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ENERGY

SMART GREEN CITIES


A Survey of Industry Stakeholders

SAFER, SMARTER, GREENER

Smart Green Cities ENERGY 02

CONTENTS

THE SMART IMPERATIVE

03

UNDERSTANDING THE ISSUES

04

THE CITY PERSPECTIVE:


BECOMING A
SMART GREEN CITY

THE UTILITY PERSPECTIVE:


POWERING THE
SMART GREEN CITY

LOOKING AHEAD:
SHARED VISION FOR
SMART GREEN CITIES

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

14

Utility Perceptions on the Benefits of


Smart City Programs 14
Potential Challenges 16
Smart Green City Opportunities
17

19

Strategies for Realizing Mutual Benefits


19
A Smart Green City Planning Framework
20
Future Funding Opportunities 20
Green Cities Action Plan 21

Smart Green Cities ENERGY 03

THE SMART IMPERATIVE


Many cities in North America are experiencing an accelerated increase in population, economic activity, and
household income levels. This is creating shared challenges for cities and utilities that include growing demand for
water, 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 digital
self-services, and they expect both entities to plan for and mitigate against climate-related effects such as extreme
weather events. Utilities and cities are also driven by the need to meet regulatory requirements and develop
strategies to cope with erosion of revenues.
Key barriers to implementing and sustaining environmental and technological improvements while meeting
increased expectations for resources and services include :
Mitigating adverse environmental and emissions

impacts associated with increased population,


economic activity, and traffic
Updating and replacing municipal and private utility

infrastructure to meet increased demands


Fortifying infrastructure that is susceptible to

increased climate-related impacts


Investments in Smart Green City technologies and
strategies offer solutions to many of these challenges
by taking advantage of rapid increases in capability and
decreases in cost for telecommunications, distributed
energy generation, and more efficient transportation
technologies. However, to fully realize Smart Green City
benefits, municipalities and utilities need to find better
ways to partner toward achieving common goals. They
have good reasons to work together but rarely do.

Cities are increasingly


interested 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.

DNV GL asked city leaders and energy service providers


about the benefits and problems inherent in cityutility partnerships for transforming communities into
smarter and greener cities. The findings suggest that
the time is right for cities and utilities to build a mutually
beneficial relationship based on implementing more
sustainable systems. This paper explores opportunities
and challenges for cities and utilities to work together to
successfully implement Smart Green City solutions.

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

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Smart Green Cities ENERGY 04

UNDERSTANDING THE ISSUES


Utilities and cities have a mutual interest in becoming
smarter and greener, but bring different resources
to the table. Because they each have unique tools for
integrating smart technologies and strategies into
their communities. For example, interviews conducted
by DNV GL with local government leaders reveal that
they need information on energy consumption in the
community to plan citizen engagement strategies
and offer services, but they dont have access to such
data. For their part, utilities dont have the same ability
to identify potential projects or are restricted on
funding for infrastructure demonstration projects. The
benefits of collaboration are apparent, but identifying
overlapping areas of interest to focus on remain unclear.

enhanced services, energy cost stability, energy


independence, and new avenues for economic growth.
For utilities, its about reliability and meeting customer
expectations, while addressing market pressures on
their traditional business model created by distributed
energy resources (DER), lower demand, and an aging
infrastructure.
Utilities and cities share a need to find ways to maintain
revenue streams (and profitability for investor-owned
utilities) while rethinking the ways they interact with
their constituents and customers in a rapidly expanding
technology marketplace. Figure 1 illustrates how a shift
in focus is needed by both cities and utilities to advance
smart green community goals.

The Smart Green Cities movement is not about


introducing expensive new technologies into the market
for the sake of technological advancement.
For cities, its about providing their citizens with

Utility

Utility

City

City

Residents

Businesses

Residents

Businesses

Figure 1: City-Utility Shift in Relationship

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

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Smart Green Cities ENERGY 05

ity

Now is an opportune time for cities to work with their


utility counterparts to tackle some of the most difficult
issues in energygreater efficiency, increased reliability
and security, and integrating renewable energy
systems. Utilities on their part are looking to further
enhance relationships with their customers and local
communities so they can better tailor solutions to satisfy
customer and community needs and maintain a strong
customer base. Utilities and local governments need to
forge partnerships that allow for a better understanding
of the way each other works, the unique problems they
face, and their ability to take action. Such partnerships
will require utility and city departments, with seemingly
disparate responsibilities, to work together and
overcome the confines created by working in silos.

30 city, local government, and utility representatives


and explored the pathways for adopting smart green
strategies and more effectively implementing smart city
solutions. The figure below (Figure 2) describes who we
talked to. We set out to understand:

To understand the challenges and potential benefits


of collaboration more clearly, DNV GL interviewed

And what are the perceived benefits and barriers

Our respondents hailed from utility


Utility
customers
organizations including investor-

sinesses

owned utilities and municipal utility


departments.

What are cities most in need of to become

smarter and greener?


What do cities perceive as the greatest benefits

and barriers to adopting smarter and greener


energy technologies?
What do utilities see as opportunities to work with

cities to help build smarter greener cities?

to utilities in taking on the initiatives?

20%
Local gov
organization

20%

30%

Local gov
organization

Investorowned
utilities

Utilities
Local government representatives

from city departments, as well as local


government associations were also
interviewed.

