dnv gl smart green cities 2015 .pdf

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SMART GREEN CITIES

ENERGY

SAFER, SMARTER, GREENER

A Survey of Industry Stakeholders



Smart Green Cities ENERGY 02

03

04

14

19

06

THE SMART IMPERATIVE

UNDERSTANDING THE ISSUES

THE UTILITY PERSPECTIVE:

POWERING THE

SMART GREEN CITY

LOOKING AHEAD:

SHARED VISION FOR

SMART GREEN CITIES

THE CITY PERSPECTIVE:

BECOMING A

SMART GREEN CITY

Areas of Interest 06Challenges 08Funding and Financial Resources 09Technical and Staff Resources 10Staff Commitments and Coordination across CityDepartments 10Realizing the Smart Green City Vision 11

Utility Perceptions on the Benefits ofSmart City Programs 14Potential Challenges 16Smart Green City Opportunities 17

Strategies for Realizing Mutual Benefits 19A Smart Green City Planning Framework 20Future Funding Opportunities 20Green Cities Action Plan 21

CONTENTS




DNV GL, 155 Grand Ave, Suite 500, Oakland, CA 94612 , www.dnvgl.com Version Jan.2016

Many cities in North America are experiencing an accelerated increase in population, economic activity, andhousehold income levels. This is creating shared challenges for cities and utilities that include growing demand forwater, energy, heating and cooling, waste services, transportation, and data and telecommunications. Consumers

increasingly expect expanded services from municipalities and utilities such as renewable energy and digitalself-services, and they expect both entities to plan for and mitigate against climate-related effects such as extremeweather events. Utilities and cities are also driven by the need to meet regulatory requirements and developstrategies to cope with erosion of revenues.

Key barriers to implementing and sustaining environmental and technological improvements while meetingincreased expectations for resources and services include :

THE SMART IMPERATIVE

Investments in Smart Green City technologies andstrategies offer solutions to many of these challengesby taking advantage of rapid increases in capability anddecreases in cost for telecommunications, distributedenergy generation, and more efficient transportation

technologies. However, to fully realize Smart Green Citybenefits, municipalities and utilities need to find betterways to partner toward achieving common goals. Theyhave good reasons to work together but rarely do.

DNV GL asked city leaders and energy service providersabout the benefits and problems inherent in city-utility partnerships for transforming communities intosmarter and greener cities. The findings suggest thatthe time is right for cities and utilities to build a mutuallybeneficial relationship based on implementing moresustainable systems. This paper explores opportunities

and challenges for cities and utilities to work together tosuccessfully implement Smart Green City solutions.

Cities are increasinglyinterested and empowered to

address energy issues within

their communities to achieve

sustainability, resilience, and

economic goals. Their utility

partners have an important role to

play to support local government

efforts to achieve mutual goals for

reliable, renewable, and low-cost

energy solutions.

■ Mitigating adverse environmental and emissionsimpacts associated with increased population,economic activity, and traffic

■ Updating and replacing municipal and private utilityinfrastructure to meet increased demands

■ Fortifying infrastructure that is susceptible toincreased climate-related impacts





Figure 1: City-Utility Shift in Relationship

UNDERSTANDING THE ISSUES

Utilities and cities have a mutual interest in becoming“smarter” and “greener,” but bring different resourcesto the table. Because they each have unique tools for

integrating smart technologies and strategies intotheir communities. For example, interviews conductedby DNV GL with local government leaders reveal thatthey need information on energy consumption in thecommunity to plan citizen engagement strategiesand offer services, but they don’t have access to suchdata. For their part, utilities don’t have the same abilityto identify potential projects or are restricted onfunding for infrastructure demonstration projects. Thebenefits of collaboration are apparent, but identifyingoverlapping areas of interest to focus on remain unclear.

The Smart Green Cities movement is not aboutintroducing expensive new technologies into the marketfor the sake of technological advancement.For cities, it’s about providing their citizens with

enhanced services, energy cost stability, energyindependence, and new avenues for economic growth.For utilities, it’s about reliability and meeting customer

expectations, while addressing market pressures ontheir traditional business model created by distributedenergy resources (DER), lower demand, and an aginginfrastructure.

Utilities and cities share a need to find ways to maintainrevenue streams (and profitability for investor-ownedutilities) while rethinking the ways they interact withtheir constituents and customers in a rapidly expandingtechnology marketplace. Figure 1 illustrates how a shiftin focus is needed by both cities and utilities to advancesmart green community goals.

BusinessesResidents

Utility Utility

Businesses

City City

Residents





Now is an opportune time for cities to work with theirutility counterparts to tackle some of the most difficultissues in energy—greater efficiency, increased reliabilityand security, and integrating renewable energysystems. Utilities on their part are looking to furtherenhance relationships with their customers and localcommunities so they can better tailor solutions to satisfycustomer and community needs and maintain a strongcustomer base. Utilities and local governments need toforge partnerships that allow for a better understandingof the way each other works, the unique problems theyface, and their ability to take action. Such partnershipswill require utility and city departments, with seeminglydisparate responsibilities, to work together andovercome the confines created by working in silos.

