RESEARCH REPORT

Executive Summary:
Utility Opportunities in Smart Cities
EV Charging, Smart Street Lighting, Smart Buildings,
DER, and Smart City Communication Networks:
Global Market Analysis and Forecasts

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Published 1Q 2019

Ryan Citron
Senior Research Analyst

Eric Woods
Research Director
 Utility Opportunities in Smart Cities

Section 1
EXECUTIVE SUMMARY
1.1 Energy Industry Disruption Creating Smart City Opportunities for Utilities
The shift to a decarbonized global economy and toward an increasingly clean, intelligent,
mobile, and distributed energy ecosystem presents immense opportunities and challenges
for energy utilities. In parallel, digital technologies are transforming the energy
infrastructure and the vertical sectors this infrastructure supports. Many of these issues are
being brought together in smart city developments around the world.

Smart cities sit at the confluence of major disruptions across multiple industries, including
energy, transportation, buildings, and core city services. Utilities have been key partners in
many early smart city projects but often with a limited focus on technology evaluation. This
is changing as utilities realize that smart cities also offer opportunities to develop new
business lines, extend their partner ecosystems, and establish new bonds with local
communities. This report examines emerging opportunities for utilities in smart cities in
areas such as renewable generation, energy storage, EVs, smart street lighting, and smart
buildings.

1.2 Market Issues

Utilities around the world are already extending their involvement with smart city
developments, particularly in North America and Europe. Several smart city application
areas provide a particularly good entry point for new services as they offer the chance to
build on existing assets and skill sets.

EV charging is potentially the single most important new smart city business opportunity for
utilities. Utilities risk being shut out of the most significant load growth factor within the next
10-20 years if they do not become key players in the EV charging value chain. Smart street
lighting also fits well with utility priorities, particularly where they already have ownership
over considerable lighting assets (e.g., in many parts of North America). Smart street
lighting uses traditional utility capabilities as providers of lighting services, and connected
lighting has a proven and short payback period compared to other smart city solutions.
Supporting the expansion of distributed energy resources (DER) in urban environments is
a natural evolution from traditional utility functions, and smart buildings offer opportunities
to develop a range of new energy-related services.

While utility interest and involvement in smart city deployments is increasing, several key
barriers to greater market participation remain. These barriers include regulatory
challenges, utility business culture and organizational structure, technical and operational
challenges, and the lack of a business case for some smart city applications. The
configuration of these challenges is unique to each utility given its history, location, culture,

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 Utility Opportunities in Smart Cities

and current asset base. However, there are many lessons to learn from early leaders
already establishing their footprint in the smart cities market.

1.3 The Market Opportunity

Navigant Research expects the annual utility revenue opportunity in smart cities to grow
from $44.8 billion in 2018 to $100.5 billion by 2027, at a compound annual growth rate
(CAGR) of 9.4%. The cumulative 2018-2027 smart city revenue opportunity for utilities is
estimated to reach $689.4 billion.

Chart 1-1. Annual Utility Revenue Opportunity in Smart Cities by Region, World Markets:
2018-2027

$120,000

North America
$100,000 Europe
Asia Pacific
Latin America
($ Millions)

$80,000
Middle East & Africa

$60,000

$40,000

$20,000

$-
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

(Source: Navigant Research)

The primary technology segments included in the forecast are DER, smart buildings, EV
charging, and smart street lighting. DER is expected to be the largest smart city revenue
opportunity for utilities, as the global energy system continues its transition to make the
electricity grid more efficient, resilient, cost-effective, and sustainable. While smart
buildings are anticipated to be the second largest technology segment in terms of revenue,
research suggests it will also be the slowest growing sector due to the maturity of the
market. Investment is expected to ramp up quickly in EV charging to support growing sales
of EVs, making it the fastest growing technology segment included in the study. Smart
street lighting is another emerging opportunity for utilities, but regulatory challenges and
lack of ownership over street light poles in some regions mean a comparatively small
revenue opportunity is expected over the forecast period.

