The global Smart City market: what’s it worth?

global smart city marketThere has been much written about Smart Cities, but the field is quite light on definitions and on quantifying the opportunity that they represent. A recent study has identified that the global Smart City market is likely to be worth a cumulative $1.56 trillion by 2020.

Smart is the New Green

The Frost and Sullivan report suggests that Smart Cities are built on technology leading to the adoption of at least five out of eight smart parameters. Smart energy involves the digital management of energy, such as smart grids and smart meters. Smart buildings will mean automated and ‘intelligent’ buildings, with advanced heating and lighting equipment. Smart mobility includes traffic management systems and parking management. Smart healthcare uses e-health and m-health systems. Smart infrastructure includes security as well as digital waste and water management. Smart technology requires seamless connectivity. Smart governance and education is ‘government on the go’. Smart citizens make smart choices about lifestyle, and use green mobility options.

The report describes smart as ‘the new green’, but there is a clear difference between smart and sustainable. Sustainable cities may include ‘smart’ systems, but are focused on being eco-friendly. There are expected to be 26 smart cities by 2024, and 92 sustainable cities. It is, perhaps, in the smart citizens domain that the two are most likely to overlap, with smart citizens seeking eco-friendly ways to travel, and also reducing waste by better recycling and lifestyle choices.

Smart cities: current state of play

By this definition, there are currently no smart cities in the world. There are, however, many cities running one or more smart project. There are expected to be more than 26 smart cities by 2025, at least half of which will be in Europe or North America. They include Calgary, Seattle, Amsterdam, Copenhagen, Beijing and Tokyo.

Of the eight segments of the smart city market, the biggest is expected to be smart governance and education. This is likely to be around one quarter of the market. In its wake come smart security, smart energy, smart infrastructure, and smart healthcare, all of which will be between 13% and 16%. Bringing up the rear, smart building and smart mobility are each expected to be around 8–9% of the market.

It’s perhaps not surprising that smart governance and education is expected to be the biggest market, because by far the biggest funder of smart city projects is government, whether national or city. Sources of funding are special development funds, including supra-national funds, which make up 40% of funding, public private partnerships at 37%, self-funding from city budgets, at 22%, and private investment at 1%. The result is that most smart city citizens are expected to have access to e-services within the next decade, including e-healthcare and online tax systems.

One of Frost and Sullivan’s most interesting insights is into convergence. Smart cities are expected to form partnerships amongst themselves, and therefore converge. However, they are also expected to converge with other companies and organisations in the ‘ecosystem’, from energy suppliers to broadband and internet service companies.

For example, Amsterdam Smart City has focused on smart energy, smart ICT and smart communication. It is working with IBM, Cisco, Accenture, Philips and Vodafone to deliver smart projects including energy management, an online portal and open network, and smart workplace projects.

Singapore, described as the ‘next generation smart city’, aims to have 80% of its buildings meet a minimum energy efficiency standard by 2030. It already has smart grid systems installed in one third of houses, and more than 90% of its energy is from natural gas. Cloud computing models are used in most of its healthcare systems, and there is full penetration of broadband. All residents have access to sanitation and half already commute to work by public transport. The target is for 70% of traffic to be public transport by 2020, by providing real-time access to travel information on phones and internet.

Opportunity knocks globally

While smart does not have to mean sustainable, there is no question that the management of many potential and aspirant smart cities is using technology to improve sustainability. The market for smart technologies is increasingly sophisticated, and growing. As the technology improves, cities are likely to want more and more, whether it’s to create a full smart city, or just to run a few smart projects. It’s hard to see how it can be any other way.

Image credit: Lloyds Lights by Sean batten 

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