On the 19th of July 2016, Frost & Sullivan organized an executive briefing and workshop in Sydney on the future of smart urban infrastructure. The event brought together industry leaders from power and water utilities, information technology companies, telcos, building technology vendors, facilities management organizations, waste management companies and government agencies.

The summary and insights from the session are presented in two parts: the first one focuses on transformational trends in urban infrastructure relevant to Australia and second part is the outcome of brainstorming during the workshop involving industry participants.

Part 1: Urban Infrastructure—Transformation Trends

Frost & Sullivan’s presentation focused on three key aspects:

  1. Mega Trends impacting urban infrastructure including Big Data, Internet of Things (IoT), new business models, and innovating to zero
  2. Technology trends in smart buildings, water infrastructure, urban waste management, and distributed energy
  3. Industry value chain transformation, driven by rapid technology changes and the emergence of service-oriented business models

Urban Operating Systems (UOS)

Aspiring smart cities are deploying elaborate sensor networks to measure and monitor various parameters pertaining to security, environment, usage, demand, and so on. Low-cost communication technologies are being used to connect these sensors across the city. The next stage will be to employ mathematical and statistical models for real-time analysis of information so collected, for effective decision making. The task of integrating silos of information from various types of infrastructure across the city will be massive. This is where the emerging concept of Urban Operating Systems (UOS) will be a game changer.

UOS is a sophisticated software platform which processes data collected from thousands of sensors embedded across the city infrastructure, through a cloud ecosystem. The city of Bristol in the United Kingdom is pioneering an open UOS, on which any third party can build its apps. This will help the city to innovate and enable the deployment of new urban services. More importantly, it will be possible to transfer the OS from one city to another, thus crowd sourcing further development. Zeetta Networks, a technology spin-off from the University of Bristol, will help in commercialisation and wider adoption of its unique CityOS offering. Exhibit 1 depicts the building blocks of Smart Urban Operating Systems.

Exhibit 1: Building Blocks of Smart Urban Operating Systems

building blocks of smart.jpg

Building Energy Storage

Strong growth of distributed renewable energy, particularly rooftop solar, high electricity prices, and the increasing need for energy security and supporting regulations are driving the adoption of energy storage in buildings. Frost & Sullivan forecasts that the global market for residential and commercial energy storage will grow from US$2.00 billion in 2015 to US$11.30 billion in 2025, at a compounded annual rate of 19%. Along with the penetration of demand-side management, smart metering technologies, and electric vehicles, battery energy storage will help in the creation of Virtual Power Plants (VPP) that offer significant opportunities for new entrants and challenge the status quo in the power utility sector.

Adelaide-based solar power installer, Zen Energy is taking advantage of this trend and preparing itself for disruptive transformation in energy systems. In its new avatar, Zen Energy is positioning itself as a technology-neutral community energy provider, by integrating the best-of-breed energy storage technologies with renewable energy. Further, the company believes its value creation in the future will be in finding new applications (for energy storage systems), both behind and in front of the meter.

X-as-a-Service Model in Urban Infrastructure

With massive investment requirements for typical urban infrastructure expansion and upgrades, Anything as a Service (XaaS) business models are increasingly becoming attractive. Products and solutions as diverse as building energy management, building information management, public and indoor lighting, water treatment infrastructure, renewable energy, and so on are increasingly being offered as service. New and innovative companies that leverage cloud and IoT are thus transforming traditional infrastructure industries and radically changing the industry value chain and competitive landscape.

A case in point is Sydney-based Vivid Industrial, which offers lighting-as-a-service through a ‘save and share’ model to its industrial and commercial customers. Vivid’s proprietary smart Matrixx lighting system, with embedded measurement and verification capabilities, provides energy and maintenance savings to customers, without the requirement for upfront investment in new lighting systems.