Interview
Respondents
27%

27%
Healthy,

clean
eviroments

Other stakeholders include


foundations, non-profit organizations,
and state agencies.

Cities and
counties

Cities and
counties

Interview
Respondents
6%

Municipal
utilities

30%
Investorowned
utilities

6%
Municipal
utilities

17%

Other stakeholders
( funders non - profits)

17%

Other stakeholders
( funders non - profits)

Figure 2: Who we interviewed

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Smart Green Cities ENERGY 06

THE CITY PERSPECTIVE:


BECOMING A SMART GREEN CITY
Objective

Understand opportunities and challenges cities have related to new smart


energy technologies

The findings in this chapter are based on our interviews with cities and counties from across the country as well as
regional 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.

Areas of Interest
The municipalities that we interviewed showed interest
in many areas: low carbon transportation, sustainable
solid waste management, and water conservation, but
the greatest amount of interest was in areas of energy
management, clean and efficient use of energy, and
climate resiliency. All eight of the city representatives we
spoke with indicated energy efficiency, resiliency, and
better control are main concerns for them. Overall,
there was wide support for the concept of creating
a detailed and well developed plan for using smart
technologies and strategies to address these issues,
and recognition that such a plan could garner
significant political support.

Top 6 Clean
Technologies of Interest
1. Energy efficiency technologies
2. Solar photovoltaic
3. Automation/controls
4. Microgrid technologies
5. Smart street lights

Local government officials are not only aware of


the available range of cleaner energy technologies
associated with becoming a greener community, but
are acting to use these strategies for their benefit.
Many of the representatives interviewed were involved
with local energy and sustainability initiatives aimed
at reducing energy costs and increasing resiliency
and have successfully implemented pieces of a larger
Smart Green City strategy. Related to energy, city
representatives primarily noted three areas of interest:

6. Electric vehicles

representatives we spoke with were interested in


extending their solar PV projects into microgrid
and energy storage systems, but unsure of how to
proceed. Furthermore, many cities didnt know how
or who to approach at the utilities to start these
conversations given there are obvious concerns
from utilities about shifting away from the current
centralized model.

Distributed energy resources (DER). Cities are

exploring how systems such as solar photovoltaic


(PV), microgrids, and battery storage can benefit
them. For example, the city of San Diego is currently
focused on new or emerging technologies in this
respect and working on innovative solar deployment
programs, biofuels, and the cutting edge research
that the University of California at San Diego is
doing on microgrid research (See also City of Austin,
TX case study on the next page). Many of the city

Energy efficiency in municipal facilities and the

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community. Many cities expressed a desire to show


leadership in energy efficiency by upgrading their
facilities to be more efficient. City representatives
noted many achievements, but that many
opportunities remain and that they generally

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Smart Green Cities ENERGY 07

have significant political support for these types


of projects. LED streetlight programs and energy
efficiency upgrades in existing buildings are popular
projects as well as other types of projects that
improve facility controls and energy management. To
encourage residents and business in the community
to participate in utility sponsored energy efficiency
programs, some cities have partnered with their local
utility to promote the programs in their communities.
In Massachusetts for instance, the City of Newton
encourages residents to participate in Eversources
program for home energy assessments through their
Newton Energy Savers initiative. Their goal is to have
1,000 home energy assessments completed through
the utility program this year.

Energy assurance and resiliency. City officials are

very concerned about disaster preparedness and


the ability to maintain operations of facilities and
community resources during periods of power
outages, flooding, wildfires, and other hazardous
events. A key aspect of this is having resilient energy
infrastructure, and adequately designed DER in place
to be able to operate independently of the larger
utility grid, if needed. For example, in Brooklyn, NY,
the neighborhood of Red Hook is using a $100,000
grant from the State to investigate the use of a mix
of solar panels, battery storage, and small wind
turbines scaled to power local apartment buildings,
businesses, and a community center, and ensure the
community can successfully endure disruptive storms.
The state provided grant funding to 83 communities
in New York to explore similar initiatives.

Case Study: Austin Energy Solar PV Programs


Austin Energy is the municipal utility that powers the City of Austin, TX. They have been leaders in finding
ways to enable their customers to integrate solar power into the municipal electric system in ways that make
sense for the community and for the utility, and therefore all ratepayers. The website www.austinenergy.com
lists programs available to residential customers:
Solar PV Rebates. Austin Energy provides rebates for
residential customers who purchase home solar PV
systems. Customers earn a Value of Solar (VOS) credit on
the monthly bill for every kilowatt-hour of electricity the
solar system produces under a Residential Solar Rate.
Rooftop PV Leasing Program. Customers wishing to avoid
the hassle of maintaining a rooftop system can choose
to lease a rooftop PV system that will be owned and
maintained by the utility. The customer receives a VOS
credit on the bill for every kilowatt-hour generated.
Community Based Solar. Community based solar
programs allow local businesses and residents who arent
able to install solar on their rooftops, access to solar
credits through the development of a large-scale solar
system. For those who want to be involved in building
solar resources in the City, Austin Energy has started a
community based solar program whereby customers can
buy into a local-sited PV system, thereby enjoying the
benefits while avoiding the hassle.

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20%

Smart30%
Green Cities ENERGY 08

Local gov
organization

Investorowned
utilities

At the root of it, these initiatives are often driven by the notion that greater efficiency, clean energy, and more
6%
reliable infrastructure enhances public safety, provides jobs, and stimulates economic development. Cities view
Interview
these initiatives as part of a greater strategy to attract businesses to the area
and create a strongMunicipal
commercial and
Respondents
utilities
residential base through environmental stewardship and sustainable innovation.

