June 30, 2017
As smart cities evolve, how utilities can take a leadership role
By: Jim Mazurek

A recent research report estimates the global market for smart cities will reach US$3.5 billion by the year 2026. A number of companies, from communication services and technology platform providers to device and software manufacturers, are all jockeying for a piece of this smart cities pie. Each of these players provides something cities can leverage to achieve sustainable economic growth and meet the needs of their growing populations. But they don’t offer what utilities can:

  • Utility-grade communications infrastructure (smart meter networks, SCADA systems).
  • Wide geographic coverage of vital “nodes” such as streetlights, distribution poles and rights-of-way.
  • Plethora of valuable data including energy usage, electric vehicle charging, geospatial facilities and topography – and emerging analytics capabilities to draw unique insights.
  • A long history of working with municipalities to improve the quality of life for their citizens.

In the United States alone, more than 74 million smart meters have been deployed through 2016. Many utilities are now seeking ways to further leverage their smart investments, and have fortified their communication platforms and launched solutions such as smart streetlights and “sensing” devices that piggyback on the smart communication networks for municipal monitoring and response. Now, utilities could take their smart city investments to the next level by becoming information-driven partners that use analytics to generate insights that will fundamentally change how smart cities are run.

Community & citizens

We’ve identified seven areas of focus we believe will underpin smart city initiatives in the years ahead (see figure). More than half—mobility, energy, water and waste management—are heavily dependent on utilities’ involvement, if not leadership. In each area, the next wave of smart city services will call for utilities to move past simply leveraging its communications infrastructure and begin to draw from the full range of unique capabilities that only the utility could offer, including its infrastructure, data, work and asset management competencies, and stakeholder management skills.

But why should utilities bother? Is it worth the distraction? Use cases in these and other smart cities areas show that utilities could not only be positioned to help city leaders manage their future challenges, but also produce tangible benefits for their customers and shareholders. As many utilities are seeking new sources of earnings growth beyond traditional rate-based growth, smart cities are emerging as an important avenue for future growth. For instance, at one Midwestern US utility, we have conservatively estimated that these smart city applications have the potential to generate more than $200 million in additional revenue. This new revenue stream could grow dramatically if utilities stretch even further and think about offering adjacent services such as providing smart meter services to local water and municipal utilities, and monetizing data streams from all these smart city applications.

But utilities need to act quickly to stake their smart city claim. Already, communications and technology giants are positioning themselves as smart city leaders (and branding themselves this way). Many of these companies have entered creative public-private partnerships where they have been able to provide the upfront gear and communications infrastructure in return for a share of smart cities revenues (or savings). Utilities run the risk of being left out of these partnerships, or be relegated to limited role, which would blunt the potential impact utilities can have in this space.

To ideally position themselves to take advantage of the coming smart city opportunities, utilities should:

  • Invest time in developing a “smart cities vision”: determining the utility’s aspirations, how this fits into the business model, and explicitly define the role the utility would like to play in community leadership and powering the future economy.
  • Take inventory of all the infrastructure assets and capabilities they may be able to use to provide services to other smart city ecosystem partners.
  • Define and prioritize the use cases with the greatest potential to create value for the utility and “shared value” for smart city stakeholders and citizens. Launch pilots to demonstrate value and viability.
  • Identify opportunities to establish or take a leadership role in ecosystems to bring the next wave of smart city services to life. This will involve developing new, structured processes to identify, attract, vet, negotiate, manage and sustain public-private partnerships—with the goal of creating value for partners, the utility, the city and citizens.
  • Make all traditional infrastructure replacement/upgrade decisions with an eye toward creating a “smart” infrastructure that can support future smart city programs.

In High Performance Smart Cities, Accenture lays out why smart cities are looking to revamp their operations with the help of digital technologies. The need to manage increasingly complex systems, balance their budgets and engage with citizens more effectively top the list. Utilities have a real chance to help municipal leaders meet each of these challenges. Doing so would not only make them indispensable city partners, but also open up new opportunities for growth and relevance. For utilities, smart city could be smart business.

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