Smart Cities: Smarter Solutions for better tomorrow

Smart Cities: Smarter Solutions for better tomorrow

Analysis and Report by Resurgent India

Contents

Message from the desk of Sh. Jyoti Gadia, Resurgent India

Introduction to Smart Cities

Concept

Need

Coverage

Financing of Smart Cities

Financing Requirement

Financing Options and Models

Global Case Studies

Message from the desk of Shri

Jyoti Gadia

It is estimated that by 2030, 40% of India’s population will be living in urban areas and contributing 75% of GDP. On account of the ongoing rural-to-urban migration, an estimated 400 million people are expected to migrate to cities over the next 15 years. It has become imperative to build new cities in order to meet the challenges these changes will raise and the pressure it will put on basic services, utilities and on an already crumbling infrastructure. Towards this end, the Indian government has already made a start –with the launch of the Smart Cities Mission, which aims at rebuilding 100 cities with basic infrastructure and smart solutions. The magnitude of investments required in ‘Smart Cities’ mission is significant. It is estimated that investments to the tune of USD 1.2 trillion will be required over the next 20 years to meet the targets set out in the ambitious 100 smart cities development plan. Though, the government has allocated significant capital both at the central and state levels, the figures pale in comparison with the aggregate capital investment required. In order to meet the significant investment requirement, it is expected, that most of the infrastructure will be built on the public-private partnership (PPP) model. While some initiatives have been taken by the regulators to address the issues around equity and debt financing in PPP models for smart city infrastructure development, there is still a lot to be done towards creating long-term sources of financing such as insurance, pension funds, bonds and public schemes. Apart from this, the stakeholders will also have to address challenges faced during implementation and the mindset of the people. Major reforms in contract enforcement, environmental clearances, land acquisition and permit and procurement processes will be required at the state and city levels to accelerate the implementation of this initiative through PPPs. We hope the report manages to touch upon all pertinent topics for the industry, to be taken forward for larger deliberation and action.

Introduction to Smart Cities

Introduction

With half the world’s population living in cities, increasing the strain on energy,

transportation, water, building and public spaces, the relevance of Smart Cities is more

than ever. While the vision is well acknowledged across the globe, there is no unified

standard definition for smart cities that has been adopted. The conceptualization,

therefore, varies from city to city and country to country, depending on the level of

development, willingness and scope to reform, resources and aspirations of the city

residents. A compile of some of the definitions for Smart City is captured below in the

illustration:

Given the lack of standard definition, Ministry of Urban Development in its report on

Smart City Guidelines, has put together definitional boundaries that can guide the

cities in the Mission. It states that the objective of Smart City Mission is to promote

cities that provide core infrastructure and give a decent quality of life to its citizens, a

clean, inclusive and sustainable environment and application of ‘Smart’ Solutions. In

other words, the Smart Cities initiative will help create cities which optimally tap into

digital and information technologies, urban planning best practices, public-private

partnerships, and positive policy changes.

The guidelines focus on creation of core infrastructure and adoption of smart solutions.

While core infrastructure delivery is critical, it will not enable development of a Smart

city in itself, unless backed by Smart Solutions and Applications.

Smart City = Core Infrastructure Delivery + Smart Applications

Smart City Core Infrastructure Delivery Smart Applications

(Illustrative)

Smart Water Adequate Water Supply

Smart Meters and Management

Leakage Identification

Quality Monitoring

Preventive Maintenance

Smart Energy Assured Electricity Supply

Smart Meters and Management

Smart grids, Micro grid

Responsive devices

Renewable Sources of Energy

Energy Efficient and Green Buildings

Smart Mobility Efficient urban mobility and public

transport

Smart Parking

Personalized Transport Information

Smart Traffic Control

Integrated Multi modal transport

Smart

Sanitation

Sanitation, including solid waste

management

Just in time Waste Collection

Waste to Energy & Fuel

Waste to Compost

Waste Water to be treated

Recycling & Reduction of C&D waste

Smart Housing Affordable housing, especially for

the poor

Appliance Control

Security

Match energy use to occupancy\

Landscape Control

Healthcare monitoring

Smart Health Healthcare

Self - Generated Health Data

Personalization of treatments through big data

Digital platforms to connect demand and supply

3D printing

Robotics

Smart

Education Provision of Education

Digitization

Adaptive learning & counselling

Unbundling of education

Personalization of Education

Smart

Governance

Good governance, especially e-

Governance and citizen

participation

Big Data analytics on societal problems

Citizen Engagement

Electronic service delivery

Video Crime Monitoring

Smart Safety

Safety and security of citizens,

particularly women, children and

the elderly

Smart Street Lighting

Predictive Policing

Data-based crime prevention programs

Emergency apps

Smart

Environment Sustainable environment

Smart Buildings

Match Energy use to occupancy

Renewable Energy Sources

Seasonal Thermal Energy Storage

Smart IT Robust IT connectivity and

digitalization

High Speed Broadband

Big Data Analytics

Cloud Technology

Thus, in sum, the Mission aims to drive inclusive economic growth and enhanced

quality of life by enabling local area development and harnessing technology.