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 Utility Opportunities in Smart Cities

Section 6
TABLE OF CONTENTS

Section 1 ...................................................................................................................................................... 1

Executive Summary .................................................................................................................................... 1

1.1 Energy Industry Disruption Creating Smart City Opportunities for Utilities ................................... 1

1.2 Market Issues ................................................................................................................................ 1

1.3 The Market Opportunity ................................................................................................................ 2

Section 2 ...................................................................................................................................................... 3

Market Issues .............................................................................................................................................. 3

2.1 Utilities Enter New Markets in the Global Energy Transformation ................................................ 3

2.2 Market Evolution ........................................................................................................................... 4

2.2.1 The Rise of Sustainable Cities ................................................................................................ 4

2.2.2 Smart City Platforms ............................................................................................................... 6

2.2.3 The Impact of Digitization and Automation ............................................................................. 7

2.3 Smart Cities Present New Business Opportunities ....................................................................... 8

2.3.1 Smart Street Lighting ............................................................................................................... 8

2.3.2 EV Charging Infrastructure and Services .............................................................................. 10

2.3.3 DER ....................................................................................................................................... 13

2.3.3.1 Distributed Renewables Development and Integration ................................................ 14

2.3.3.2 Distributed Energy Storage Systems............................................................................ 15

2.3.3.3 Microgrids ..................................................................................................................... 17

2.3.4 Smart Buildings ..................................................................................................................... 18

2.3.5 Smart City Communication Networks.................................................................................... 20

2.4 Market Barriers ............................................................................................................................ 22

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 Utility Opportunities in Smart Cities

2.4.1 Regulatory Challenges .......................................................................................................... 22

2.4.2 Utility Business Culture and Organizational Structure .......................................................... 23

2.4.3 Technical and Operational Challenges ................................................................................. 24

2.4.4 The Smart City Business Case ............................................................................................. 24

Section 3 .................................................................................................................................................... 25

Utility Profiles and Case Studies ............................................................................................................. 25

3.1 Introduction.................................................................................................................................. 25

3.1.1 Alliander................................................................................................................................. 25

3.1.2 CLP Group............................................................................................................................. 26

3.1.3 ComEd................................................................................................................................... 26

3.1.4 DEWA .................................................................................................................................... 27

3.1.5 Duke Energy .......................................................................................................................... 28

3.1.6 E.ON ...................................................................................................................................... 28

3.1.7 Enel ....................................................................................................................................... 29

3.1.8 ENGIE ................................................................................................................................... 29

3.1.9 Georgia Power....................................................................................................................... 30

3.1.10 PG&E ................................................................................................................................ 31

3.1.11 Seattle City Light ............................................................................................................... 32

3.1.12 Singapore Power............................................................................................................... 33

3.1.13 Xcel Energy ....................................................................................................................... 33

Section 4 .................................................................................................................................................... 34

Market Forecasts ....................................................................................................................................... 34

4.1 Scope and Methodology ............................................................................................................. 34

4.2 Global Smart City Revenue Opportunity for Utilities ................................................................... 35

4.3 Smart City Revenue Opportunity by Technology ........................................................................ 36

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 Utility Opportunities in Smart Cities

4.4 Smart City Revenue Opportunity by Region ............................................................................... 38

4.4.1 North America........................................................................................................................ 38

4.4.2 Europe ................................................................................................................................... 39

4.4.3 Asia Pacific ............................................................................................................................ 40

4.4.4 Latin America......................................................................................................................... 41

4.4.5 Middle East & Africa .............................................................................................................. 42

4.5 Conclusions and Recommendations .......................................................................................... 42

Section 5 .................................................................................................................................................... 45

Acronym and Abbreviation List ............................................................................................................... 45

Section 6 .................................................................................................................................................... 47

Table of Contents ...................................................................................................................................... 47

Section 7 .................................................................................................................................................... 50

Table of Charts and Figures..................................................................................................................... 50

Section 8 .................................................................................................................................................... 52

Scope of Study .......................................................................................................................................... 52

Sources and Methodology ....................................................................................................................... 52

Notes .......................................................................................................................................................... 53

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 Utility Opportunities in Smart Cities

Section 7
TABLE OF CHARTS AND FIGURES

Chart 1-1. Annual Utility Revenue Opportunity in Smart Cities by Region, World Markets:
2018-2027 ............................................................................................................................. 2

Chart 2-1. PEV Sales by Region, World Markets: 2018-2027 ............................................................... 10

Chart 2-2. Annual Installed Total DER Power Capacity by Technology, World Markets: 2018-2027 ... 14

Chart 4-1. Annual Utility Revenue Opportunity in Smart Cities by Region, World Markets:
2018-2027 ............................................................................................................................ 35

Chart 4-2. Cumulative Utility Revenue Opportunity in Smart Cities by Region, World Markets:
2018-2027 ............................................................................................................................. 36