To understand the challenges and potential benefitsof collaboration more clearly, DNV GL interviewed

■ What are cities most in need of to becomesmarter and greener?

■ What do cities perceive as the greatest benefitsand barriers to adopting smarter and greenerenergy technologies?

■ What do utilities see as opportunities to work withcities to help build smarter greener cities?

■

And what are the perceived benefits and barriersto utilities in taking on the initiatives?

30 city, local government, and utility representativesand explored the pathways for adopting smart greenstrategies and more effectively implementing smart citysolutions. The figure below (Figure 2) describes who wetalked to. We set out to understand:

Figure 2: Who we interviewed

InterviewRespondents

Cities andcounties

27% 17%

Other stakeholders( funders non -profits)

Municipalutilities

Investor-ownedutilities

6%

30%20%Local govorganization

Our respondents hailed from utility

organizations including investor-

owned utilities and municipal utility

departments.

Local government representatives

from city departments, as well as local

government associations were also

interviewed.

Other stakeholders include

foundations, non-profit organizations,

and state agencies.





Areas of InterestThe municipalities that we interviewed showed interestin many areas: low carbon transportation, sustainablesolid waste management, and water conservation, butthe greatest amount of interest was in areas of energymanagement, clean and efficient use of energy, andclimate resiliency. All eight of the city representatives wespoke with indicated energy efficiency, resiliency, andbetter control are main concerns for them. Overall,there was wide support for the concept of creatinga detailed and well developed plan for using smarttechnologies and strategies to address these issues,and recognition that such a plan could garnersignificant political support.

Local government officials are not only aware ofthe available range of cleaner energy technologiesassociated with becoming a greener community, butare acting to use these strategies for their benefit.Many of the representatives interviewed were involvedwith local energy and sustainability initiatives aimedat reducing energy costs and increasing resiliencyand have successfully implemented pieces of a largerSmart Green City strategy. Related to energy, cityrepresentatives primarily noted three areas of interest:

THE CITY PERSPECTIVE:

BECOMING A SMART GREEN CITY

The findings in this chapter are based on our interviews with cities and counties from across the country as well asregional planning organizations, local government associations, and non-profit organizations that work with cities.Local government respondents included a wide range of city representatives ranging from sustainability officers,community planners, as well as public works and facilities staff.

1. Energy efficiency technologies

2. Solar photovoltaic

3. Automation/controls

4. Microgrid technologies

5. Smart street lights

6. Electric vehicles

Top 6 Clean

Technologies of Interest

■ Distributed energy resources (DER). Cities are

exploring how systems such as solar photovoltaic(PV), microgrids, and battery storage can benefitthem. For example, the city of San Diego is currentlyfocused on new or emerging technologies in thisrespect and working on innovative solar deploymentprograms, biofuels, and the cutting edge researchthat the University of California at San Diego isdoing on microgrid research (See also City of Austin,TX case study on the next page). Many of the city

representatives we spoke with were interested inextending their solar PV projects into microgridand energy storage systems, but unsure of how toproceed. Furthermore, many cities didn’t know howor who to approach at the utilities to start theseconversations given there are “obvious concerns

from utilities about shifting away from the currentcentralized model.”

■ Energy efficiency in municipal facilities and the

community. Many cities expressed a desire to showleadership in energy efficiency by upgrading theirfacilities to be more efficient. City representativesnoted many achievements, but that manyopportunities remain and that they generally

Understand opportunities and challenges cities have related to new smartenergy technologiesObjective





Case Study: Austin Energy Solar PV Programs

Solar PV Rebates. Austin Energy provides rebates forresidential customers who purchase home solar PV

systems. Customers earn a Value of Solar (VOS) credit onthe monthly bill for every kilowatt-hour of electricity thesolar system produces under a Residential Solar Rate.

Rooftop PV Leasing Program. Customers wishing to avoidthe hassle of maintaining a rooftop system can chooseto lease a rooftop PV system that will be owned andmaintained by the utility. The customer receives a VOScredit on the bill for every kilowatt-hour generated.

Community Based Solar. Community based solarprograms allow local businesses and residents who aren’t

able to install solar on their rooftops, access to solarcredits through the development of a large-scale solarsystem. For those who want to be involved in buildingsolar resources in the City, Austin Energy has started acommunity based solar program whereby customers canbuy into a local-sited PV system, thereby enjoying thebenefits while avoiding the hassle.

Austin Energy is the municipal utility that powers the City of Austin, TX. They have been leaders in findingways to enable their customers to integrate solar power into the municipal electric system in ways that makesense for the community and for the utility, and therefore all ratepayers. The website www.austinenergy.comlists programs available to residential customers:

have significant political support for these typesof projects. LED streetlight programs and energyefficiency upgrades in existing buildings are popularprojects as well as other types of projects thatimprove facility controls and energy management. Toencourage residents and business in the communityto participate in utility sponsored energy efficiencyprograms, some cities have partnered with their localutility to promote the programs in their communities.In Massachusetts for instance, the City of Newtonencourages residents to participate in Eversource’sprogram for home energy assessments through theirNewton Energy Savers initiative. Their goal is to have1,000 home energy assessments completed throughthe utility program this year.