Application of Smart Solutions will enable cities to use technology, information and

data to improve infrastructure and services.

Strategy for building Smart Cities

The mission shall be implemented through area-based and pan-city developments.

The area-based developments would include the following:

a. Retrofitting which shall include transformation of existing built-up areas through more intensive infrastructure services and smart applications (e.g. city centers and central zones).

b. Redevelopment of existing areas, including replacement of existing built-up environments to enable co-creation of new layouts with better infrastructure and land-use (e.g. redevelopment of slums).

c. Greenfield developments to introduce smart solutions to the cities through innovation planning, financial planning and implementation planning tools to accommodate expanding populations (e.g. Industrial and Technology Parks and clusters, such as the Gujarat International Finance Tec-City (GIFT City) in Gujarat.

In addition to the above, pan-city developments would aim to enable the application of identified smart solutions to existing infrastructure across the cities. The application would leverage state-of-the-art Information and Communication Technology (ICT) tools to improve the living conditions and governance. (E.g. intelligent traffic management systems, waste water recycling, smart metering, etc.).

The Smart City proposal of each shortlisted city is expected to encapsulate either a retrofitting or redevelopment or Greenfield development model, or a mix thereof and a Pan-city feature with Smart Solution(s). Further, it has been envisaged that the area-based and pan-city development objectives would converge with other initiatives including AMRUT and Clean India Mission.

Need for Smart cities

Cities are engines of growth for the economy of every nation, including India. This

makes them the center of economic activity, opportunities and aspirations, causing

migration from neighboring towns and cities. McKinsey “Granularity of Growth” work

(2010) though a little dated is still a very good reference to bring forth this point. It

states by 2030, top 3 cities in India will be size of some countries today (2010, at the

time of analysis) and the next 6 cities will become 2-4X of what Mumbai is today (2010,

at the time of analysis).

Source: McKinsey “Granuality of Growth” Work

Further, at the national level, it is estimated

that cities are likely to inhabit 40% of India’s

population by 2030, and contribute nearly

75% of the national GDP in the next 15

years.

The global experience is that a country’s

urbanization beyond 30% happens at a

much faster pace till it reaches about 60-

65%. This makes it critical for India as it

stands at a point of transition now. The

speed of urbanization will exert immense pressure on the urban infrastructure, urban

finance, natural resources, quality of urban

life etc.

Thus, planning for urban cities become

critical to magnify the development

potential and arrest underlying stress. With

this vision, the Government of India, led by

Prime Minister Narendra Modi, has set up

the task on development of 100 Smart

Cities in the country.

Coverage

The launch of three mega urban schemes in India, i.e., Smart Cities Mission, Atal

Mission for Rejuvenation and Urban Transformation (AMRUT), and Housing for All in

urban areas, will set in motion the process of urban transformation to enable better

living. The missions are new, innovative and focused on pressing needs to improve

the quality of life for citizens today, and in the future. With the start of these mission,

many ministries have followed suit focusing on their departments and areas of impact.

As a result, there is a much larger coverage coming out of the aforesaid missions and

programs:

Smart Cities: The Smart cities mission will cover 100 cities and its duration will

be five years (FY2015-16 to FY2019-20). The Mission may be continued

thereafter in the light of an evaluation to be done by the Ministry of Urban

Development (MoUD) and incorporating the learnings into the Mission. The

government has allocated an outlay of Rs 98,000 crore (US$ 15,329.26 million)

to execute 100 smart cities, and the Atal Mission for Rejuvenation and Urban

Transformation (AMRUT), which is an urban rejuvenation programme for 500

towns and cities in next 5 years.

The cities coverage under 100 Smart City Mission is captured below (Source: The Mint

epaper):

The list of first 20 Smart cities include:

o Bhubaneswar, Pune, Jaipur, Surat, Kochi, Ahmedabad, Jabalpur,

Vishakhapatnam, Solapur, Davangere, Indore, NDMC, Coimbatore,

Kakinada, Belagvi, Udaipur, Guwahati, Chennai, Ludhiana, Bhopal

Smart Heritage Cities: The Ministry of Urban Development launched the

National Heritage City Development and Augmentation Yojana (HRIDAY)

scheme in January 2015. The scheme aims to preserve and revitalize soul of

the heritage city to reflect the city’s unique character by encouraging

aesthetically appealing, accessible, informative & secured environment.