27%

Challenges

17%

Citiesthat
and cities felt are the main
Other
stakeholders
Throughout our interviews there were several recurring issues
barriers
to becoming
counties
( funders non - profits)
smarter and greener (Figure 3). The number one barrier did not come as a surprise: funding. This was followed by
a lack of technical expertise and the inability to properly assess new technologies, equipment and strategies, as
well as limited staff resources. Notably, the lack of utility support was a 4th barrier. The figure below lists the top
responses in terms of frequency of mention.

Barriers to Becoming at Smart Green City

0%

20%

40%

60%

80%

Figure 3: Barriers to Smart Green City initiatives

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Greater

Mutual
goals

efficiency

Economic

Cities and
counties

Other stakeholders
( funders non - profits)

Healthy,

Smart Green Cities ENERGY 09

clean
eviroments

prosperity

Funding and Financial Resources


Funding for Smart Green City initiatives and projects can be difficult to obtain, particularly now that federal stimulus
Resilient
grants from the American Reinvestment and Recovery Act concluded.1 Municipal budgets are often stretched thinand
Reliable
and 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 improvement
projects is through:
Specialty financing: A number of financing programs

were noted as being critical to cities moving forward


with clean energy projects, among them, propertyassessed clean energy (PACE) programs and municipal
low-interest financing. Cities in California and New York
specifically mentioned the low interest loans through
the California Energy Commission and the New York
Power Authority, respectively. These programs help
local governments invest in smart and green projects;
however, it was noted that one drawback to receiving
this type of funding was that the funds had to be used
for very specific projects. Projects with no quantifiable
energy savings benefits (e.g., education and outreach)
are often not able to receive this type of funding.
0%

Utility incentives: Cities generally reported having

had success with receiving financial support from


utilities including incentive and on-bill financing.
Many city respondents also noted the importance
of technical assistance provided along with financial
assistance as the greatest benefit of utility programs.
A few cities were concerned, however, about relying
too heavily on investor-owned utility (IOU) programs
for implementing energy efficiency initiatives and felt
that cities needed to find other ways to build their
own staff capacity.

20%

40%

60%

80%

The city general fund: Cities that have enough political

support have found that their citizens were willing to


fund projects out of the general fund. Cities that have
selected projects with a solid business case and good
return on investment have had greater success as they
are able to justify the use of the funds. This adds even
more importance to having a plan in place to ensure
that when dollars become available, they are spent in
the most efficient way possible.

Other sources of funding that cities have had success with included grants for specific projects, ear-marking certain
tax dollars for projects, using energy savings from efficiency projects to fund new projects, and creating public-private
partnerships. Bond funding or the issuance of green bonds has also become a potential mechanism for funding that
many 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 sources
were noted as having drawbacks including rigorous paperwork and lack of flexibility. Some cities struggle to identify
funding for certain projects because the benefits are not easy to quantify. For example, the costs and savings from
energy efficiency and solar projects are well known, but for projects aimed at improving resiliency, the financial benefits
that 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 multiple
funding sources to maximize the impact. One city official mentioned that he funded smart city projects with a mix of
funds from the water utility and the general fund. Another city representative discussed private-public partnerships
where a grant may pay for outreach to attract clean technology companies, but the companies themselves would pay for
facility upgrades and construction. Even so, identifying priority projects, conducting technical assessments, developing
project requirements, and merging funding opportunities can be incredibly difficult. This becomes even more
challenging if the city does not have staff members with the technical knowledge required to address these issues.
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.

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Sh
for

Smart Green Cities ENERGY 10

Technical and Staff Resources


This leads to the next barrier to Smart Green City
investments: lack of technical expertise, which was
the second most frequently mentioned challenge to
achieving objectives. Cities need assistance to evaluate
options in terms of engineering aspects as well as
the business case or financial implications of potential
projects.
Several city representatives mentioned they are
frequently approached by service providers and
technology companies that provide smart solutions to
individual problems and that its difficult for city staff to
determine which solutions are best for their city, whats
appropriate and what should be a priority. Individual
vendors often cannot (or do not) address issues of
interoperability between systems or provide a reliable
assessment of the true costs and benefits of installing
smart devices, particularly with respect to the bigger
picture and the citys goals. For example, a building can
be equipped with sensors and sub-meters on each piece
of equipment to provide trending data and a real-time
understanding of how it is operating, but at what cost?
Smart devices can be expensive. Rather than outfit the
entire facility with sub-meters, a more targeted approach
may be more sensible and a smarter use of limited funds.
One respondent indicated that many times energy
projects were implemented based on local or internal
interests, rather than an assessment of the citys most
critical needs. In our research, cities consistently
ranked cost-benefit analysis of technologies as a high
need followed by technology or project prioritization
assistance. Most communities find it extremely difficult
to assess and place priority on projects that can include
anything from energy management and efficiency
to smart grids or renewable energy systems. A fully
comprehensive assessment of potential energy projects
can include improvements to water systems, improved
transportation systems, and solid waste management
as well.
Approaching a broad array of energy projects alone is
a daunting task, even when choosing among a range of
energy efficiency measures for one building, let alone
an entire community or city. Assessing and prioritizing
projects is difficult without proper technical assessments,
frameworks, and understanding of systems and
technologies and how they must work together.