■ Energy assurance and resiliency. City officials arevery concerned about disaster preparedness andthe ability to maintain operations of facilities andcommunity resources during periods of poweroutages, flooding, wildfires, and other hazardousevents. A key aspect of this is having resilient energyinfrastructure, and adequately designed DER in placeto be able to operate independently of the largerutility grid, if needed. For example, in Brooklyn, NY,the neighborhood of Red Hook is using a $100,000grant from the State to investigate the use of a mixof solar panels, battery storage, and small windturbines scaled to power local apartment buildings,businesses, and a community center, and ensure thecommunity can successfully endure disruptive storms.The state provided grant funding to 83 communities

in New York to explore similar initiatives.





80%60%40%20%0%

At the root of it, these initiatives are often driven by the notion that greater efficiency, clean energy, and morereliable infrastructure enhances public safety, provides jobs, and stimulates economic development. Cities viewthese initiatives as part of a greater strategy to attract businesses to the area and create a strong commercial andresidential base through environmental stewardship and sustainable innovation.

ChallengesThroughout our interviews there were several recurring issues that cities felt are the main barriers to becomingsmarter and greener (Figure 3). The number one barrier did not come as a surprise: funding. This was followed bya lack of technical expertise and the inability to properly assess new technologies, equipment and strategies, aswell as limited staff resources. Notably, the lack of utility support was a 4th barrier. The figure below lists the topresponses in terms of frequency of mention.

Barriers to Becoming at Smart Green City

Figure 3: Barriers to Smart Green City initiatives





l

Funding and Financial ResourcesFunding for Smart Green City initiatives and projects can be difficult to obtain, particularly now that federal stimulusgrants from the American Reinvestment and Recovery Act concluded.1 Municipal budgets are often stretched thinand are prioritized to focus on basic services, operations, maintenance, and capital improvements. Nonetheless,interviewees indicated that many financing sources still exist. The most common means to fund energy improvementprojects is through:

1 From 2009-2014, ARRA grant monies were made available to local governments for energy efficiency projects through the Energy Efficiency and Conservation Block Grant program and via

states through the State Energy Program.

■ Specialty financing: A number of financing programswere noted as being critical to cities moving forwardwith clean energy projects, among them, property-assessed clean energy (PACE) programs and municipallow-interest financing. Cities in California and New Yorkspecifically mentioned the low interest loans throughthe California Energy Commission and the New YorkPower Authority, respectively. These programs helplocal governments invest in smart and green projects;however, it was noted that one drawback to receivingthis type of funding was that the funds had to be used

for very specific projects. Projects with no quantifiableenergy savings benefits (e.g., education and outreach)are often not able to receive this type of funding.

■ The city general fund: Cities that have enough politicalsupport have found that their citizens were willing tofund projects out of the general fund. Cities that haveselected projects with a solid business case and goodreturn on investment have had greater success as theyare able to justify the use of the funds. This adds evenmore importance to having a plan in place to ensure

that when dollars become available, they are spent inthe most efficient way possible.

■ Utility incentives: Cities generally reported havinghad success with receiving financial support from

utilities including incentive and on-bill financing.Many city respondents also noted the importanceof technical assistance provided along with financialassistance as the greatest benefit of utility programs.A few cities were concerned, however, about relyingtoo heavily on investor-owned utility (IOU) programsfor implementing energy efficiency initiatives and feltthat cities needed to find other ways to build theirown staff capacity.

Other sources of funding that cities have had success with included grants for specific projects, ear-marking certaintax dollars for projects, using energy savings from efficiency projects to fund new projects, and creating public-privatepartnerships. Bond funding or the issuance of green bonds has also become a potential mechanism for funding thatmany of our respondents are now exploring.

In spite of these options, each city has its own unique challenges associated with funding, and all of the funding sourceswere noted as having drawbacks including rigorous paperwork and lack of flexibility. Some cities struggle to identifyfunding for certain projects because the benefits are not easy to quantify. For example, the costs and savings fromenergy efficiency and solar projects are well known, but for projects aimed at improving resiliency, the financial benefitsthat are based on a risk probability are harder for decision-makers to quantify.

Additionally, some of the cities we spoke with who had successfully implemented smart city initiatives had used multiplefunding sources to maximize the impact. One city official mentioned that he funded smart city projects with a mix offunds from the water utility and the general fund. Another city representative discussed private-public partnershipswhere a grant may pay for outreach to attract clean technology companies, but the companies themselves would pay forfacility upgrades and construction. Even so, identifying priority projects, conducting technical assessments, developingproject requirements, and merging funding opportunities can be incredibly difficult. This becomes even morechallenging if the city does not have staff members with the technical knowledge required to address these issues.





Technical and Staff ResourcesThis leads to the next barrier to Smart Green Cityinvestments: lack of technical expertise, which wasthe second most frequently mentioned challenge toachieving objectives. Cities need assistance to evaluate

options in terms of engineering aspects as well asthe business case or financial implications of potentialprojects.