With a duration of 27 months (completing in March 2017) and a total outlay of

INR 500 Crores, the Scheme is being implemented in 12 identified Cities

namely, Ajmer, Amaravati, Amritsar, Badami, Dwarka, Gaya, Kanchipuram,

Mathura, Puri, Varanasi, Velankanni and Warangal.

Smart Ports: The government plans to connect 12 smart cities with the

maritime hubs at an estimated cost of Rs 50,000 crore (US$ 7821.05 million).

As per the draft guidelines:

o Each of these city to be constructed at a cost of Rs 3,000-4,000 crore.

o Green energy generation to be prioritized in these smart cities

o Port water to be recycled, vehicles to be incentivized to use biogas,

which will be produced from waste at the ports

o Emphasis on SEZs, ship-breaking and ship-building centers, allied port

activities in these cities

Smart Armed Force Stations: There is a proposal to develop 6 smart armed

force stations (SAFS). Of the 6 stations; 3 will be army stations, 2 of air force

and 1 of the navy.

Smart Aerotropolis: As more and more aviation-oriented businesses are

being drawn to airport cities and along transportation corridors radiating from

them, a new urban form is emerging—the Aerotropolis. It consists of an airport

city and outlying corridors and clusters of aviation-linked businesses and

associated residential development. The West Bengal government plans to

develop first airport city called the Bengal Aerotropolis Pvt Ltd (BAPL) at Andal

in Burdwan district.

Smart Railways: Through this the government is aiming to target higher

investments via resource mobilization, prioritize decongestion of heavy haul

routes and speed up trains. Providing better passenger amenities and safety,

and improving railway systems through sustainable measures would also be

the focus areas.

Further, under the specific world-class station programme, the task will be to

upgrade and revamp the existing railway stations. New Delhi Station will be the

first station to be redeveloped within this programme spread over 86 hectares

land with 18 platforms to handle in excess of 500,000 passengers per day. The

Surat railway station is also to follow with 2.27 lakh square meter for

redevelopment of new station. Along with this a total of 1,052 stations have

been identified for upgradation of passenger amenities. It is proposed to include

200 more stations under this scheme.

Smart Villages: Saansad Adarsh Gram Yojana (Parliamentarian’s Model

Village Scheme aims to ensure holistic development of identified gram

panchayats, improve quality and standard of life, generate models of local

development and local governance, nurture and replicate. Under this

programme, Andhra Pradesh is the first state to launch the ‘Smart Village’.

DMIC: Delhi - Mumbai Industrial Corridor (DMIC) is India's most ambitious

infrastructure programme aiming to develop new industrial cities as "Smart

Cities" and converging next generation technologies across infrastructure

sectors. The programme will provide a major impetus to planned urbanization

in India with manufacturing as the key driver. In addition to new Industrial Cities,

the programme envisages development of infrastructure linkages like power

plants, assured water supply, high capacity transportation and logistics facilities

as well as softer interventions like skill development programme for

employment of the local populace. In the first phase eight new industrial cities

are being developed. The programme has been conceptualized in partnership

and collaboration with Government of Japan.

The Delhi Mumbai Industrial Corridor (DMIC) running through six states Delhi,

Western Uttar Pradesh, Southern Haryana, Eastern Rajasthan, Eastern

Gujarat, aims to build a dedicated freight corridors along the Delhi-Mumbai. The

cities that have been identified are Dholera in Gujarat, Shendra-Bidkin in

Maharashtra, Greater Noida in UP, Ujjain (MP) and Gurgaon in Haryana.

SEZ: Guizhou International Investment Corp (GIIC) has signed a MoU with

Kakinada SEZ (KSEZ) to develop industrial park over 2,000-acre land for

setting up Chinese high-end equipment manufacturing plants. It will invest $500

million in developing the infrastructure and various facilities of the industrial

park. These Chinese companies will invest $2-3 billion in setting up their

operations over the next 5 years and generating more than 5,000 jobs for both

skilled and unskilled workers.

Financing of Smart Cities

Financing Requirement

India’s ambitious 100 smart cities development plan offers an unprecedented

investment and economic growth opportunity that will require focused effort. It is

estimated that investments of about USD 1.2 trillion will be required over the next 20

years to build smart cities in India.