Staff Commitments and Coordination across City


Departments
Integrating smart and green solutions into the day-to
day-operations of a city was also a major challenge for
the cities that we interviewed. Aside from the external
barriers to adopting these solutions and technologies,
cities also noted having to overcome differences in
priorities between city departments. One sustainability
officer located in the City Managers office specifically
mentioned the need to partner with departments
responsible for building and operating facilities and
equipment. In particular, utility departments have critical
functions and financial responsibilities. See boxed text
on the next page about what New York City did to work
across department lines.

Getting the decision makers to sit down and


make things happen in a timely manner was also
described as being a big challenge in our interviews.
Market observers mentioned that city government
organizational issues can be a barrier to investments in
Smart Green City technologies and that the complexity
of municipal approval systems often hinders the
process. When developing an action plan to identify
and integrate smarter and greener energy projects,
all stakeholders need to be brought together at the
beginning to discuss how priorities align and where
they do not. Representatives from different city
departments as well as elected officials and utility
representatives should be included in this discussion.
Clear incentives can be introduced to help this process
along, as was seen in New York City. But successful
smart city solutions need this integrated approach
across city departments to ensure that all concerns are
addressed, and that projects are optimized to meet the
needs across all aspects of the city.

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Smart Green Cities ENERGY 11

Partnering Across City Departments

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 by
technology vendors, and its difficult for them to
assess and sort through what is presented. Risks
can be reduced by enlisting the help of technology
experts to assess both engineering and financial
aspects of technology choices. Utilities that generally
have ready access to these resources can help
by being part of technologies investigations and
planning for Smart Green Cities.

In 2007 New York City Mayor Michael Bloomberg


sought to better integrate capital and operational
budgets to support sustainability. By Executive Order
he created the New York City Energy Conservation
Steering Committee. The Steering Committee
included representatives from the following
departments:
Office of Operations/Long-Term Planning

and 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, the


various departments were incentivized by allowing
them to claim the savings within their fuel budgets.
In 2008, they introduced a long term plan to reduce
the citys carbon footprint by making the citys
buildings more efficient. One hundred and thirtytwo projects throughout the five boroughs were
identified through the steering committees work
that would reduce greenhouse gas emissions by
an estimated 34,000 tons annually. In total, the plan
required an estimated $2.3 billion investment over
nine years. It was funded partially through the citys
energy budget, state and federal programs, private
foundations, and energy performance contracts.

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 shift
away from a centralized power generation model to
a more distributed network. They want to understand
better the citys role and the potential impacts
this shift could have on them. Investor-owned and
municipal utilities across the country appear to vary in
their receptivity to distributed energy resources (DER).
Some cities have the perception that their utility is a
barrier to local clean energy.
Significant opportunities are thought to exist

Realizing the Smart Green City Vision


To summarize, the findings from the city interviews
showed that cities are facing very complex issues when
looking to become smarter and greener. These issues
can 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 in
municipal utilities, silos remain that tend to limit access
to vital information and prevent holistic planning. When
engaging cities and developing an action plan for smart
green initiatives, the research shows that:

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with data driven solutions, but are not yet well


understood. Many cities mentioned their desire
to have better access to data on the energy use in
their community and associated greenhouse gas
emissions. Some utilities have established and
opened avenues for sharing data that does not violate
privacy issues. Unfortunately, many cities express
significant frustration with accessing energy usage
and greenhouse gas emissions information from
utilities. Some utilities such as Pacific Gas and Electric
Company (PG&E) are leading the way to help cities
understand energy trends in their communities,
disaggregated by market sector and by participation
rates in energy efficiency programs. Key challenges
related to community-level data include how to
provide data at sufficient detail and granularity to
support action, while protecting the privacy of utility
customers.

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Smart Green Cities ENERGY 12

Despite the challenges that cities face, our survey identified a number of potential opportunities that city staff can
pursue 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 of


utilizing new smarter technologies, cities can partner
with individuals and companies who want to evaluate,
test and implement these emerging technologies (see
Port of San Diego Case Study on the next page). These
projects can help find and nurture creative products
and services that will help cities to manage and
better use energy. Utilities can help by providing the
resources to hire independent third party verifiers to
test and evaluate the outcomes, as well as ensure that
new technologies are compatible with built systems.
Working together with utilities to define mutually

beneficial smart city strategies. As cities move forward


in implementing their sustainability and resiliency
vision, regulators and utilities may be important
partners in finding solutions. Even so, the needs and
capabilities of the individual entities in the process will
vary and needs to be discussed and taken into account.
Through open and honest communications cities and
utilities can lay out a plan and determine where their
mutual interests lie and what the limitations are to
deploying smarter greener energy strategies.
Addressing institutional barriers that prevent data

driven solutions. Cities have specific institutional


capabilities that they can leverage to facilitate changes
and enhance the quality and availability of data through
local laws and permit tracking processes or use of new
technologies (such as rooftop PV installations or battery
storage systems). Time-of-sale ordinances requiring
energy use disclosures or passing benchmarking laws
are another means of enhancing the availability of
energy data while also facilitating behavioral changes.
Employing unique city touch points for public

education on energy programs and facilitating


technology deployment. Cities have unique ways to
reach and engage homeowners, building owners,
residents, tenants, and local businesses that utility
companies do not. These include working through
volunteer committees, or local events. To realize the
mutual benefits from working more collaboratively
together, utilities can leverage city networks to