Several city representatives mentioned they arefrequently approached by service providers andtechnology companies that provide “smart” solutions toindividual problems and that it’s difficult for city staff todetermine which solutions are best for their city, what’sappropriate and what should be a priority. Individualvendors often cannot (or do not) address issues ofinteroperability between systems or provide a reliable

assessment of the true costs and benefits of installingsmart devices, particularly with respect to the biggerpicture and the city’s goals. For example, a building canbe equipped with sensors and sub-meters on each pieceof equipment to provide trending data and a real-timeunderstanding of how it is operating, but at what cost?Smart devices can be expensive. Rather than outfit theentire facility with sub-meters, a more targeted approachmay be more sensible and a smarter use of limited funds.

One respondent indicated that many times energyprojects were implemented based on local or internal

interests, rather than an assessment of the city’s mostcritical needs. In our research, cities consistentlyranked cost-benefit analysis of technologies as a highneed followed by technology or project prioritizationassistance. Most communities find it extremely difficultto assess and place priority on projects that can includeanything from energy management and efficiencyto smart grids or renewable energy systems. A fullycomprehensive assessment of potential energy projectscan include improvements to water systems, improvedtransportation systems, and solid waste managementas well.

Approaching a broad array of energy projects alone isa daunting task, even when choosing among a range ofenergy efficiency measures for one building, let alonean entire community or city. Assessing and prioritizingprojects is difficult without proper technical assessments,frameworks, and understanding of systems andtechnologies and how they must work together.

Staff Commitments and Coordination across CityDepartmentsIntegrating smart and green solutions into the day-today-operations of a city was also a major challenge forthe cities that we interviewed. Aside from the externalbarriers to adopting these solutions and technologies,cities also noted having to overcome differences inpriorities between city departments. One sustainabilityofficer located in the City Manager’s office specificallymentioned the need to partner with departmentsresponsible for building and operating facilities andequipment. In particular, utility departments have criticalfunctions and financial responsibilities. See boxed texton the next page about what New York City did to workacross department lines.

Getting the decision makers to sit down andmake things happen in a timely manner was alsodescribed as being a big challenge in our interviews.Market observers mentioned that city governmentorganizational issues can be a barrier to investments inSmart Green City technologies and that the complexityof municipal approval systems often hinders theprocess. When developing an action plan to identifyand integrate smarter and greener energy projects,all stakeholders need to be brought together at thebeginning to discuss how priorities align and wherethey do not. Representatives from different city

departments as well as elected officials and utilityrepresentatives should be included in this discussion.Clear incentives can be introduced to help this processalong, as was seen in New York City. But successfulsmart city solutions need this integrated approachacross city departments to ensure that all concerns areaddressed, and that projects are optimized to meet theneeds across all aspects of the city.





Partnering Across City Departments

In 2007 New York City Mayor Michael Bloombergsought to better integrate capital and operational

budgets to support sustainability. By Executive Orderhe created the New York City Energy ConservationSteering Committee. The Steering Committeeincluded representatives from the followingdepartments:

■ Office of Operations/Long-Term Planningand Sustainability

■ Office of Management and Budget■ Economic Development Corporation■ Department of Design and Construction■ Department of Citywide Administrative Services

To further the cooperation between departments, thevarious departments were incentivized by allowingthem to claim the savings within their fuel budgets.In 2008, they introduced a long term plan to reducethe city’s carbon footprint by making the city’sbuildings more efficient. One hundred and thirty-two projects throughout the five boroughs wereidentified through the steering committee’s workthat would reduce greenhouse gas emissions byan estimated 34,000 tons annually. In total, the plan

required an estimated $2.3 billion investment overnine years. It was funded partially through the city’senergy budget, state and federal programs, privatefoundations, and energy performance contracts.

■ Cities tend to be risk averse and struggle with

making decisions on advanced technologies.

Cities need help with more advanced programs/technologies. They are constantly approached bytechnology vendors, and it’s difficult for them toassess and sort through what is presented. Riskscan be reduced by enlisting the help of technologyexperts to assess both engineering and financialaspects of technology choices. Utilities that generallyhave ready access to these resources can helpby being part of technologies investigations andplanning for Smart Green Cities.

■ Cities see themselves as part of the changing energy

and utility landscape but are uncertain about the

interests of the utilities that serve them. Several cities

mentioned utilities and their concerns about a shiftaway from a centralized power generation model toa more distributed network. They want to understandbetter the city’s role and the potential impactsthis shift could have on them. Investor-owned andmunicipal utilities across the country appear to vary intheir receptivity to distributed energy resources (DER).Some cities have the perception that their utility is abarrier to local clean energy.

■ Significant opportunities are thought to exist

with data driven solutions, but are not yet well

understood. Many cities mentioned their desireto have better access to data on the energy use intheir community and associated greenhouse gasemissions. Some utilities have established andopened avenues for sharing data that does not violateprivacy issues. Unfortunately, many cities expresssignificant frustration with accessing energy usageand greenhouse gas emissions information fromutilities. Some utilities such as Pacific Gas and ElectricCompany (PG&E) are leading the way to help citiesunderstand energy trends in their communities,disaggregated by market sector and by participation

rates in energy efficiency programs. Key challengesrelated to community-level data include how toprovide data at sufficient detail and granularity tosupport action, while protecting the privacy of utilitycustomers.