Financing Options

Smart city projects require substantial financial investment and financing remains one

of the greatest challenges facing such initiatives. Some of the funding options that can

be leveraged for smart city development are -

Internal Sources of financing

1. Land based financing instruments- This is widely accepted financing model

used by public authorities across the globe to finance smart city projects, and is

gaining recognition among Indian authorities as well.

I. Tax Increment Financing is a method that finances debt in anticipation of

future tax revenues. TIFs allow cities to fund smart city projects with

borrowed funds with a promise of repay those funds back with additional tax

revenues generated from the increased property value in the area around

the development. The repayment comes solely from revenue generated

through new taxes from within the new development area. This tool has

been used effectively in US and Canada. Under this form of financing, cities

designate a TIF area for capital improvements and then earmark any future

growth in property taxes to pay for investments in infrastructure and other

economic development initiatives. In most cases, cities consider TIF

projects a viable option because the proposed development of the area is

anticipated to spark an increase in property values. For example, in

Chicago, 10% of all property taxes were earmarked for TIF purposes, and

TIF districts covered more than 25% of the city’s geographic area.

II. Impact Fees can be levied based on the impact that buildings have on

urban infrastructure. These can be charged at the time of giving building

permission - separate rates for residential and commercial buildings.

III. FSI (Floor Space Index) Charges beyond a certain minimum which can be

claimed as a right attracts additional charges, which can be used for funding

smart city projects.

IV. Conversion charges collected can also be utilized towards funding smart

city projects. These are collected at the time of land use conversion, that is,

from rural to urban use and from residential to commercial use.

V. Exactions are types of impact fees that require developers to pay for the

impact their new development has on the community.

2. Municipal Bonds - Since the central and state governments support may not

suffice the overall funding requirement for smart city projects, the urban local

bodies (ULBs) can target to contribute by raising funds through the issue of

municipal bonds. While the current size of the municipal bond market is limited and

is distributed over a few strong municipalities of Ahmedabad, Nasik and Nagpur, it

is expected to emerge as an important source of finance in the future time period.

RBI and SEBI have taken several steps to strengthen the municipal bond markets.

RBI has even suggested that insurance companies, National Pension System, and

provident funds may be allowed to invest in the rated securities of ULBs.

Municipal bonds / General obligation bonds have been used in the past for funding

smart city projects. Under this scheme, the issuing entity, typically the local

government / municipal body backs the issuance of the bonds, this means, that the

jurisdiction leverages its tax revenues to repay the bond buyers plus interest. Bond

ratings agencies such as Standard & Poor’s, Moody’s and Fitch evaluate and grade

the risk of the bonds in terms of the fiscal health of the issuing jurisdiction. This

rating influences the interest rate the jurisdiction will have to pay on the bonds (e.g.,

the cost of borrowing). The returns to investors are not as aggressive as other

types of bonds reflecting the lower risk of default.

Example where the instrument was leveraged- In 2006, the state of California

leveraged USD 68 Bn in GO bonds under its strategic growth plan initiative to fund

the state infrastructure- transportation, education, water and health infrastructures

3. User Fees, User Charges and Asset Based Taxes- These are some additional

options that can be leveraged to cover the costs associated with growth.

I. User Fees - User Fees allows local jurisdictions to fund smart city projects.

Under this system, the municipalities collect use fees to cover the cost

incurred towards funding enhancements to city infrastructure aimed at

improving the quality of life. In other words, levying user fees involves

assigning project costs to project beneficiaries. Parking charges / fees is an

important instrument of revenue enhancement through user charges for

local governments.

II. On-Bill financing is an effective tool to drive adoption of new technologies

among customers who are reluctant to pay high upfront costs. On-bill

financing allows the local utility to decide the best upgrade package that can

be reasonably financed. The utility then oversees the upgrades and

customers are assessed a fixed monthly charge on their utility bills to pay

for the upgrade.

III. Different forms of charges such as – Utility Charges, Highway Toll Charges,

Sewerage Charges, Sanitation Charges, and Real Estate Property Taxes

could be imposed to leverage funds for smart city initiatives. However, they

need to be explored further to understand their potential benefit / impact.

4. Other financing options aimed at enhancing the resource base for smart city

development include Betterment Tax, Advertisement tax, Entertainment tax, Octroi

and Intra-State Entry Taxes, and Professional tax. However, they need to be

explored further to understand their potential benefit / impact

External sources of financing

1. PPP (Public Private Partnership) Financing - The private sector would have

a critical role to play — by taking up projects in PPP mode or work as

contractors, consultants, etc. PPPs are agreements between a public agency

(federal, state or local) and a private-sector entity that uses the specific skills

and assets of each sector for the delivery of a service for the general public.

