Cleantech Investor

First published in Cleantech magazine, October 2010. Copyright Cleantech Investor Ltd. 2010

Felicia Jackson reviews the challenges and opportunities implicit in sustainable urban development.

Cities are key drivers of change. Local governments own and operate substantial portfolios of buildings, fleets and other infrastructure and have great potential to lead by example. Cities can play a signifi cant leadership role in the transformation to a low carbon economy, by virtue of their responsibilities in managing transportation and waste management networks, in setting standards for energy efficiency, in managing local pollution and in responsibility for planning. They have a key role in addressing how to manage the impact of growth on infrastructure that already seems overstretched and they can mandate policies ranging from a shift from coal to renewables, to the reuse and recycling of products and materials, as well as policies to change consumer awareness and consumption patterns.

Cities can provide incentives to corporations and individuals to take action on sustainability and climate change, and stimulate and support community action. Perhaps most importantly, they have significant procurement power. Cities can negotiate strong deals with the private sector, demanding supplies and services to a specific standard. Because of their roles as hubs of commerce, as well as homes to millions, cities already use around 75% of the world’s energy. That means cities must begin to focus on cutting resource consumption, energy security, increased effi ciency and a reduction in waste (municipal, energy and heat). Operating effectively will entail enhancing effi ciencies and making the most of resources which are becoming increasingly scarce.

According to the Carbon Disclosure Project, 70% of total global greenhouse gas emissions are generated from economic activity in cities. Thus, cities must play a major role in addressing the mitigation of emissions and long term adaptation to the consequences. They can address the need for the development of local frameworks of low resource demand. This can result in anything from increased water cycle localisation (from demand reduction, removal of contaminants, reintroduction of ecosystem support), an increase in distributed generation, even the reintroduction of local food supplies.

If we can’t further decarbonise existing city infrastructure, we can change the way it operates through technologies to provide point of use power generation, in-home CHP and increasingly energy efficient water treatment. A key element in terms of technology for a sustainable city is the smart grid. Martin Pollock, Director of Siemens Energy Sector, comments that:

“Smart grids bring to life the key features of smart buildings, like virtual generation and storage, to build an ‘internet of energy’ for the sustainable city. Smart grids devolve power locally - literally - and will make our energy distribution networks much more responsive to radically changing needs from both large and small consumers.”

Cities are complex entities, however, and addressing the challenges faced by cities of the future is no straightforward task. Peter Sharratt, Head of Sustainabilty and Climate Change at WSP Environment & Energy, a leading global environmental and sustainability consultancy, believes that, if we are to be eff ective in making cities more sustainable, we need to accept that cities operate as vastly complex systems and address them appropriately. Transportation, the electricity sector, buildings and agriculture all involve complex systems of technology, infrastructure, support industries, regulation, lifestyle and behaviour. Major shifts in any of these sectors require time for the iterative processes that eventually lead to large scale shifts in technology and society. Such changes require long term planning.

Successful management of future urban environments will require innovation in clean technologies, fi nancing of that innovation and its deployment. Issues to be addressed range from compliance with external regulations, logistics management, security, health and local politics. We need eff ective means of addressing energy supply (renewable energy both centralised and localised); smart transportation; energy effi ciency (including everything from smart grid technology – both for demand response applications and at the domestic level of smart metering – to ‘green buildings’, cogeneration and electronics); clean industry, air and environment; water and even agriculture. The city is the only entity which must consider the impact of its operations in each of these areas.

Three questions must be addressed if we are to identify the opportunities arising from the transition to low carbon urban environments:

• New build or regeneration?

• How do we implement sustainability in existing cities?

• Who will pay?

New build or regeneration?

There is a hot debate about whether we should build eco-cities from scratch or attempt a retrofit of existing urban areas.Should we focus our efforts on developing new sustainable cities or on retrofitting existing cities to make them more sustainable long term? The answer requires an understanding of how embedded any individual city is in its emissions trajectory, and what might be involved in correcting that trajectory.

PRP Architects, a UK-based architectural practice, has completed the central master plan for Chongqing, the key industrial city in western China. Chris Wilford, chair of PRP’s sustainable steering group, says there are certain key requirements in the creation of a new city: location; vision and strong local leadership; an integrated planning approach; and critically a long term business plan which benefi ts the community, de-risks the developers’ delivery, and enables upfront infrastructure (such as transport/schools/green open spaces) to be delivered within the early phases of the development.

Sean Lockie, Head of Sustainability at project management firm Faithful+Gould, points out what should be obvious, that:

“A town built from scratch allows for the development of a fresh, brand new infrastructure that is low or zero carbon. Standards are set very high, providing the opportunity to completely rethink the infrastructure.”