Realizing the Smart Green City VisionTo summarize, the findings from the city interviewsshowed that cities are facing very complex issues whenlooking to become smarter and greener. These issuescan be solved through a combination of new technology,policy changes, and collaboration with utilities and

community groups in an integrated planning process.Even when the utility is part of local government, as inmunicipal utilities, silos remain that tend to limit accessto vital information and prevent holistic planning. Whenengaging cities and developing an action plan for smartgreen initiatives, the research shows that:





Despite the challenges that cities face, our survey identified a number of potential opportunities that city staff canpursue to progress Smart Green City initiatives and have a substantive impact on sustainability, energy security,and reliability including:

■ Utilizing city facilities as demonstration projects for

new technologies. To overcome the perceived risks ofutilizing new smarter technologies, cities can partnerwith individuals and companies who want to evaluate,test and implement these emerging technologies (seePort of San Diego Case Study on the next page). Theseprojects can help find and nurture creative productsand services that will help cities to manage andbetter use energy. Utilities can help by providing theresources to hire independent third party verifiers totest and evaluate the outcomes, as well as ensure thatnew technologies are compatible with built systems.

■ Working together with utilities to define mutually

beneficial smart city strategies. As cities move forwardin implementing their sustainability and resiliencyvision, regulators and utilities may be importantpartners in finding solutions. Even so, the needs andcapabilities of the individual entities in the process willvary and needs to be discussed and taken into account.Through open and honest communications cities andutilities can lay out a plan and determine where theirmutual interests lie and what the limitations are todeploying smarter greener energy strategies.

■ Addressing institutional barriers that prevent data

driven solutions. Cities have specific institutionalcapabilities that they can leverage to facilitate changesand enhance the quality and availability of data throughlocal laws and permit tracking processes or use of newtechnologies (such as rooftop PV installations or batterystorage systems). Time-of-sale ordinances requiringenergy use disclosures or passing benchmarking lawsare another means of enhancing the availability ofenergy data while also facilitating behavioral changes.

■ Employing unique city touch points for publiceducation on energy programs and facilitating

technology deployment. Cities have unique ways toreach and engage homeowners, building owners,residents, tenants, and local businesses that utilitycompanies do not. These include working throughvolunteer committees, or local events. To realize themutual benefits from working more collaborativelytogether, utilities can leverage city networks to

promulgate information about energy efficiencyand sustainability actions through city newsletters,or letters from the mayor. Utility programs can enjoygreater energy savings while cities can claim thegreenhouse gas emission reductions. Or, in the case ofelectric vehicles, cities can promote a greener cleanermode of transport, while utilities gain an increase inelectricity sales.

AB 802 – California’s New EnergyBenchmarking Law

The foundation of data-driven solutions is the abilityto collect good data. Benchmarking rules takingeffect in many cities across the country are helpingmake building energy use information more widelyavailable.

As an example of these evolving programs, in 2007,the State of California passed Assembly Bill 1103which required owners of buildings greater than

10,000 sf to benchmark their facilities energy use,prior to the sale, lease, or financing of the building.Implementing the bill proved challenging howeverand significant delays were encountered becauseof the inability of building owners and operators toobtain whole building energy use data from utilitiesprimarily due to privacy concerns.

On October 8, 2015, Assembly Bill 802 was signedinto law to create a new energy disclosure programthat will replace the previous version (Assembly Bill1103). With the passage of this new bill, the private

disclosure barriers will be removed and publicdisclosure of building operating performance datais now required. Upon request, the utilities will needto provide a building owner or operator energy usedata for the previous 12 months within four weeksof the request.

While enabling building owners and operatorsto more easily obtain energy use data, this newpublic disclosure law will also give cities the abilityto act and implement local energy benchmarkingprograms of their own.





The Port of San Diego is a unified districtencompassing five member cities surroundingSan Diego Bay. As a self-supporting public benefitcorporation, the Port manages over 3,415 acres ofland and serves as the landlord for over 600 bayfronttenants. In December of 2014, The Port announcedits role as the first demonstration site in a series ofregional public-private smart building initiatives aspart of Smart Cities San Diego.

With the assistance of Smart Cities San Diegoand a team of Internet of Things (IoT) technologyproviders, the Port has installed a number of smartsensors that will help them harness the power of bigdata and predictive analytics. These cutting edgetools will help the Port detect energy consumptionpatterns and translate it into easy-to-manage, real-time data for building operators to act upon. Thisdeployment of smart technologies is enabling thePort to simultaneously achieve energy savings andcost savings, while also reducing their greenhouse

gas emissions.

Smart Cities San Diego is a multi-year collaborationwith the City of San Diego, San Diego Gas & Electric,GE, UC San Diego and Cleantech San Diego.