These partnerships generally seek to balance responsibilities, risks and

rewards among all parties involved. Public-private partnerships (PPPs) can

provide the much needed financing for cash-strapped municipalities to

undertake smart city projects. Further, they also help in offsetting pressure on

the government to bring in the incremental revenue necessary to help finance

smart cities.

Operating models leveraged in PPP for building smart cities

There are several types of possible contracts with different degree of private

sector involvement and risk. The four main operating models that are leveraged

by the companies across the globe to engage with city authorities and utilities

for smart city development projects are-

Build Own Operate (BOO) -The smart city planner independently builds the

city infrastructure and delivers smart city services. The operation and the

maintenance of the services are fully under the planner’s control.

Build Operate Manage (BOM) - The smart city planner appoints a trusted

partner to develop the city infrastructure and services. The partner operates

and manages the smart city services. The city planner plays no further role.

Most PPPs are built on this model.

Build Operate Transfer (BOT) -The smart city planner appoints a trusted

partner to build the city infrastructure and provide smart city services for a

particular area within a time period. After completion, the operation is handed

over to the smart city planner.

Open Business Model (OBM) -The city planner allows any qualified company

or business organization to build city infrastructure and provide city services.

However, the city planner will impose some regulatory obligations. This model

offers maximum potential for innovation as it provides much more flexibility and

scalability to the developer.

Public-private partnerships have become a common feature of many smart

cities around the world. Government of South Korea has introduced various

kinds of financial and tax incentive policies to facilitate PPP financing in smart

city infrastructure. Barcelona has had a series of successful PPPs. There are

many successful examples of PPPs that have been deployed to fund smart city

developments across the globe. Some of them are mentioned below-

Source- China Academy of Telecommunications Research

While it is known that most of the infrastructure for smart cities in India will have

to be built on PPP model, investors and developers have faced challenges

around getting sufficient debt financing for PPP smart city infrastructure

projects. The liquidity crunch of private and public sector commercial banks for

financing the debt in PPP smart city infrastructure projects needs to be

addressed by creating long-term sources of financing such as insurance,

pension funds, bonds and public schemes. The recent regulatory changes by

the RBI on take-out financing and longer debt tenors have helped significantly

and have attracted long-term pension funds into the sector.

2. Other Private sector investments such as Energy Saving Performance

Contracts-These have been used to fund smart city projects notably in the US.

The initial capital investment is provided by the financial community and the

services are delivered by Energy Services Companies (ESCOs). The financier

is paid back out of the accrued energy savings, with the ESCO guaranteeing a

certain level of savings or performance. If the performance standards are not

met, the ESCO is responsible for repaying the loan.

Example where the instrument was leveraged - Schneider Electric leveraged

an ESPC to perform energy efficiency upgradation on 40 municipal buildings in

the city of Houston. The infrastructure upgrades decreased the city’s emissions

and also saved the city USD 3 Mn annually in energy and water costs

3. Foreign Government bodies- India has invited investments from foreign

countries in developing the smart cities and has also signed agreements to

build 8 such cities — 3 with Germany, 3 with the U.S., and 1 each with Spain

and Singapore. The nature of these investments will range from technical

assistance, capacity building, and logistical planning to allocations for research

and development (R&D), and information and communication technology (ICT)

services.

4. Banks and Non-Banking Finance Institutions – Banks and NCFCs can play

a significant role in the financing of smart city projects in India. Bank and NBFC

loans can also be a suitable option given that they present fewer regulatory

hurdles and lower transaction costs.

5. Financial Intermediaries - Another option for funding smart cities is indirect

financing i.e. raising money through financial intermediaries such as Banks,

Venture Capitalists, and insurance companies etc. who act as a facilitator.

6. Bilateral and Multilateral Agencies-

a. The government is pursuing a loan of USD 1 billion from Asian

Development Bank and another USD 500 million from the World Bank

to provide funds to the smart city project. Modalities in this regard are

being worked out and loan should be available in 2016.

b. Other funding agencies such as China-led Asian Investment

Infrastructure Bank, Japan International Cooperation Agency (JICA),

and Germany’s GIZ and KfW Development Bank could also be other

options for sending proposals for procurement of funds.

7. Crowd Financing - This option can also be further explored for funding smart

cities. Crowd funding is a method where the people voluntarily contribute

towards a cause. This is a popular platform for raising funds in the US. Example:

In Chicago City, the local community members participate in the implementation

of renewable energy projects through a community based crowd funding model.

