A point that is often missed when assessing technology and its impact on society is the business model for implementation/utilization of the technology. Glenn Wintrich and Brian Donnellan are co-investigators on a National Science Foundation grant researching smart cities. As part of that work they are investigating the role of business models and how they directly impact the adoption of new technologies in smart cities.
Dell recently collaborated on a smart buildings project for a 40-story office building in New York City. By collecting data on the occupancy of the building and comparing it to the HVAC system settings, they found that they were cooling the buildings long after people had left for the evening. In addition, through data analytics, they found that during lunch the building occupancy was very low, allowing them to adjust the HVAC to accommodate that change. These two solutions produced a $250,000 per-quarter savings to the building owner. This solution was an easy sell to the building owners, who quickly asked where else they could realize savings.
Replacing parking meters with smart meters could allow a new level of service for city residents, such as enabling credit card payments and even providing the ability to locate unoccupied parking spots. The replacement cost of a parking meter, however, is not cheap. In Santa Monica, new smart parking meters cost $750 each with a total capital investment of $4.5M. Seattle installed parking stations, which service 7 parking spaces on average, for a capital investment of $10.2M. The expected payback period for Seattle is 3+ years and is based on a prediction of increased revenue from easier parking and reduced service expenses. A multi-million dollar capital investment with a 3+ year return represents a challenging initiative for any city government.
Innovative Business Models
Ericsson and Phillips recently introduce “Zero Site” an integration of wireless technology and low-power LED lighting. Their goal is to provide a business model for cities, to fund the transition from traditional to LED lighting. The LED lighting provides energy reduction of 50%, but that may not be enough to support the capital cost for new lighting. What’s the solution? Zero Site adds micro cells for cellular and broadband data that can be leased to data providers. The license fees help accelerate payback and support maintenance of the system.