Quantifying RoI in smart city infrastructure

How can municipal planners build a business case for investment in smart city technology?

At a time when budgets are being constantly squeezed, city officials must allocate limited resources and identify infrastructure in need of maintenance or upgrades, making decisions on investments whose consequences may only be felt decades later, says German industrial group Siemens. As a result, it’s vital that they have a factual base for providing the funds to make their cities future-ready and competitive.

A new study by Siemens and professional services firm Arup proposes a methodology for quantifying return on investment (RoI) in digital urban infrastructure, based on an analysis of five European cities.

The report sets out the benefits of six infrastructure sectors – energy, transport, buildings, security, harbours and connectivity – in the real-life urban environments of London, Brussels, Aberdeen, Alba Iulia in Transylvania, Romania, and Istanbul’s Kartal district. Using more than 350 data inputs, it calculates their benefits to the city and their return on investment.

The methodology encompasses not just ordinary cost-benefit assessments, but also the additional benefits to investors, the city, and other stakeholders, as well as the value of the data and the digital economy.

In London, for instance, the electricity grid is operating close to capacity, placing stress on 40% of substations. Smart technology can address this issue in a variety of ways:

  • Digital solutions such as flexible AC transmission systems (FACTS) can optimise existing distribution infrastructure to gain capacity without requiring new investment in the grid itself.
  • Virtual power plants, where multiple generators are digitally linked, can minimise the need for baseload generation.
  • Intelligent LED streetlights can respond dynamically to their environment using motion sensors, reducing emissions and light pollution as well as energy costs.

The research found that in East London’s “Arc of Opportunity” development scheme, energy measures would result in a digital dividend of €304m (£280m) in benefits over 35 years, including indirect benefits from new energy delivery models, changes in consumer behaviour, and carbon reduction.

Meanwhile, an investment of €12m (£11m) over four years in smart measures to boost transport connectivity in the Royal Docks could return up to €251m (£230m) in long-term direct and indirect gains.

Elsewhere, the study found that Brussels could save up to 8% of its policing costs, a digital dividend of €30m (£28m), through predictive policing based on algorithms and surveillance cameras. Furthermore, in Kartal, a district of Istanbul on the earthquake-prone Bosporus, smart sensors could save lives in addition to managing energy efficiently. The overall value of return from investment in smart buildings in the district is estimated to reach an impressive rate of 24:1.

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