8. Senior Debt Instruments / Subordinate Debt and Mezzanine Financing -

Mezzanine financing is a type of unsecured debt that gives the lender the rights

to convert to an ownership or equity interest in the company if the loan is not

paid back in time and in full. Mezzanine financing is generally supplied by

venture capitalists, Commercial banks, Insurance companies etc.

9. Government Financing in the form of Grants-

a. The Central Government proposes to provide financial support to the

extent of Rs. 48,000 crores over five years i.e. on an average Rs. 100

crore per city per year, and an equal amount of funding is expected to

be contributed by the State/ULB; therefore, nearly Rupees one lakh

crore of Government/ULB funds will be available for smart cities

development.

b. Funds for the smart cities project can also be mobilized from other

central Government schemes like Swachh Bharat Mission, AMRUT,

National Heritage City Development and Augmentation Yojana

(HRIDAY), Digital India, Skill development, ‘Housing for All’, etc.

c. National Investment and Infrastructure Fund (NIIIF) can also be

leveraged for funding smart city projects. NIIF is a fund created by the

Government of India for enhancing infrastructure financing in the

country.

Global Case Studies

Case Study 1: Beijing Haidian District

City Overview

Beijing, as the capital and political and cultural center of China, is a world famous ancient city and modern cosmopolis. Standing in the northwest of Beijing, Haidian District is important and famous for its science and technology, culture, education and tourism. It, consists of 22 sub -districts and 11 townships, has a total area of 426 square kilometers and a resident population of 1.5 million.

Objectives of smart city development program

Smart Haidian aims to build smart administration, smart parks, smart urban areas, smart homes, and IT industry leadership

Strategic plan for smart city development

A dedicated plan including Smart Haidian Top -level Design, Smart Haidian Development Program, and Smart Haidian Construction Program was developed for the purpose. The plan included construction of a network and cloud infrastructure and an intelligence application system.

Key Focus areas under the smart city development program

Smart administration- An information based system was implemented which interlinked districts and communities through a common website / portal for seeking government services. The new system improved service quality and brought more transparency in government affairs.

Smart city management: Developed and implemented a social management service system which tracked and assessed social situations and public opinions in a timely manner so as to improve city management and enable faster handling of situations.

Smart parks: Built smart parks / platforms to support the development of enterprises, especially SMEs. Smart parks provide professional services in credit financing, innovative marketing, corporate management, and intellectual property rights etc. and promote the development of SMEs.

Smart education initiative was taken to improve the education network in Haidian district. A cloud resource center has been built and a two level (district and schools) digital education management system has been established to combine information technology with teaching in the district.

Smart sanitation: Built a regional sanitation information system and data center. This platform helped in sharing and exchange of sanitation information and resources in the region.

Governance

Smart Haidian program was started under the full responsibility of Haidian District Government. For the execution of program, a work leading group led by district governor and deputy district governors with leaders of district bureaus, industry experts and other stakeholders was formed.

Funding

The funds for smart city development are allocated by the district government. The district government also set up a construction Fund for this purpose. Haidian invested about 300 million Yuan annually in 2011 and 2012 and 500 million Yuan in 2013. In addition, Haidian mobilizes social capital by using service leasing, Build Operate and Transfer (BOT) and other ways.

Business Models leveraged

Haidian adopted a variety of models including Build, Operate and Transfer (BT) and Build, Own and Operate (BO) in basic network and data center construction.

Outcome

Haidian District achieved government data exchange, business collaboration and resource sharing by building an intelligence application system in government administration, urban management, parks, education and health, and thereby significantly improved urban management, fast processing capabilities etc.

Case Study 2: Qianhai Shenzhen-Hong Kong Cooperation Zone of Shenzhen,

Guangdong Province, China

City Overview

Qianhai Cooperation Zone is located to the west of Shekou Peninsula in the west of Shenzhen City, covering an area of 14.92 square kilometers and a population of 300,000. Qianhai District enjoys sound industry foundation and favorable policy environment. The district mainly focuses on big industries such as finance, modern logistics, information service, scientific service and other professional services.


The smart city program aims to build smart infrastructure, smart administration, smart city management, transportation, finance, water town, logistics, security, industry, community, building, medical care and education.


A comprehensive plan comprising of a master plan, overall design, action plan and roadmap and a detailed evaluation system was developed.


Smart water city – Implementing a plan to leverage technology to provide scientific analysis to ensure safety of water resources and water environment.

Smart safety – Implementing an information security guarantee system by leveraging IT applications in firewall, safety management, cloud virtualization and intelligent picture processing technologies. Also, set up an information platform aimed to enhance public security.

