before the big freeze. Inventories fell by 7.3 million barrels to 461.8 million barrels, their lowest since March, the Energy Information Administration reported on Thursday. [EIA/S]
The United States on Thursday said it was ready to talk to Iran about returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons. Still, analysts did not expect near-term reversal of sanctions on Iran that were imposed by the previous U.S. administration.
“This breakthrough increases the probability that we may see Iran returning to the oil market soon, although there is much to be discussed and a new deal will not be a carbon-copy of the 2015 nuclear deal,” said StoneX analyst Kevin Solomon.
(Additional reporting by Ahmad Ghaddar in London and Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; Editing by Jason Neely, David Goodman and David Gregorio)
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