The provision of a blank canvas enables a completely new approach to traditional problems such as planning, zoning, transportation, land use, waste and water management. A business wanting to operate in a new city must abide by the rules of that city – which means changing the approach of companies. However, there is a flaw in the vision: while an eco-city could be created to be sustainable in operation, the process of construction is emissions intensive. According to Global Green USA, the net impact of new eco-cities is likely to be an overall rise in emissions, due to the emissions impact of construction itself.

Sustainability in existing cities

Peter Lacy, Managing Director of the Sustainability Services Practice across Europe, Africa and Latin America at management consultancy Accenture, warns that it is crucial to address the issue of sustainability in existing cities:

“Given that 70% of today’s global CO2 emissions come from existing cities, it is absolutely crucial to make these environments more sustainable rather than simply building new cities from scratch. Retrofitting existing cities will be a huge challenge, but through the use of new technology including smart grids and the adoption of cleaner more decentralised energy, we can tackle the demand issue and help make the city environment more energy efficient.”

The problem with existing cities, argues Sean Lockie, is that:

“Existing infrastructures rely on carbon heavy energy sources such as coal or gas and have leaky, inefficient buildings, which haven’t benefi ted from the latest technologies and materials. Existing cities also have to deal with often badly planned layouts that have been developed over time.”

This implies that we need to take an entirely different approach to making cities smarter and more sustainable. We must look at the wider implications for economies, clean air and comfort that addressing emissions and streamlining energy use and transportation can have.

The greatest potential may lie in brownfield developments: not simply improving the operation of existing cities, but redeveloping the ‘edge’ areas of cities in the rehabilitation of land or clean-up of sewage plants. Jaime Lerner, former Mayor of Curitiba (a Brazilian city recognised as a model of urban planning), believes that new models must be developed on existing infrastructure:

“Green building is important, as are new sources of energy, new materials, but on their own none of them is enough. There are three key issues which must be addressed – mobility, sustainability and diversity (social justice). We must accept that sustainability is an equation between what we save and what we waste.”

The role of planners, zoning and an eff ective mix of use is crucial here. Factoring in space for growing food, or for local markets to take pressure off transportation, and managing the density of living and working space can improve the quality of living. Effective designs for green buildings should incorporate their impact on the local environment: e.g. the integration of distributed generation and development of local grids and networks in urban areas, where wind or solar power on homes and apartments is less likely to be effective. According to a report from the WWF, incorporation of existing technologies in planning sustainable communities could save 22 million tonnes of CO2 in the EU-25 alone.

Who will pay?

The cost of action is a critical issue. Replacing existing physical infrastructure is expensive and disruptive. In developing greenfield cities, the commitment to long term infrastructure development, with projects taking far longer to complete than expected, can prove too much for many investors. The integration of smart technologies into existing cities raises economic questions – but these pale in comparison to the difficulties of implementation across multiple groups and areas. Technological innovations in IT and engineering may mean that existing infrastructures can be infused with intelligence, enhancing their efficiency, competitiveness and sustainability. The question remains: who will pay?

Cities can create frameworks to encourage the deployment of new technologies by demanding high standards of energy effi ciency. Suppliers may use energy from fossil fuels to manufacture, transport and deliver goods and services to a city. If the price of energy rises because of a Renewable Portfolio Standard, or a carbon market or tax, that increase will be passed on to the city – with considerable cost implications if a signifi cant proportion of that city’s budget is spent on purchased goods and services. Procurement plans can stimulate a market for low carbon technologies, goods and services, bringing down the price as supply increases.

Malcolm Smith, Global Leader of the urban design practice at Arup, a firm of designers, planners and engineers, points out that:

“Economic principles are at the heart of cities. So in order to drive systemic change, changes must be economically viable. This need is exacerbated because the new technologies and systems that need to be implemented are transformational, and go some way beyond the ideas in use at the moment.”

According to Peter Head, Chairman of Global Planning at Arup: “Innovation in cities is about landuse planning and technology but it’s also about new ways of managing financial models.” Head suggests that cities could provide entirely new sources of funding for the transformation of local environments:

“It’s possible to imagine a city where pensions savings are recycled through the city to improve its function.”

WSP’s Sharratt suggests another alternative – carbon bonds. ‘Green bonds’ have also been proposed by the European Parliament. Such bonds might be an effective way of capitalising the value of emissions off set/reduction projects and programmes undertaken at the scale of municipality and offering them to individuals or organisations for purchase as a premium off set product with local ‘value’. Alternatively, bonds might be granted to support local community projects or off ered as part of incentivisation programmes to reward improved environmental performance.