Case Study: Regional Port of San Diego





THE UTILITY PERSPECTIVE:

POWERING THE SMART GREEN

CITY

Identify strategies and programs to work collaboratively with cities relatedto new smart energy technologies

Objective

This section discusses DNV GL’s research findings regarding the utility perspective on Smart Green Cityopportunities, barriers, and potential strategies. The results are based on interviews with utility managers atinvestor owned companies as well as municipal utilities and other public power entities. A key point that we oftenheard is that most utilities with more robust energy efficiency programs need to find ways to generate deeperenergy savings and many Smart Green City strategies could help with that.

Prompted by maturing energy efficiency programs, increasing environmental priorities, evolving technologies,competition, and aging infrastructure, the utility industry itself is moving towards a more dynamic, more complexfuture. As the system evolves, new forms of customer engagement are needed to adapt to the changing landscapeand maintain a strong customer base. Working together with local governments and leveraging the ties they havewith the local community is one promising means to accomplish their goals and develop the next generation ofsmarter greener energy programs.

Utility Perceptions on the Benefits of Smart City ProgramsEnergy utilities and cities are inherently intertwined. The customers or citizens they serve are one in the samealthough the structures in which they interact may vary. Some cities have their own municipal utilities governedby the city while others are served by IOUs. Others still are served by public power organizations, such as NewYork Power Authority that supplies electricity to government agencies in the state. Cities are also often significantcustomers of the utilities themselves purchasing electricity or natural gas to run their own administrative,maintenance, and other facilities, and often work closely with the municipal utility, IOUs, or other authority on localenergy initiatives.

We asked how utilities currently work with cities on smart or green initiatives and discussed with them where theirinterests lie and what mechanisms might be available to work with communities and support the planning andimplementation of Smart Green City strategies. Common themes we heard were:

■ Comprehensive city-focused programs are a

developing market for IOUs. Utilities acrossthe country have been working with cities andcommunities to promote energy efficiency and

support economic development. While most utilityprograms for local governments have been relatedto energy efficiency, some utilities surveyed planto expand their reach and support communities ingreenhouse gas emissions accounting, developingclimate action plans, and building more resilientinfrastructure resources.

■ Utilities recognize local governments as important

partners for economic and environmental

sustainability. Most utility staff reported that they haveaccount executives or managers dedicated to local

governments and see cities as important partners forenergy issues ranging from energy efficiency to smartmeter rollouts to grid reliability. Utilities are vestedin the well-being of the communities that they servefor a strong and robust rate base and with a focus oncontinued customer satisfaction.





Both IOUs and publically owned utilities recognize theimportance of sustainability initiatives and engagingin city planning, community development, and publicworks departments. However, both utilities andcities agree that more can be done to leverage thetechnical and sometimes financial resources of theutilities to help cities advance sustainability in theiroperations and communities. According to one utilityrepresentative we spoke with, “we are continuingto explore programs to reach more in communities.We find that there’s not a lot of guidance out therefor LED streetlights, model RFPs, or other technicalspecifications.” Utilities told us their primary interestsin Smart Green Cities were:

■ Enhanced community outreach and customer

engagement. Utilities have an interest in leveragingthe unique networks and community relationshipsthat city governments have with local residents,businesses, visitors, and employees. Manysuccessful energy efficiency efforts have leveragedthe participation of elected officials, who aregenerally well-known and trusted members in theircommunities. For example, in Atlanta, Mayor KasimReed’s Office of Sustainability has been working insupport of the Atlanta Better Buildings Challenge, aleading public-private partnership initiative to reduceenergy and water consumption in the city. The local

utility, Georgia Power is a partner in the program.

■ Providing funding and financing assistance to

capture new opportunities for energy savings.IOUs in particular expressed an interest in providingadditional funding or financial assistance tohelp communities adopt smarter and greenertechnologies. In many areas of the country whereutility energy efficiency programs have matured, theopportunities for greater kWh savings are becomingharder to find. Utilities in these cases are lookingat the use of energy management systems and

controls to improve user efficiency, and reduce peakdemands. As one utility representative put it, “a lotof the low-hanging fruit has already been capturedin municipal or government buildings, so having thenext generation of programs to offer is attractive.”

■ Offering technical assistance. Cities tend to be riskaverse and struggle with advanced technologiesand making decisions. Utilities typically have a greatdeal of technical resources they are able to leverageand can provide help to cities with assessing andintegrating more advanced smart green technologies.

Utility representatives ranked technology assessmentsand project prioritization as the second highest needfor supporting city staff in adopting smarter greenerstrategies. This was closely followed by providing cost-benefit analyses of projects.

Overall, there are many possibilities for furthercollaboration our utility interviews showed that thereare many possibilities between utilities and localgovernments to improve customer relations, shareinformation, and leverage resources such as funding,technical expertise, and access to customers.

In Ohio, AEP Ohio – The Community EnergySavers Program is a community based

program focused on Energy Efficiency.

In Minnesota, Xcel MN works directly

with communities to help them meet

environmental and energy goals.

In California, Southern California Edison

(SCE) and PG&E have robust local

government partnership programs

that support sustainability programsimplemented by local jurisdictions.