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AB 802 Californias New Energy


Benchmarking Law
The foundation of data-driven solutions is the ability
to collect good data. Benchmarking rules taking
effect in many cities across the country are helping
make building energy use information more widely
available.
As an example of these evolving programs, in 2007,
the State of California passed Assembly Bill 1103
which 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 however
and significant delays were encountered because
of the inability of building owners and operators to
obtain whole building energy use data from utilities
primarily due to privacy concerns.
On October 8, 2015, Assembly Bill 802 was signed
into law to create a new energy disclosure program
that will replace the previous version (Assembly Bill
1103). With the passage of this new bill, the private
disclosure barriers will be removed and public
disclosure of building operating performance data
is now required. Upon request, the utilities will need
to provide a building owner or operator energy use
data for the previous 12 months within four weeks
of the request.
While enabling building owners and operators
to more easily obtain energy use data, this new
public disclosure law will also give cities the ability
to act and implement local energy benchmarking
programs of their own.
promulgate information about energy efficiency
and sustainability actions through city newsletters,
or letters from the mayor. Utility programs can enjoy
greater energy savings while cities can claim the
greenhouse gas emission reductions. Or, in the case of
electric vehicles, cities can promote a greener cleaner
mode of transport, while utilities gain an increase in
electricity sales.

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Smart Green Cities ENERGY 13

Case Study: Regional Port of San Diego

The Port of San Diego is a unified district


encompassing five member cities surrounding
San Diego Bay. As a self-supporting public benefit
corporation, the Port manages over 3,415 acres of
land and serves as the landlord for over 600 bayfront
tenants. In December of 2014, The Port announced
its role as the first demonstration site in a series of
regional public-private smart building initiatives as
part of Smart Cities San Diego.
With the assistance of Smart Cities San Diego
and a team of Internet of Things (IoT) technology
providers, the Port has installed a number of smart
sensors that will help them harness the power of big
data and predictive analytics. These cutting edge
tools will help the Port detect energy consumption
patterns and translate it into easy-to-manage, realtime data for building operators to act upon. This
deployment of smart technologies is enabling the
Port to simultaneously achieve energy savings and
cost savings, while also reducing their greenhouse
gas emissions.

Smart Cities San Diego is a multi-year collaboration


with the City of San Diego, San Diego Gas & Electric,
GE, UC San Diego and Cleantech San Diego.

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Smart Green Cities ENERGY 14

THE UTILITY PERSPECTIVE:


POWERING THE SMART GREEN
CITY
Objective

Identify strategies and programs to work collaboratively with cities related


to new smart energy technologies

This section discusses DNV GLs research findings regarding the utility perspective on Smart Green City
opportunities, barriers, and potential strategies. The results are based on interviews with utility managers at
investor owned companies as well as municipal utilities and other public power entities. A key point that we often
heard is that most utilities with more robust energy efficiency programs need to find ways to generate deeper
energy 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 complex
future. As the system evolves, new forms of customer engagement are needed to adapt to the changing landscape
and maintain a strong customer base. Working together with local governments and leveraging the ties they have
with the local community is one promising means to accomplish their goals and develop the next generation of
smarter greener energy programs.

Utility Perceptions on the Benefits of Smart City Programs


Energy utilities and cities are inherently intertwined. The customers or citizens they serve are one in the same
although the structures in which they interact may vary. Some cities have their own municipal utilities governed
by the city while others are served by IOUs. Others still are served by public power organizations, such as New
York Power Authority that supplies electricity to government agencies in the state. Cities are also often significant
customers 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 local
energy initiatives.
We asked how utilities currently work with cities on smart or green initiatives and discussed with them where their
interests lie and what mechanisms might be available to work with communities and support the planning and
implementation of Smart Green City strategies. Common themes we heard were:
Comprehensive city-focused programs are a

Utilities recognize local governments as important

developing market for IOUs. Utilities across


the country have been working with cities and
communities to promote energy efficiency and
support economic development. While most utility
programs for local governments have been related
to energy efficiency, some utilities surveyed plan
to expand their reach and support communities in
greenhouse gas emissions accounting, developing
climate action plans, and building more resilient
infrastructure resources.

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

partners for economic and environmental


sustainability. Most utility staff reported that they have
account executives or managers dedicated to local
governments and see cities as important partners for
energy issues ranging from energy efficiency to smart
meter rollouts to grid reliability. Utilities are vested
in the well-being of the communities that they serve
for a strong and robust rate base and with a focus on
continued customer satisfaction.

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Smart Green Cities ENERGY 15

Both IOUs and publically owned utilities recognize the


importance of sustainability initiatives and engaging
in city planning, community development, and public
works departments. However, both utilities and
cities agree that more can be done to leverage the
technical and sometimes financial resources of the
utilities to help cities advance sustainability in their
operations and communities. According to one utility
representative we spoke with, we are continuing
to explore programs to reach more in communities.
We find that theres not a lot of guidance out there
for LED streetlights, model RFPs, or other technical
specifications. Utilities told us their primary interests
in Smart Green Cities were:

Utilities Working
with Cities

In Ohio, AEP Ohio The Community Energy


Savers 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 programs
implemented by local jurisdictions.