Cities can also play a role in creating economic growth through the development of knowledge clusters, becoming laboratories for innovation, especially in cleantech. ‘Smart cities’ off er an integrated and networked physical and utility infrastructure, combined with significant ICT investment, to improve economic and business efficiency and supportclusters of hi-tech knowledge industries. Eurocities, a group of 140 cities in over 30 European countries, is working with EU institutions to accelerate the pace of investment in advanced infrastructure. Paul Bevan, Secretary General of Eurocities, says:

“Urban concentration allows us to use resources like land, energy and water more effi ciently; it also supports producer and consumer markets that provide a critical mass for innovation and public services. We just need to make cities more sustainable, and ICT can help us.”

In many cities in the developing world, a more critical area is the development of resilience and capacity building, in terms of city planning and management, and in sourcing funding for city adaptation. The recent floods in Pakistan, China and Niger have been a reminder that the world must bolster its resilience to climate change, which will likely have the most devastating eff ect on poorer countries. In the past three decades 85% of deaths associated with all natural catastrophes have occurred in the developing world, where even small economic losses can have long term effects on development and where human health is generally poorer. According to Andrew Maskrey of the United Nations International Strategy for Disaster Reduction, even ignoring climate change, risk is increasing as populations and exposure increase.

The difference in impact on rich versus poor is highlighted by a recent ‘tale of two cities’. The earthquake (7.1 on the Richter scale) which hit Christchurch, New Zealand caused no deaths, while a similar earthquake in Port-au-Prince, Haiti (with an epicentre at an equal distance) killed 230,000 people. The key difference was the relative strength and resilience of the infrastructure in the respective countries. Insurance can play a key role in supporting increased resilience to disaster, through encouraging a system-wide reassessment of risk and its mitigation.

The insurance and re-insurance industries could help governments, at both national and city levels, in several ways, from sharing risk management expertise, helping price the cost of risk, as well as designing risk-reduction and risk-transfer mechanisms. Frameworks within which action to mitigate, or adapt to, risk is incentivised are being investigated. If cheaper insurance is the result of investing in adaptation, or mitigation, there is a further incentive for action. In a world where requirements for increased sustainability are obvious, but sources of funding to pay for new technology and sustainable practices are scarce, a smarter city may be one which considers entirely new ways of financing sustainable urban development.

Given that the majority of the world’s urban environments already exist, and are growing rapidly, we need to fi nd new ways to encourage changes in behaviour, in fi nancing models, in planning, in construction and in the overall management of resources, be they energy, water, food or other material supplies. Eurocities’s Paul Bevan points to the importance of ICT as part of a greater whole:

“ICT can help reduce cities’ carbon footprints particularly by changing the behaviour of citizens and firms. For example smart meters improve energy efficiency, and realtime information allows us to make smarter transport choices. Fast broadband can increase productivity through process innovation and opens up global markets even to small businesses, while working and trading virtually reduces travel and its climate impact.“

Driving Change

As far as Jaime Lerner is concerned, making cities smarter is not about a problem or solution, but rather about having a vision for the future. According to Alex Solk, a sustainability expert with Sheppard Robson, a leading UK architectural practice:

“For existing cities to be improved, it is vital that there is the will at high level to carry out the changes needed. Without the will to change things, it won’t happen – the people in power need to spearhead major infrastructure changes. And for inhabitants of existing cities to put up with short term disruption/pain for the long term ambitions of projects/the environment.”

Another barrier to change is our expectations. Most of the energy in buildings is used to maintain what we regard as ‘comfort’ through heating and airconditioning. Changing our expectations of comfort could have a major impact on energy use – but would likely have a signifi cant eff ect on consumers, requiring a re-engineering of the indoor environment. There is now widespread agreement that adopting more effi cient methods of heating and cooling buildings to current ‘standards’ is unlikely to be enough. If we need to move further, is this a hurdle for politicians – or perhaps a unique opportunity to reframe our relationship with our environment? Arup’s Malcom Smith believes that awareness of the wider social and local environment is vital when developing a sustainability strategy:

“It can’t be approached with an ‘off the peg’ solution. Some communities have a very strong collective sense; I think long term sustainable improvement requires this collective approach – the level of change required means that it can be easier for individuals to engage when they feel part of something bigger.”

We must understand more closely what makes communities sustainable, and what we mean by sustainability, by resilience, even what we defined as a city. A city needs to mix working and residential areas, as well as address issues like health and social inequity. An overall approach to sustainability should lie in understanding the city in terms of density, intensity and use, as well as its social and economic framework. Many factors must be addressed to create a sustainable urban environment; transportation, energy, water, waste and more. According to Peter Sharratt: “We are being driven down the path of closed cycles and resource systems.”

‘Cities of the Future’ will explore how an integrated city management programme can address issues ranging from compliance with external regulation, logistics management, energy security and independence, health, politics and social justice. The role that cities have to play in mitigation and adaption could open up new and exciting markets for both corporates and investors. The programme will identify the innovations and new technologies required, as well as the companies that deploy them. It will explore new models in financing and deployment, as well as the frameworks enabling cities to act as drivers for a low carbon economic future.