Ahead of the release on November 5 of a major report by Enterprise IoT Insights into the state of the smart city market, entitled How to buy / sell a smart city – procurement models to make every city smart, we five burning questions for five leading solutions providers around the issue of funding in smart cities.
These questions will be posed in turn, across a ‘5×5’ series of five articles. First up, we guage exactly how hard it is to finance smart city projects, and whether new funding models, notably the rise of public-private partnership (PPP) deals, has made the task easier.
1 / 5 | How hard is it to fund smart cities? Is it getting any easier?
Markus Keller, senior vice president for smart city, Deutsche Telekom
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“In Europe, the transition to smart cities is being actively pushed forward and funded by legislative institutions such as the European Commission, the European Investment Bank and local governments, which view ‘intelligent transport systems’ (ITS) and smart street lighting as the most beneficial infrastructure for connected cities.
“EU funds for smart-city infrastructure, such as intelligent lighting, cover anything from 40 per cent to 100 per cent of the investment. It is therefore important for cities to know the availability and understand the prerequisites of these funds – to maximise benefit for their citizens and minimise their own investment. So far, cities are not fully aware of these opportunities, and often rely on our support and expertise to help.
“Most large-scale implementations around the world have not been overly successful. They have either come too early, or their long-term value has not been clear. Cities are now taking a step-by-step approach, and are only starting to implement projects when there is a clarity of purpose, and a clear business case. Most are backed by the EU, UN, World Bank and so on.”
Markus Keller – large-scale implementations have not been successful
Alicia Asín, chief executive, Libelium –
“Cities are increasingly using collaborative formulas for public-private financing, but we have to be realistic. Investments in IoT technology for cities have to come mostly from public funds because the return on investment in most cases generates savings in terms of the management public resources, which benefits the city and citizens.
“Is it getting easier? Nothing is easy in the business of smart cities. The important thing is public managers know what they want to achieve with technology projects. The objective should not be to fill cities with devices – to look good with citizens and say that they are ‘smart’. What is valuable is to bet on projects that improve people’s quality of life and add value to the management of public resources.”
Alicia Asín – collaborative formulas for public-private financing
Itai Dadon, director of smart cities and IoT, Itron –
“Funding smart city initiatives is a challenge for cities, particularly those with shrinking budgets and ageing infrastructure. They are addressing this in a couple of ways. Firstly, cities are starting with mature use-cases with proven ROIs. Many cities adopt smart street lighting as their first application, for example, because the business case is compelling – a 50 per cent saving on energy costs, and 20 per cent on operations and maintenance.
“On top of that, with mesh solutions such as Wi-SUN, streetlights create the network canopy for other smart city applications, such as environmental sensing, smart parking, and traffic sensing. This approach makes it more economical – to invest in an open, standards-based network platform on which multiple applications can be supported.
“Secondly, cities are testing the waters with public private partnerships (PPPs) as a way to modernise and improve cities, reach sustainability goals, and create new opportunities for citizens.This type of model can be successful because it is a multi-player landscape – it’s not simply a supplier and customer scenario. Collaborating across public and private sectors so that everyone wins is essential for PPPs.
“A good example is Kansas City in the US. It is seeking a strategic private-sector partner to manage and fund smart city initiatives; in turn, the partner will reap the benefit from any return on investment. Many cities are watching this very closely to see how it plays out.”
Itai Dadon – streetlights create a canopy for other city applications
Max Claps, global future cities team lead, SAP –
“Many cities turn to telecoms companies to provide readily available services that advance their initiatives while respecting tight budgets. With long-standing experience in monetising digital services, telcos can help cities reduce time to benefit by providing revenue management services and applications. These services turn capital expenses into operating expenses, freeing funds that can be reinvested in smart city initiatives.
“Smart city initiatives are often spearheaded, and funded, by public-private partnerships, supported by non-profits and academic institutions. The ease of funding heavily depends on interest from the government, citizens and businesses alike. It is becoming easier for cities to make the business case because smart cities work to improve the lives of citizens while also providing cost-effective mobility, utility and telecoms options.”
Max Claps – it is becoming easier for cities to make the business case
Mike Monteith, chief executive, Thoughtwire –
“There are public sector funds dedicated towards smart cities. However, I wouldn’t suggest it is any ‘easier’ to secure funding. As complete smart applications continue to drive value and emerge in prominent commercial properties, it will inevitably become easier to make the business case. Due to the fact that there is so much noise in the IoT market, it’s becoming more essential to prove impact on end users and ROI.”
Mike Monteith – it is essential to prove the impact on end users and ROI
This is an excerpt and forerunner for a report and webinar, titled How to buy / sell a smart city – procurement models to make every city smart, to be published on November 5. Sign up to the Enterprise IoT Insights newsletter here to get the next instalment in the 5X5 series, updates about the report, and related news. Register for the webinar here to hear from speakers from AT&T, Cisco, the City of Cardiff, Cradlepoint and Navigant.
Smart cities 5×5 | How hard is it to fund smart cities? (1/5)
Smart cities 5×5 | What’s so good about PPP? (2/5)
Smart cities 5×5 | Which smart city apps provide the surest ROI? (3/5)
Smart cities 5×5 | Should cities build a central data platform? (4/5)
Smart cities 5×5 | Does the tech industry need a new way to sell to cities? (5/5)
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