With smart cities attracting massive investment and some under construction already, what are their implications for power companies?


None of us currently live in what could claim to be smart city, but in a decade’s time that could have radically changed.

And we’re not talking about existing cities adopting smart technology for anything from power grids to transport to traffic lights – that’s already happening: Amsterdam is spending $383 million on network sensors for the city’s grid to improve domestic energy monitoring and cut electricity use.

We’re talking about purpose-built cities designed to be home to a massive workforce.

Research published last week predicted that 2010’s $8.1 billion spend on smart city technologies will hit $39.5 billion by 2016, and later this year Barcelona will host the first Smart City Expo World Congress. Also last week it was revealed that a smart ‘ghost town’ on the scale of a mid-sized American city is to be built in New Mexico for the sole purpose of being a test centre for smart technology.

Probably the best known smart city currently under construction is Abu Dhabi’s desert metropolis Masdar, but there are other projects worldwide that are equally, if not more, ambitious.

New Songdo City, set to be the size of Boston, is being built on a man-made island in the Yellow Sea along with South Korea’s tallest building – the 1001-foot Northeast Asia Trade Tower – and is scheduled to be completed by 2020. Skolkovo is Russian president Dmitry Medvedev’s bid to create another Silicon Valley. And King Abdullah Economic City is one of four Saudi smart cities that are intended to create more than a million jobs.

An artist’s impression of the Courtyard building in Masdar City

So what does all this hold for the power industry? Someone has to keep the lights on, but these flagship cities are selling themselves on flagship energy technology. Masdar trades on its commitment to renewables, as does Songdo, and many of the major players in clean energy technology already have a foot in the door of these cities.

But if smart cities – and in turn smart power – are the future, how does a utility or manufacturer that deals in conventional power plan for this future? Do you try to keep pace with emerging technology while maintaining your traditional customers and try to keep all those balls in the air?

Last week I met the president of a company that manufactures components for conventional power plants and also has a finger in the renewables pie, and asked him if he could see a time when the renewables slice of his business would de dominant. The answer was a resounding ‘no’, because “there is such a gap in the economics” between fossil fuelled power and renewables.

But with Masdar well into construction and Songdo also under way, the money tied-up in smart cities is huge and comes from investors who are doing more than taking a punt on these projects will be a success. And if they revolutionise the industry of their home countries in the way that they are intended to, all the major business infrastructure built, say post-2025, could be ‘smart’. Can power players afford to take a wait-and-see approach?

Maybe smart cities will sit alongside their established counterparts with enough power business opportunities for all. Or maybe the smart city bandwagon will be one that many simply refuse to jump on. Boulder in Colorado is home to the most sophisticated smart grid network currently in use in the US and is the result of the Xcel Smart Grid City project, which was set up to test Smart Grid technology.

Yet Tom Willie, the chief executive of Smart Grid technology company Current, told PEi that “as the project came to a conclusion, it began being measured primarily on the cost of deployment instead of the lessons learned from innovation, which was clearly not the initial target”. (See Q&A on p.22–25)

If some are going to baulk at the implementation costs for a comprehensive smart grid, maybe there is room in the power market for everyone. But I’d guess the smart money is on that changing sooner than we may think.

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