It’s becoming increasingly clear that the future of utilities and the rise of urbanization will be inevitably intertwined. Consider that, while more than half of the world’s population already lives in urban areas, more than two-thirds will live in cities by 2050. That means a third more power must be delivered to urban areas. And with utilities around the world already struggling to supply growing urban populations, that’s a daunting task. How can utilities possibly keep up?
Enter smart cities. With urbanization moving on at a pace, smart city technologies are more important than ever—and can provide utilities with the breathing room they need to meet the growing demand. Smart city technology maximizes the efficient use of energy by collecting, sharing, and analyzing data. Sensors and responsive devices can detect leaks and other inefficiencies as well as temporarily stop consumption when demand for energy (and prices) increase.
Cities are already benefitting from smart city initiatives. Amsterdam’s smart city recorded 4% to 9% saving on energy bills, with a projected 40% reduction in carbon emissions by 2025. And Barcelona’s smart water initiative saves the city US$58 million annually. Smart initiatives have also resulted in a savings of US$1.2 billion for the Dubai government.
Despite the urgent need for smart city solutions—and the economic benefits—most cities are having trouble getting started for a range of reasons. Making a business case for transformation can be a tough sell in light of strapped budgets. Internet of things (IoT) technology and infrastructure aren’t quite ready for the demands of a smart city. Disparate and legacy platforms are inhibiting the necessary network of sensors. Regulatory and privacy issues, while necessary, are a stumbling block.
But while cities are still sorting out these issues, utilities can step up and drive the capabilities needed to support smart cities. In fact, utilities may be the single most important player in the smart cities ecosystem.
Take data. Data is the cornerstone of smart cities, and utilities have plenty of it. Utilities already have access to reams of data obtained from smart meters and smart transformers that track consumption patterns. This infrastructure can be retrofitted to provide further information—anywhere from water use to air quality. The sensors can also help utilities monitor and control usage in peak hours and balance the grid against demand.
Utilities also support a key pillar in the smart cities platform—sustainability. The idea that smart cities can provide a better quality of life is inextricably tied to the role of sustainable energy. And with wind and solar power now reaching price and performance parity, utilities are increasingly able to offer cities and its occupants, renewables.
Many utilities are also devising instruments that enable businesses to invest more in renewables. For example, in the United States, green power products and green tariffs allow businesses to buy renewable energy through a regulated utility. Utilities are also opening up their community solar farms—previously reserved for residents—to businesses, especially if they agree to buy the bulk of the energy produced.
Utilities’ commitment to renewable energy can also spur transformation within smart cities—that is, the shift of key functions from fossil fuels to electrification. The most obvious example of this is transportation. Another is structures (buildings and their heating and water systems generate nearly 40% of annual global green house gas (GHG) emissions). Add in the traffic reduction potential of switching to electric buses from internal combustion engines and the ability to monitor electricity use in buildings via sensors—not to mention the impact on air and noise pollution—and you have a smart cities solution made in heaven.
With all this potential to help make smart cities a reality, utilities need to be prepared to play their role. Not only do they have to prepare from a grid perspective, but they also need to recognize how central they are to the smart cities journey as a whole. Sensors, retrofitting, and renewables are only a part of it. Utilities have to advocate for the policy changes that can enable a real commitment to smart cities. They need to engage with stakeholders—from businesses to government to residents—to build buy-in. Utilities, of course, can’t do it all on their own—but they certainly can help lead the way.
 “68% of the world population projected to live in urban areas by 2050, says UN,” United Nations Department of Economic and Social Affairs, 6 May 2018.
 The integrated digital city, Deloitte, 2019.
 “Why the Building Sector?” Architecture 2030, accessed 9 November 2019.
Felipe is a consulting partner and the Energy, Resources & Industrials Leader (ER&I) in Deloitte Spain. With more than 28 years of experience in the power sector, Felipe has also actively been involved in engagements within the oil, gas, and water sectors. His key areas of expertise include strategy definition, operational excellence programs, business model transformation, regulation management, financial transformation, and IT transformation program implementation.