The world is evolving rapidly, and amidst the challenges of recent years, there has been a growing need for local organizations to adapt and transform. The COVID-19 pandemic exposed the lack of preparedness among government organizations, with around 45% ill-equipped to handle the crisis. As a result, there has been a renewed focus on improving local infrastructure and the emergence of smart cities that can effectively manage challenging conditions while attracting new residents who have the option of remote work and flexibility.
What is a smart city?
Smart cities, also known as eco-cities or sustainable cities, utilize technology to enhance efficiency, sustainability, and quality of life for their residents. These cities leverage information and communication technologies to improve livability, workability, and sustainability. If you’re intrigued by this concept and keen on rankings or considering a move, you should check out the Smart Cities Index (2021 Full Report) to explore how cities around the world are rated. Spoiler alert: London clinched the top spot again.
Dublin, Ireland serves as an excellent example of what a smart city can offer. In 2015, Dublin City Council implemented the Mayflower Central Management System, integrating city-wide smart sensors and applications. This system monitors various factors such as noise levels from cars, CO2 emissions, energy consumption of street lighting, weather conditions, and groundwater levels to address the city’s vulnerability to flooding. The Smart Dublin initiative was launched in 2016, focusing on leveraging new technologies and practices to improve the quality of life for Dublin’s citizens and future-proof the city. The result is a safer city, reduced fuel consumption, lower pollution levels, and optimized locations for schools, hospitals, and homes.
Do we need smart cities?
The shift towards urban living is undeniable. In 1800, less than 10% of the global population resided in urban areas. However, according to the UN World Urbanization Prospects, as of 2007, urban populations surpassed those in rural areas. Today, more than half of the world’s population, approximately 55%, live in urban areas. By 2050, this proportion is projected to increase to 68%, adding another 2.5 billion people to urban areas. By 2030, there are expected to be 43 megacities with over 10 million inhabitants, predominantly in developing regions.
The success, both economically and environmentally, will depend largely on how cities manage their resources in this increasingly urbanized world. We must also consider the well-being of billions of people living in cities. Smart technologies are the key to a better future, as Jesse Berst, the founder of the Smart Cities Council, aptly puts it, “If cities are our best hope for a better future, smart technologies are the path to that better future.”
Apart from environmental and livability concerns, the pandemic highlighted the risks of working in silos. The World Economic Forum experts suggested that smart city ecosystems should prioritize global data governance and data exchanges. This has further accelerated the push towards technology infrastructure spending. Additionally, with declining fertility rates in developed countries, the competition for talent is intensifying. Some countries, such as the U.K., are granting visas to graduates and their families from top universities worldwide.
Why is this an investment opportunity?
The Internet of Things (IoT) has become increasingly prevalent in smart cities. Estimates predict significant growth in smart city spending.
- The SmartAmerica Challenge reveals that city governments in the United States alone will invest around $41 trillion over the next 20 years to upgrade infrastructure and leverage IoT solutions.
- A report by Research and Markets indicates that the global smart cities market is projected to grow at a CAGR of over 20%, reaching $2.5 trillion by 2025. This growth is driven by urbanization and technology spending on smart city programs and infrastructure development.
- Markets & Markets predicts a CAGR of approximately 19% for the global IoT in smart cities market, growing from $130.6 billion in 2021 to $312.2 billion by 2026.
- International Data Corporation expects direct digital transformation (DX) investments to reach $6.8 trillion between 2020 and 2023.
- Grandview Research forecasts that the global smart cities market will reach nearly $7 trillion by 2030, with a CAGR of around 24%.
Companies investing in smart city technology
Funding smart city development poses a challenge due to public debt burdens worldwide. Many cities are forming public-private partnerships to overcome this obstacle. Siemens, for instance, has invested $600 million in Berlin through its Siemensstadt project, transforming a large industrial area into a futuristic urban district. Siemens offers a range of smart city solutions, including MindSphere Application Centers and infrastructure financing.
Affluence Corporation’s subsidiary, OneMind Technologies, is collaborating with Dell Technologies and Orange Business Services to provide comprehensive data for city decision-makers. This collaboration aims to deliver IoT and smart city technology solutions. You can learn more about this partnership in an interview with James Honan, CEO of Affluence.
Numerous companies are making strides in specific areas of smart city development:
Resource Management
As the world becomes more conscious of energy generation and consumption, utility companies use “smart meter” IoT devices to optimize energy flow and enable users to monitor their own consumption. The implementation of smart meters is predicted to save utility companies $157 billion by 2035. Companies like Cisco Systems, General Electric, IBM, Microsoft, and Schneider Electric offer various smart grid solutions.
Smart grid technology is also focusing on decentralization, allowing customers to generate their own power through solar panels and sell excess energy back to the grid. This distributed model includes household and business storage units connected to the grid, reducing demand during peak hours. Tesla, Generac, and Panasonic offer residential and business battery solutions.
Water scarcity is a growing concern, with nearly one-fifth of the global population living in water-scarce areas. Innovation in this area includes rainwater management, water reclamation, and rapid leak detection. Companies like IBM, Microsoft, Evoqua Water Technologies Corp, Xylem, and Ecolab provide water management solutions.
Waste Removal
Smart solutions monitor bin levels, enabling waste management companies to optimize pickup routes and prevent overflow from contaminating surrounding areas. AI-based recognition systems, such as Bin-e, streamline the initial sorting process, reducing waste management costs by up to 80%. Other solutions like the Evo bin by EvoEco educate and motivate users to properly dispose of their trash. Bigbelly systems use solar power to alert authorities when bins are full and even compact waste internally to reduce pickup frequency. Rubicon Technologies uses AI to improve waste management and increase recycling.
Transportation Management
Smart parking solutions, like SmartPark by Smart Parking Limited, help drivers locate available parking spaces quickly, reducing congestion and frustration. Pittsburgh implemented Rapid Flow Technologies Scalable Urban Traffic Control (Surtrac) to reduce congestion and emissions by optimizing intersection control. Surtrac’s AI/robotic system treats intersection control as a single machine scheduling problem, resulting in 25% faster travel times, 40% fewer stops, and a 20% reduction in emissions. Rapid Flow is set to launch Routecast, a platform that can further save drivers valuable time at intersections.
Investing in smart city technology promises significant returns, given the ongoing urbanization and the need for sustainable solutions. Companies like Siemens, Affluence Corporation, Dell Technologies, and Orange Business Services are leading the way in this rapidly expanding field.
In conclusion, as our world becomes increasingly urbanized, it is crucial for cities to embrace smart technologies. Smart cities offer solutions to pressing environmental, economic, and livability challenges. The potential for investment in this sector is vast, with substantial growth expected in smart city spending over the coming years. By investing in the development of smart cities, we can build a future that is not only sustainable but also intelligent and prosperous for all.
Disclaimer: The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