Smart transportation -Leveraging IT and big data analytics to build an advanced navigation and positioning system, innovative parking resource system.

Smart communities – Building an IT platform to offer integrated community services such as smart medical care, smart building and urban emergency services.

Smart medical care –Leveraging technology to develop a health planning and management system, public health service and disease prevention information system, epidemic release monitoring system and an emergency command system.

Governance

Qianhai Administration of Shenzhen city has set up a Smart Qianhai working group, with its Smart Qianhai office responsible for the development strategies, plans and policies and overall management of the project. In addition to this, a Smart Qianhai Expert Group comprising of relevant experts has also been set up, for providing macro level direction and guidance to the program.

Funding

Qianhai smart city program has three funding channels: (1) Special funds established by the government; (2) private capital attracted from Hong Kong, Macao and Taiwan, foreign funds attracted by the government via the injection of capital, subsidized loan, financing guarantee and service outsourcing subsidization; (3) cross-border loans and financing in Hong Kong through land sale and government bonds.


Multiple business models were leveraged including- Build Operate Manage (BOM) and Build Operate Transfer (BOT)

Outcome

Smart Qianhai has formulated 11 special applications such as smart water applications, smart education with smart sensory interaction, smart buildings with centralized monitoring over building energy consumption, unified cold source arrangement and solar materials applications, smart medical care with personal health project management system, disease prevention information system, and epidemic announcement and surveillance system. Further, Qianhai set up a long-term standard evaluation system to fully understand the characteristics and influencing factors at different stages of Smart Qianhai development, including infrastructure, IT application and services and construction management, and to calculate and evaluate the results in urban management, administrative services, industrial development and emission reduction.

Case Study 3: Manchester, UK

City Overview

Greater Manchester is the single biggest economic area outside London with a residential population of 2.7 million. Greater Manchester is made up of 10 local authorities, of which the city of Manchester is the largest. The city of Manchester is located at the core of the Greater Manchester metropolitan area. Manchester’s core sectors are the business, finance and professional services sector which contribute ~40% to the city’s economy.


Manchester’s smart city vision is built around an aspiration to be amongst the Top 20 smart cities in the world by 2025. The city has developed smart city plan in the area of transport, planning, climate change, digital and community.


The smart city plan encompasses several areas including: improving the efficiency of doing business by better smart transport; increasing access to health services, engaging people more in how their city is managed; increasing low and zero carbon energy supply; cutting road transport emissions and reducing energy demand and improving the efficiency of supply.


Smart Transport- One of the key areas of focus includes the deployment of smart transport services. At the heart of this service is DRNETIS (Dynamic Road Network Efficiency and Travel Information System). The DRNETIS solution allows the city to build a set of interventions aimed at actively changing the operation of the network, for example by changing the traffic signal sequences, or by influencing travelers through providing them with information on their planned journey and providing other alternatives. These interventions are deployed either automatically without user intervention or by giving an alert to a user who can make a decision about whether to implement it. DRENETIS enables the delivery of real -time information to travelers enabling them to make smarter choices with a greater degree of confidence on the reliability of services. The ability to receive personalized alerts and information is a significant benefit offered by the DRNETIS solution.

Smart Health- Under this initiative, the mHealth Innovation Centre has been set up to exploit the rapid evolution of mobile and wireless technology in the health and social care sector. Major focus areas include developing applications that leverage mobile health technologies, such as, recording medications, delivering therapy for depression, monitoring and prevention using of smart-phone apps.

Smart services- Public services in Manchester are deploying information technology to reform and improve services. Manchester was one of the first cities that digitized public services using the cloud. Free Wi-Fi is available in many city center locations as a result of a deal between Manchester City Council and Arqiva (a communications infrastructure and media services company). Apart from this, health and social care agencies are utilizing technology to provide services to the citizens. These include alarms and communication devices that support people with advice and targeted help when and where it is needed.

Governance Greater Manchester Authority is responsible for the execution and monitoring of the project.

Funding

The city has deployed several funding and business models to deliver its smart city development. Manchester has developed an Investment framework which draws together funding from the public and private sector to fund its smart city projects. Apart from this, funding is also provided by the European Regional Development Fund, Greater Manchester Transport fund, the GM pension fund and other private sector investments. The Greater Manchester Authority engages with business through existing formal structures and through developing individual market facing projects. The strength of the relationship between the city and business is evidenced through its track record of delivery of many successful projects. Examples of where this approach has been adopted to support project delivery include; the expansion of the broadband network, Manchester Airport Enterprise Zone, the Business Growth Hub, Manchester Science Parks and the Green Deal.