Enhanced community outreach and customer

engagement. Utilities have an interest in leveraging


the unique networks and community relationships
that city governments have with local residents,
businesses, visitors, and employees. Many
successful energy efficiency efforts have leveraged
the participation of elected officials, who are
generally well-known and trusted members in their
communities. For example, in Atlanta, Mayor Kasim
Reeds Office of Sustainability has been working in
support of the Atlanta Better Buildings Challenge, a
leading public-private partnership initiative to reduce
energy and water consumption in the city. The local
utility, Georgia Power is a partner in the program.

Offering technical assistance. Cities tend to be risk

averse and struggle with advanced technologies


and making decisions. Utilities typically have a great
deal of technical resources they are able to leverage
and can provide help to cities with assessing and
integrating more advanced smart green technologies.
Utility representatives ranked technology assessments
and project prioritization as the second highest need
for supporting city staff in adopting smarter greener
strategies. This was closely followed by providing costbenefit analyses of projects.

Providing funding and financing assistance to

capture new opportunities for energy savings.


IOUs in particular expressed an interest in providing
additional funding or financial assistance to
help communities adopt smarter and greener
technologies. In many areas of the country where
utility energy efficiency programs have matured, the
opportunities for greater kWh savings are becoming
harder to find. Utilities in these cases are looking
at the use of energy management systems and
controls to improve user efficiency, and reduce peak
demands. As one utility representative put it, a lot
of the low-hanging fruit has already been captured
in municipal or government buildings, so having the
next generation of programs to offer is attractive.

Overall, there are many possibilities for further


collaboration our utility interviews showed that there
are many possibilities between utilities and local
governments to improve customer relations, share
information, and leverage resources such as funding,
technical expertise, and access to customers.

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

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Smart Green Cities ENERGY 16

Potential Challenges
Utilities 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 programs
that promote energy efficiency and sustainability in their communities. Others however, have not yet been able to
develop these more comprehensive programs. Some challenges that utility respondents noted include:
Operational challenges with providing core services.

The fundamental business of energy utilities is


to provide electricity and natural gas services to
customers, and ensure a reliable and cost-effective
energy supply. Utilities must manage energy costs
and cost variability including the costs spent to build,
maintain, and operate the grid. From a program
perspective many Smart Green City strategies are
attractive; however, utility business strategy or
engineering departments may feel differently. Its hard
for program administrators to know which of these
types of strategies are appropriate and can result in
savings because many of the technologies associated
with smarter greener city strategies affect infrastructure
design and generation assets.

applications for other funding sources to ensure they


are well thought out and well written. However, most
of the utility respondents acknowledge that funding
through dedicated energy efficiency ratepayer funds
would be difficult. Many regions do not allow for
utility ratepayer funds dedicated to energy efficiency
programs to be spent on initiatives that dont meet
current cost-effectiveness frameworks. One solution
is to change regulatory structures to allow for more
programs focused on education and outreach, training
and early design assistance as they do in California.
Lack of outreach to and engagement with cities. While

Regulatory structures create barriers for funding and

non-resource or market transformation programs.


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

many IOUs on the West Coast and East Coast appear


to have relatively robust programs targeted at
cities, other IOUs across the country do not. Utility
representatives interviewed suggested that many times
the extent of their interactions with city staff are through
external affairs personnel, and often times only when
there is a problem. Whats missing is that program
administrators dont see the benefits of engaging with
city staff and operations.

Most IOU representatives interviewed expressed a mild interest in developing expanded Smart Green City
programs, but were concerned that many of the strategies involve infrastructure, communications, and distributed
energy resources that are outside of the traditional energy efficiency program purview. To add to that, one of the
utility representatives interviewed stated that IOUs are also still trying to determine where they stand on things like
microgrids and distributed generation.
To seize these potential opportunities, utilities need to break down the internal barriers that often separate the energy
efficiency program administrators from the distribution engineers and the long-term strategists. As another utility
representative stated, Its hard to say whether or not this would fit into the current portfolio of programs, because
the technologies more affect infrastructure, we dont connect on these issues often.

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

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Smart Green Cities ENERGY 17

Making a city smarter and greener is also a difficult concept to grasp for utilities in many respects. The idea of
smart cities is so much bigger than just energy. Its 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 smart
city strategy. Focusing on the energy dimension may make the process more manageable, but the benefits to the
utility need to be clearly understood.

Smart Green City Opportunities


DNV GLs research shows that many utilities business, operational, and long-term interests are well aligned with
city-level objectives, which are focused on grid reliability, energy savings, and more efficient management of
energy resources. Based on our discussions with industry representatives, we see the following as key areas for
utilities to enhance their work with cities:
Work with regulatory commissions to develop

Focus on programs that engage cities on a regional

additional mechanisms for partnerships with local


governments. Increasing the opportunity for utilities to
provide education, funding, and additional technical
support to cities and local governments in the interest
of promoting energy efficiency and new smart grid
technologies can benefit both the utilities and the
communities they serve. One utility representative
mentioned the need to brainstorm around the
future of local government programs and how to
break out of energy efficiency and focus on a more
holistic partnership combining reliability, adaptation,
demand response, and other approaches with energy
efficiency.

basis. Surrounding communities should also be able


to benefit from city initiatives. Further, developing
a platform where cities and local communities can
exchange 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 with
the private sector to provide street light conversion
services to other municipalities is provided on the
next page. Regional planning organizations may be
used to accomplish this as well. In Massachusetts, the
Metropolitan Area Planning Council supports the city
of Boston and surrounding communities with energy
planning services including bulk purchasing programs
that make buying certain technologies, such as LED
street lights, more economical for local communities.