Chart 4-3. Annual Utility Revenue Opportunity in Smart Cities by Technology, World Markets:
2018-2027 ............................................................................................................................. 37

Chart 4-4. Annual Utility Revenue Opportunity in Smart Cities by Technology, North America:
2018-2027 ............................................................................................................................ 38

Chart 4-5. Annual Utility Revenue Opportunity in Smart Cities by Technology, Europe: 2018-2027 ... 39

Chart 4-6. Annual Utility Revenue Opportunity in Smart Cities by Technology, Asia Pacific:
2018-2027 ............................................................................................................................. 40

Chart 4-7. Annual Utility Revenue Opportunity in Smart Cities by Technology, Latin America:
2018-2027 ............................................................................................................................. 41

Chart 4-8. Annual Utility Revenue Opportunity in Smart Cities by Technology, Middle East & Africa:
2018-2027 ............................................................................................................................. 42

Figure 2-1. Utility Opportunities in the Urban Energy Cloud ...................................................................... 4

Figure 2-2. Platform Value Creation in the Energy Cloud ......................................................................... 7

Figure 2-3. EV Charging Business Models .............................................................................................. 12

Figure 2-4. Framework for Generating Value for Buildings in the Energy Cloud .................................... 20

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 Utility Opportunities in Smart Cities

Table 2-1. Climate Action Plans of Selected Cities .................................................................................. 5

Table 2-2. Utility GHG Reduction Targets ................................................................................................ 5

Table 2-3. Market Drivers and Services Provided by DESSs ................................................................ 17

Table 3-1. Alliander Smart City Offerings ............................................................................................... 25

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 Utility Opportunities in Smart Cities

Section 8
SCOPE OF STUDY
Navigant Research has prepared this report to present an analysis of the global smart city business
opportunities for utilities. The report focuses on smart city use cases such as EV charging, smart street
lighting, smart buildings, DER, and smart city communication networks. It includes a study of regional
trends, utility case studies, and key barriers and dynamics in the market. The report includes 10-year
forecasts of the smart city revenue opportunity for utilities segmented by world region and technology.

The report’s purpose is not to provide an exhaustive technical assessment of smart city technologies.
Rather, it aims to offer a strategic examination of the smart city market opportunity for utilities, with a
focus on key economic, business, and social drivers, technology issues, regulatory factors, and the
competitive landscape.

SOURCES AND METHODOLOGY

Navigant Research’s industry analysts utilize a variety of research sources in preparing Research
Reports. The key component of Navigant Research’s analysis is primary research gained from phone and
in-person interviews with industry leaders including executives, engineers, and marketing professionals.
Analysts are diligent in ensuring that they speak with representatives from every part of the value chain,
including but not limited to technology companies, utilities and other service providers, industry
associations, government agencies, and the investment community.

Additional analysis includes secondary research conducted by Navigant Research’s analysts and its staff
of research assistants. Where applicable, all secondary research sources are appropriately cited within
this report.

These primary and secondary research sources, combined with the analyst’s industry expertise, are
synthesized into the qualitative and quantitative analysis presented in Navigant Research’s reports. Great
care is taken in making sure that all analysis is well-supported by facts, but where the facts are unknown
and assumptions must be made, analysts document their assumptions and are prepared to explain their
methodology, both within the body of a report and in direct conversations with clients.

Navigant Research is a market research group whose goal is to present an objective, unbiased view of
market opportunities within its coverage areas. Navigant Research is not beholden to any special
interests and is thus able to offer clear, actionable advice to help clients succeed in the industry,
unfettered by technology hype, political agendas, or emotional factors that are inherent in cleantech
markets.

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 Utility Opportunities in Smart Cities

NOTES
CAGR refers to compound average annual growth rate, using the formula:

CAGR = (End Year Value ÷ Start Year Value)(1/steps)-1.

CAGRs presented in the tables are for the entire timeframe in the title. Where data for fewer years are
given, the CAGR is for the range presented. Where relevant, CAGRs for shorter timeframes may be given
as well.

Figures are based on the best estimates available at the time of calculation. Annual revenue, shipments,
and sales are based on end-of-year figures unless otherwise noted. All values are expressed in year
2018 US dollars unless otherwise noted. Percentages may not add up to 100 due to rounding.

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in whole or in part, without the express written permission of Navigant Consulting, Inc.

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 Utility Opportunities in Smart Cities

Published 1Q 2019

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Note: Editing of this report was closed on January 25, 2019.

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