Build Operate Manage (BOM)

Outcome The city successfully implemented several smart city projects

Case Study 4: Barcelona, Spain

City Overview

Barcelona is the capital and the second largest city in the country, with a population of more than 6 million. Barcelona is also one of the most advanced smart cities in the world. Barcelona is one of the world's leading tourist, economic, trade fair/exhibitions and cultural-sports centers.


The smart city development initiatives were directed towards environment and energy, transport, waste management, urban-rural cohesion, and quality of life.


In 2011, Barcelona City Council created a new department called Urban Habitat, under which several areas of the city were grouped, that is - Urban Planning, ICT, Energy, Environment, Urban Services, Infrastructure, in order to facilitate good coordination and communication between the various departments and external stakeholders. A coordination team led by the new Smart Cities Director was also set up to drive the various smart city projects in the city.


Smart Transport-Implemented intelligent traffic data management

Smart Services-Implemented the open Government project aimed at promoting citizen participation, cooperation and transparency in public services. The projected was designed to make public data and infrastructure available to the citizens in the city

Smart Buildings-Developed energy efficiency systems in buildings. This involved incorporation of solar panels, joint heating and water recycling systems under the framework of energetic self-sufficiency plan (self-sufficient building blocks, smart grid, heating and cooling network)

Implemented smart Innovation projects such as- Innovation District 22@, Smart City Campus, Smart City Tour, Smart City Cluster, Urban Lab, and Competence center mSmart City.

Developed an urban platform for improving city management. This includes projects such as CityOS, Barcelona Sensors Platform, i-City.

Governance & Monitoring

The Barcelona City Council is in charge of implementing the smart city projects. Barcelona engages with a broad range of stakeholders – within Barcelona City council, local and international companies, research institutes, and international institutions such as European Commission, the World Bank and the United Nations and citizens. Barcelona engages actively with its citizens through various mechanisms such as the Municipal Action Plan, the smart citizens’ platform and also hosts application development contests as a way of boosting innovation and the creation of new ideas. Social networks are used together with Barcelona City’s official webpage to inform and teach citizens about any possible services. In addition a tool – Cibernàrium- has been created to provide technical training for citizens to use the new services. The city has developed KPI’s which are monitored by a dedicated department within the City Council on a monthly basis. In addition, Barcelona is collaborating jointly with the city of Buenos Aires in the innovative project of the “Smart City Index” which publicizes annual Smart City rankings, both internationally and by regions, thus, constituting the best possible benchmark for performance evaluation in the Smart Cities field.

Funding

Projects are either integrally financed by the City Council or financed through PPP. The City Council funding may range from 100% in integrally self-financed projects to greater than 50% in PPP projects. Funding is also secured through public biddings, where in funds as provided by the company which is selected for incorporating smart elements to the core infrastructure. Apart from this, funding support is provided by the EU through innovation projects. It is normally a co-funding system which implies a mix between PPP and public biddings. It is interesting to note, that the City does not have an exclusive business plan associated with a smart city project; instead the project is planned in separate parts with each part allocated a specific budget.

Outcome

Barcelona has implemented over 25 smart city services, which it considers represent ‘Best Practice’ across all sectors including: Logistics, Smart Lighting, Energy and Utilities, Intelligent Buildings, Water, Waste Management, Environment, Transport, Community Development, Public Services, Open Data, Health and Education.

Conclusion

To summarize, we can say that the Smart Cities Mission aims to drive economic

growth and improve the quality of life in the country by enabling development of core

infrastructure along with the deployment of smart solutions. While core infrastructure

delivery is critical, the transformation to a smart city will come about only once it is

supported by the application of smart solutions.

The 100 smart cities development plan will require investments of about USD 1.2

trillion over the next 20 years. In order to meet the ambitious investment target,

government funding (both Centre and State) of ~ INR one lakh crore will have to be

supported by the private sector. The private sector will play a pivotal role to provide

support to deliver much needed infrastructure and help address capacity issues across

state governments and urban local bodies.

Creating world-class infrastructure within smart cities will require creative financing

and execution solutions. Some of the solutions that are leveraged across the globe for

smart city funding include – Municipal bonds, land based financing instruments and

funding under PPP models. Land based financing instruments are rapidly gaining

recognition in India as well.

To conclude, a suitable PPP model, addressing financing challenges and including

provisions for unique and innovative modes of financing of smart cities will play vital

role in ensuring financing of the smart cities.

Smart Cities: Smarter Solutions for better tomorrow

Business

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