Utilities Workingwith Cities





Potential ChallengesUtilities are cognizant of barriers cities face related to funding and lack of technical capabilities. To address this,some IOUs have dedicated ratepayer energy-efficiency funds directly to local government partnership programsthat promote energy efficiency and sustainability in their communities. Others however, have not yet been able todevelop these more comprehensive programs. Some challenges that utility respondents noted include:

Most IOU representatives interviewed expressed a mild interest in developing expanded Smart Green Cityprograms, but were concerned that many of the strategies involve infrastructure, communications, and distributedenergy resources that are outside of the traditional energy efficiency program purview. To add to that, one of theutility representatives interviewed stated that IOUs are also still trying to determine where they stand on things likemicrogrids and distributed generation.

To seize these potential opportunities, utilities need to break down the internal barriers that often separate the energyefficiency program administrators from the distribution engineers and the long-term strategists. As another utilityrepresentative stated, “It’s hard to say whether or not this would fit into the current portfolio of programs, becausethe technologies more affect infrastructure, we don’t connect on these issues often.”

■ Operational challenges with providing core services.The fundamental business of energy utilities isto provide electricity and natural gas services tocustomers, and ensure a reliable and cost-effectiveenergy supply. Utilities must manage energy costsand cost variability including the costs spent to build,maintain, and operate the grid. From a programperspective many Smart Green City strategies areattractive; however, utility business strategy orengineering departments may feel differently. It’s hardfor program administrators to know which of thesetypes of strategies are appropriate and can result in

savings because many of the technologies associatedwith smarter greener city strategies affect infrastructuredesign and generation assets.

■ Regulatory structures create barriers for funding and

non-resource or market transformation programs.

Energy utilities recognize that the funding available tocities for smart green technology projects is limited,and industry observers note that many cities rely ongrant funding for these types of initiatives. One utilitymentioned that they assist cities with developing grant

applications for other funding sources to ensure theyare well thought out and well written. However, mostof the utility respondents acknowledge that fundingthrough dedicated energy efficiency ratepayer fundswould be difficult. Many regions do not allow forutility ratepayer funds dedicated to energy efficiencyprograms to be spent on initiatives that don’t meetcurrent cost-effectiveness frameworks. One solutionis to change regulatory structures to allow for moreprograms focused on education and outreach, trainingand early design assistance as they do in California.

■ Lack of outreach to and engagement with cities. Whilemany IOUs on the West Coast and East Coast appearto have relatively robust programs targeted atcities, other IOUs across the country do not. Utilityrepresentatives interviewed suggested that many timesthe extent of their interactions with city staff are throughexternal affairs personnel, and often times only whenthere is a problem. What’s missing is that programadministrators don’t see the benefits of engaging withcity staff and operations.





■ Work with regulatory commissions to develop

additional mechanisms for partnerships with local

governments. Increasing the opportunity for utilities toprovide education, funding, and additional technicalsupport to cities and local governments in the interest

of promoting energy efficiency and new smart gridtechnologies can benefit both the utilities and thecommunities they serve. One utility representativementioned the need to brainstorm around the“future of local government programs” and how tobreak out of energy efficiency and focus on a moreholistic partnership combining reliability, adaptation,demand response, and other approaches with energyefficiency.

■ Work with city staff to pilot smart city projects. Many cities want to be seen as leaders. Demonstrationprojects provide an opportunity for utilities and citiesto work together to bring new technologies to marketsuch as advanced controls, smart meters, sensors, andmonitoring devices. City facilities such as city halls,libraries, and community centers are high-profilelocations where citizens can be engaged and providefeedback. Piloting programs for battery storagetechnologies, automation and controls, and automateddemand response also provides the opportunity toevaluate and measure actual performance and thebenefits associated with increased energy savings and

improved grid reliability.

■ Focus on programs that engage cities on a regional

basis. Surrounding communities should also be ableto benefit from city initiatives. Further, developinga platform where cities and local communities canexchange ideas and learn about best practices would

be a great benefit to advancing smart green strategies.A case study on how one Canadian city partnered withthe private sector to provide street light conversionservices to other municipalities is provided on thenext page. Regional planning organizations may beused to accomplish this as well. In Massachusetts, theMetropolitan Area Planning Council supports the cityof Boston and surrounding communities with energyplanning services including bulk purchasing programsthat make buying certain technologies, such as LEDstreet lights, more economical for local communities.

■ Enhance technical assistance in support of energy-

related planning efforts and market education.

Some utilities such as SCE through its SustainableCommunities Program have realized the benefitsof working with cities and communities early in theprocess of project design and selection. However,many are still challenged by this. To advance energyefficiency programs, enhance market development,and achieve greater levels of efficiency, utilities andregulators must embrace the idea of offering programsthat are not widget-based. Comprehensive programs

focused on planning, public education, behavioralchange, and removing market barriers are gainingmomentum and are believed by many to be the wayto transform the building industry and capture deeperenergy savings.

Making a city smarter and greener is also a difficult concept to grasp for utilities in many respects. The idea ofsmart cities is so much bigger than just energy. It’s also about other core aspects of life such as water, waste,transportation, safety, and communication. This can make it daunting for utilities to think about pursuing a “smartcity” strategy. Focusing on the energy dimension may make the process more manageable, but the benefits to theutility need to be clearly understood.