Work with city staff to pilot smart city projects.

Many cities want to be seen as leaders. Demonstration


projects provide an opportunity for utilities and cities
to work together to bring new technologies to market
such as advanced controls, smart meters, sensors, and
monitoring devices. City facilities such as city halls,
libraries, and community centers are high-profile
locations where citizens can be engaged and provide
feedback. Piloting programs for battery storage
technologies, automation and controls, and automated
demand response also provides the opportunity to
evaluate and measure actual performance and the
benefits associated with increased energy savings and
improved grid reliability.

Enhance technical assistance in support of energy-

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

related planning efforts and market education.


Some utilities such as SCE through its Sustainable
Communities Program have realized the benefits
of working with cities and communities early in the
process of project design and selection. However,
many are still challenged by this. To advance energy
efficiency programs, enhance market development,
and achieve greater levels of efficiency, utilities and
regulators must embrace the idea of offering programs
that are not widget-based. Comprehensive programs
focused on planning, public education, behavioral
change, and removing market barriers are gaining
momentum and are believed by many to be the way
to transform the building industry and capture deeper
energy savings.

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Smart Green Cities ENERGY 18

Case Study: Municipal Street Lighting in Canada


One utilitys street lighting conversion program was so successful that they decided to export their experience
by partnering with a local company to deliver streetlight conversion services to other Canadian municipalities.
Part of the Association of Municipalities of Ontario family, Local Authority Services (LAS) is a preferred provider
of competitively-priced and sustainable business services for Ontario municipalities and the broader public
sector. The below two images show an example conversion to LED street lights.

Before

After

Having the utility involved in planning and making decisions about projects and technologies to pursue also gives
cities more confidence in moving forward. In the case study below, you can see how New York Power Authority
has assisted five cities develop plans for achieving significant energy savings. Having a city working with the utility
can help reduce hurdles around costs, investments, and coordination, and position both the utility and the city
as leaders. In addition, without a fully comprehensive approach, both are missing out on potential opportunities.
For the achievement of Smart Green City goals, there needs to be a more systematic approach that goes beyond
building equipment and clean energy systems. Ideally, planning around smart green technology investments would
also take into consideration water, wastewater management, and transit systems, as they all rely on energy systems.

New York Power Authority: Build Smart NY Five Cities Energy Plans
The Five Cities Energy Plans effort is an expansion of New York Governor Cuomos BuildSmartNY initiative that
was launched in December 2012 and is supported by the New York Power Authority. The program aims to
improve the energy efficiency of New York State buildings by 20% by 2020 in a strategic, coordinated, costeffective and data-driven manner. The five cities (Buffalo, Albany, Rochester, Syracuse and Yonkers) have each
developed Energy Plans that outline efforts each city is undertaking to implement smart technologies.
Among other goals, the plans seek to reduce energy consumption, strengthen reliability and resiliency of
energy infrastructure, and catalyze clean energy investment. Participating cities use a web-based energy
data management tool to streamline data collection, tracking, and benchmarking. They are also considering
feasibility studies for expanding electric vehicle charging and distributed generation infrastructure.
The City of Albany is looking to improve the resiliency of energy delivery systems in a redevelopment project
in the 68-acre Sheridan Hollow neighborhood. The city is currently assessing the feasibility of improving smart
grid capabilities to serve the energy demands of Sheridan Hollow as well as the potential for a microgrid
development around a state-owned steam plant in the area. Albany has also formed a smart
grid working group to demonstrate the applicability of smart grid, distributed renewable, and battery
storage technologies.

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

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Smart Green Cities ENERGY 19

LOOKING AHEAD: SHARED VISION


FOR SMART GREEN CITIES

The 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 at
the city level. Figure 4 shows how cities and utilities can work more closely with their community stakeholders to
achieve mutual goals.
The Community

Voters &
citizens

Residents

Utility
customers

Businesses

Utilities

Cities

Greater

Mutual
goals

Healthy,

clean
eviroments

efficiency

Economic

prosperity

Figure 4: Common Goals

Strategies for Realizing Mutual Benefits


City relationships with local utilities vary by jurisdiction, even those with their own municipal utility. In order to
realize mutual benefits, both sides must have a clear business case for working with each other. Strategies for
success include:
Initiating a planning process to clearly understand

where city and utility interests overlap. Local


government concerns and local issues vary
significantly. Similarly, utility regulatory environments
and existing programs influence how partnerships
with cities can realize the most benefit. Identifying
overlapping interests would happen best through a
facilitated dialogue and planning process.

in street lighting, or integrating distributed energy


technologies to enhance reliability and distribution
system relief.
Planning to use these ideas as a basis for broader

Identifying specific Smart Green City projects that

might fit with existing utility initiatives. Utilities should


support cities in developing a high-level analysis of
specific projects with potential impacts and benefits
clearly defined. Projects could include help with
outreach for underperforming programs, help in
coordinating targeted geographic or market sector
programs, upgrades to city properties, improvements

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

planning discussions. City staff should prepare to


discuss long-term city goals, how these projects
support those goals, and how they may complement
0%
20%
utility interests. There is a need in many areas of the
country to develop more comprehensive programs
involving early intervention and market transformation,
and utilities interested are interested in understanding
how city initiatives can help understanding how city
initiatives can help. City and utility staff should also
ensure that state legislators and regulators know
about these ideas so they can lend support to multibenefit projects.