Part 2: Industry Transformation Workshop

Given the Mega Trends, disruptive technologies, and new business models impacting urban infrastructure, what should Australia’s response be in addressing the upcoming challenges and realizing future opportunities? This was the question posed to workshop participants, who were grouped based on the type of their organization:

  1. Technology Providers
  2. Public/Private Sector
  3. Utilities/Asset Owners
  4. Service Providers

Some of the key takeaways from each group are highlighted below.

Technology Providers

  • A critical success factor for technology providers in Australia will be to work towards open standards, facilitated by partnerships. A key enabler here will also be more long-term policy development by the government and improved regulatory frameworks.
  • A service layer as differentiator was identified as an attractive and sustainable future value proposition for technology providers.
  • To improve the uptake of new or emerging technologies amongst utilities or Commercial and Industrial (C&I) customers, it was felt that new conversation needs to be kick started with diverse decision makers and influencers within customer organizations (for example, with the CFO, as opposed to only with procurement departments).
  • Technology providers have increasingly found that green credentials aid in market penetration and this is likely to become even more important moving forward.
  • Up skilling of the workforce, both at the technology provider and the customer ends, was seen as critical to ensure that transformational change was made possible over the long term.

Public/Private Sector

  • Roll-out of infrastructure to support smart cities is often constrained by the limited financial resources available to local and state or territorial governments. New funding models need to be developed.
  • Local and state or territorial governments sometimes have limited incentives to roll out smart infrastructure. The benefits that this infrastructure can bring, e.g., enhanced productivity, are generally not a part of the Key Performance Indicators (KPIs) of these groups.
  • Cities, particularly Sydney and Melbourne, often see themselves as competitors, limiting the scope for collaboration.
  • There are widely different interpretations of smart cities and smart infrastructure concepts. Without a consistent set of terminology and understanding, cities are unable to benchmark themselves (for example, in the way building owners can benchmark themselves through NABERS rating).
  • Councilors still have significant involvement in infrastructure decisions. However, few have a clear understanding of the smart infrastructure concept. Enhanced councilor education is critical.
  • Procurement criteria for infrastructure need to evolve to place more focus on the smart and connected aspects of infrastructure.

Utilities/Asset Owners

  • Use of Big Data for asset management of utilities, both for predictive and preventive maintenance, was identified as a major opportunity for Operational Expenditure (OPEX) savings. The trend of increasing energy efficiency and slow revenue growth means that managing cost is the only option for utilities to meet their margin goals. The cost saved can also be reinvested to drive innovation.
  • Cities can look at co-processing of waste and water in the same facility; thus optimizing on land and manpower and increasing resource reuse possibilities.
  • Utilities identified diversification to non-regulated service areas as a potential opportunity to grow their business in the future. For example leveraging unused facility space for independent solar or wind farms.
  • Customer experience factors and technological changes will drive increased cooperation between power, water and waste management utilities in areas such as unified billing for all the three services, common mobile apps, and so on.
  • Innovations such as City OS will provide opportunities to undertake integrated planning across city functions, thus breaking silos between various departments.
  • With the advent of tools such as Building Information Management (BIM), city governments are more forthcoming in accepting solutions and development plans from the private sector, as they are able to get a better view of user benefits and the impact of a particular project.
  • Personalisation of urban services is gaining ground. For example, home energy packages, water-as-a-service for industrial customers, and so on are all developed to suit individual customer needs and preferences.
  • Utilities opined that despite disruption from newcomers bringing in new technologies, it is still the government’s willingness to explore and take up new solutions that will determine the success of new business models.

Service Providers

  • With the proliferation of new technologies, the commercial landscape for service providers and their clients will transform dramatically over the next decades.
  • These shifts will present new opportunities for service providers to increase the scope of their offering to their clients.
  • Automation of non-critical operations was identified as an area of growing importance that service providers will be able to assist clients with in the future.
  • Service provides will need to develop a stringent change management plan that will help their clients to transition smoothly into new operational methodologies.

About Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

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