Key sectors leading this transformation are energy, telecoms, transport and IT. Together these will be the key infrastructure facilitators for the development of smart cities, smart buildings, smart communities, and indeed smart countries.
New infrastructure systems are emerging, driven by a combination of pull factors –technological change, price, regulatory changes and increased knowledge –as well as push factors, with both empowered people as well as new entrants with different business models entering the market.
Central in all of this are smart people.
The customer has become the disrupter, facilitated by new technologies, and the customer side is now the focus of change. This has an effect on government and businesses alike. Customers want to deal with smart cities and smart companies. Energy and sustainability play a key role in this, but they are no longer stand-alone items – they need to be integrated with communications and IT developments. Cities, companies, society and economy at large will need to transform and show leadership, cut through their silos, create open systems and mould their systems, products and offerings to meet customer needs.
While city, state and federal government need to show leadership, it is in the industry’s interest to build a platform to develop the smart projects that will allow all of the various customer and industry elements to connect and engage in multiparty activities. Making the customer central to these developments means providing them with the tools and services they are looking for, enabling choice, affordability, simplicity and reliability.
An open and interconnected environment will facilitate growth opportunities for existing and new entrants to drive innovative technologies and business models. It will allow the annual global spend of over US$2 trillion in electricity, communications and IT and other infrastructure to be leveraged for the benefit of all stakeholders. Apart from telecommunications developments like smartphones, home electronics, apps and the internet, we are seeing an explosion in photovoltaics (PV) and storage, including new advances in battery technology, which will accelerate this disruption by allowing a truly two sided market. To gain the most from these developments, the industry needs a holistic platform that can incorporate transactive energy, virtual power plants, microgrids, EVs, communications developments such as Internet of Things (IoT) and machine-to-machine (M2M) interactions, as well as the all-important data analytics.
There are already a few electricity companies that are progressing on this process of transformation.
Change agent Alliander
Smart City Amsterdam is an initiative of the City of Amsterdam with two key partners – KPN, the Dutch national
telecoms company, and the energy company Alliander. Alliander N.V. is the holding company of several subsidiaries and group companies, including the regional network operators in the Netherlands, Liander and Endinet. Liandon is Alliander’s knowledge centre and it is largely responsible for the technical innovations around the transportation and distribution of electricity and gas.
Alliander’s shareholders are Dutch provinces and municipalities. The largest shareholders are the provinces of Gelderland, Friesland, Noord-Holland and the municipality of Amsterdam. The regional distribution of energy in the Netherlands is the exclusive responsibility of network operators. This is laid down in the Dutch Electricity Act and the Gas Act. Network management is the most important activity within Alliander. About 90% of the revenue comes from connections, meters and the distribution of energy by Liander and Endinet. The other 10% comes from activities involving the construction and maintenance of complex infrastructures by Liandon as well as other activities.
Alliander operates energy networks which distribute gas and electricity to large parts of the Netherlands. With their work they facilitate businesses, homes, transport and recreation.
So far, nothing unusual.
However, they also want to strengthen and empower society by providing free access to the energy infrastructure and giving customers more insight into their energy consumption. Responding to the rapidly changing energy landscape they are working to build a future-proof and open network that can accommodate multiple energy providers.
To obtain insight into society’s energy ambitions at all levels, they consult with provinces, municipalities and other customers. They help them to resolve their energy understanding where the future business opportunities are; and the further they move towards this future the more the company will rely on totally different business models. This already has resulted in stopping several investment projects based on the old grid principle, as Alliander has learned that the smart way to undertake these projects is through collaboration and sharing, rather than through building more and new traditional grids.
By taking a leadership role in developing smart cities they are gaining valuable information on what the future will hold.
Change agent Tenaga
According to Malaysia’s main energy provider, Tenaga National Behad (TNB), the topic of smart grid has well and truly moved in the direction of smart cities. To this end the company has positioned itself as a key infrastructure provider in the smart city developments of that country.
Energy will be a key element in this development but in order to become an important player in the smart city market TNB understands it will have to broaden its approach towards energy, and offer a more complete set of smart city products and services. It has also researched the key sectors in the smart city such as healthcare, transportation, culture and entertainment, telecommunications, security, building management, etc, and has come to the conclusion that specific services will have to be developed for each of those sectors. This will necessitate the company making some fundamental changes to the organisation and the way it operates, and this certainly will not be an easy task. But, as is happening elsewhere, TNB is facing reduction in traditional power supply and it will have to make a choice – whether to remain the largest player in a shrinking market or move into new services.
Obviously it will need to be realistic about this and concentrate on areas that lie within its competence. One of the areas it is looking at is whether its smart meters can be used for other applications, and if it can collaborate with partners to broaden their use It is looking at different business models.
They have developed three main models, simply operate on a project basis for third parties, a build operate and transfer (BOT) model and a build-operate and manage (BOM) solutions. So looking at these last two examples, there will clearly be a place for the grid operators in new energy market – people will continue to need safe and reliable power, and an interconnection to keep the various hubs together.
However, those operating the grid will have to start having very different conversations. It has to become bi-directional, a network of all sorts of energy interchanges. But perhaps most importantly, from now on, future energy developments will be driven by the customers, people who want to live in smart homes, smart communities and smart cities.