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40%

Smart Green Cities ENERGY 20

A Smart Green City Planning Framework


For cities and utilities that are interested in conducting a more thorough planning process to identify and prioritize
projects, we provide a Smart Green City Planning Framework on the next page (Figure 5). This simplified framework
contains a list of recommended steps cities can take toward developing a comprehensive Smart Green City
Action 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 progress
and work efficiently to develop a mutually beneficial plan that enjoys widespread support. Our research showed
that there is no lack of technologies and tools for projects; rather, there is a lack of understanding on how to work
together with utilities and across city departments.

Future Funding Opportunities


Finally, funding was consistently noted as a main challenge to implementing Smart Green City projects during the
course of our interviews. In response to that, we identify two federal funding opportunities likely to be available in
the future (2016-17) to help cities and local governments implement projects:
US Department of Energy (DOE) State Energy

Envision America: In September 2015 the Obama

Program (SEP): SEP is a source of funding that


municipalities, counties, and other local government
entities can tap into to carry out energy efficiency
and sustainability projects. The green component
of becoming a Smart Green City may be able
to secure funding for a portion of costs through
this ongoing program. SEP provides funding and
technical assistance to state and territory energy
offices to help them advance their clean energy
economy while contributing to national energy
goals, and in turn states provide resources to local
governments. According to DOE, SEP also provides
leadership to maximize the benefits of energy
efficiency and renewable energy in each state
through communications and outreach activities and
technology deployment, and by providing access to
new partnerships and resources (http://energy.gov/
eere/wipo/state-energy-program).

Administration announced Envision America, a new


Smart Cities initiative that will invest more than
$160 million in federal research and leverage more
than 25 new technology collaborations to help
local communities tackle key challenges including
managing the effects of a changing climate. Envision
Charlotte was recently named as the model for the
Envision America energy efficiency program (see
case study below). In order to tap into grants and
other resources that this program will offer, cities will
need to develop an Action Plan. Departments such
as the US Environmental Protection Agency and DOE
are still developing their plans for implementing
the administrations initiative, but cities can start to
position themselves now by partnering with their
local utilities to develop a Smart City Action Plan to be
ready to act once the Envision America programs
are launched.

Case Study: Envision America in Charlotte, NC

The White House Office of Science and


Technology Policy recently that Charlotte, NC
will be the site for the first Envision America
workshop in January 2016. The city announced
a 16.1% energy use reduction already achieved
toward its goal of 20% reduction over five
years, representing a total savings of over $17
million and elimination of 48,599 tons of CO2
emissions. (www.envisioncharlotte.com).

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

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Smart Green Cities ENERGY 21

Smart Green Cities


Identify a City and a Utility Champion Ideally
get the mayors endorsement. Most successful
efforts of a complex nature succeed because of
strong leadership and relationships, so identify
individuals with credibility across the aisle to
develop a Smart Green City vision.
Form a Task Force Pull a small set of diverse
representatives from across city (e.g., planning,
public works) and utility (e.g., customer facing,
grid reliability) to be part of a Task Force
charged with producing the Plan.

Hire a Facilitator To guide the discussion


and keep the Task Force on task, it
is important to bring in an outside
independent party with expertise in
planning in order to make sure that the
team gives equal voice to all concerns while
keeping their eye on the prize producing a
workable Smart Green City Action Plan.
Provide a Framework, Gather Data Tools
and baseline energy data are needed to
give the group a foundation for identifying
a vision and project goals, including
knowing what data to collect, and efficiently
sort through options and prioritize tasks.
This should include tools for inventorying
facilities and assets, assessing energy
efficiency and clean energy opportunities,
conducting cost-benefit analyses and
developing a business case for action.

Figure 5: Green City Action Plan

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

Action Plan
Evaluate Potential Near-term and
Long-term Initiatives The project should
inventory existing energy and sustainability
initiatives and understand different priorities
across departments. Potential Smart Green
City projects or initiatives should be evaluated
based on a cost-benefit analysis to develop a
business case for action.
Engage the Public Public participation is
essential and key stakeholders should be
identified at the outset, perhaps with an initial
kick-off or visioning workshop. Then, once options
are on the table, consider conducting a consumer
and/or business survey to get public input. Its
important to not only inform the public but
fully engage them in the process if you want to
achieve full buy-in to the eventual plan.

Make the Business Case Essential to the


planning process is making the business
case and clearly articulating the bottom
line because ultimately, that is what decision
makers are going to want to know. Keep in
mind potential funding and financing sources,
including issuance of green bonds or climate
bonds. This is a good time to highlight the
unique capabilities of both utilities and
municipal government for identifying financing
for projects. This is also where you can identify
any external sources of potential funding, like
federal institutions.

Communicate the Plan- Prepare a


communications plan for reporting on
progress. Stakeholder representations will
need to report to their superiors, and external
groups and the public should be informed at
periodic points of progress.

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SAFER, SMARTER, GREENER

For more information please contact Betty Seto,


DNV GL Sustainable Buildings and
Communities at betty.seto@dnvgl.com