Smart Green City OpportunitiesDNV GL’s research shows that many utilities’ business, operational, and long-term interests are well aligned withcity-level objectives, which are focused on grid reliability, energy savings, and more efficient management ofenergy resources. Based on our discussions with industry representatives, we see the following as key areas forutilities to enhance their work with cities:





Utilities

The Community

Residents Businesses

Cities

Voters &

citizens

Utility

customers

Economic

prosperity

Healthy,

cleaneviroments

Greater

efficiency

Mutualgoals

LOOKING AHEAD: SHARED VISION

FOR SMART GREEN CITIESThe energy sector today is characterized by significant potential for disruption and growth. Regulatory,

technological, and community-driven changes are opening the market for innovative products and services atthe city level. Figure 4 shows how cities and utilities can work more closely with their community stakeholders toachieve mutual goals.

■ Initiating a planning process to clearly understand

where city and utility interests overlap. Localgovernment concerns and local issues varysignificantly. Similarly, utility regulatory environmentsand existing programs influence how partnershipswith cities can realize the most benefit. Identifyingoverlapping interests would happen best through afacilitated dialogue and planning process.

■ Identifying specific Smart Green City projects that

might fit with existing utility initiatives. Utilities shouldsupport cities in developing a high-level analysis ofspecific projects with potential impacts and benefitsclearly defined. Projects could include help withoutreach for underperforming programs, help incoordinating targeted geographic or market sectorprograms, upgrades to city properties, improvements

in street lighting, or integrating distributed energytechnologies to enhance reliability and distributionsystem relief.

■ Planning to use these ideas as a basis for broader

planning discussions. City staff should prepare todiscuss long-term city goals, how these projectssupport those goals, and how they may complement

utility interests. There is a need in many areas of thecountry to develop more comprehensive programsinvolving early intervention and market transformation,and utilities interested are interested in understandinghow city initiatives can help understanding how cityinitiatives can help. City and utility staff should alsoensure that state legislators and regulators knowabout these ideas so they can lend support to multi-benefit projects.

Strategies for Realizing Mutual BenefitsCity relationships with local utilities vary by jurisdiction, even those with their own municipal utility. In order torealize mutual benefits, both sides must have a clear business case for working with each other. Strategies forsuccess include:

Figure 4: Common Goals





The White House Office of Science and

Technology Policy recently that Charlotte, NCwill be the site for the first Envision Americaworkshop in January 2016. The city announceda 16.1% energy use reduction already achievedtoward its goal of 20% reduction over fiveyears, representing a total savings of over $17million and elimination of 48,599 tons of CO

2

emissions. (www.envisioncharlotte.com).

Case Study: Envision America in Charlotte, NC

■ US Department of Energy (DOE) State EnergyProgram (SEP): SEP is a source of funding that

municipalities, counties, and other local governmententities can tap into to carry out energy efficiencyand sustainability projects. The “green” componentof becoming a Smart Green City may be ableto secure funding for a portion of costs throughthis ongoing program. SEP provides funding andtechnical assistance to state and territory energyoffices to help them advance their clean energyeconomy while contributing to national energygoals, and in turn states provide resources to localgovernments. According to DOE, “SEP also providesleadership to maximize the benefits of energy

efficiency and renewable energy in each statethrough communications and outreach activities andtechnology deployment, and by providing access tonew partnerships and resources” (http://energy.gov/eere/wipo/state-energy-program).

■ Envision America: In September 2015 the ObamaAdministration announced Envision America, a new

“Smart Cities” initiative that will invest more than$160 million in federal research and leverage morethan 25 new technology collaborations to helplocal communities tackle key challenges includingmanaging the effects of a changing climate. EnvisionCharlotte was recently named as the model for theEnvision America energy efficiency program (seecase study below). In order to tap into grants andother resources that this program will offer, cities willneed to develop an Action Plan. Departments suchas the US Environmental Protection Agency and DOEare still developing their plans for implementing

the administration’s initiative, but cities can start toposition themselves now by partnering with theirlocal utilities to develop a Smart City Action Plan to beready to act once the Envision America programsare launched.

A Smart Green City Planning FrameworkFor cities and utilities that are interested in conducting a more thorough planning process to identify and prioritizeprojects, we provide a Smart Green City Planning Framework on the next page (Figure 5). This simplified frameworkcontains a list of recommended steps cities can take toward developing a comprehensive Smart Green CityAction Plan. The steps involved combine organizational and procedural actions with leveraging new or existing

tools and data sources. One key goal of the process should be to break down the barriers that inhibit progressand work efficiently to develop a mutually beneficial plan that enjoys widespread support. Our research showedthat there is no lack of technologies and tools for projects; rather, there is a lack of understanding on how to worktogether with utilities and across city departments.

Future Funding OpportunitiesFinally, funding was consistently noted as a main challenge to implementing Smart Green City projects during thecourse of our interviews. In response to that, we identify two federal funding opportunities likely to be available inthe future (2016-17) to help cities and local governments implement projects:



SAFER, SMARTER, GREENER

For more information please contact Betty Seto,

DNV GL Sustainable Buildings and

Communities at [email protected]

dnv gl smart green cities 2015 .pdf

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