Smart Cities MOOC

Block 2 Reading

Author: IGLUS, EPFL

iglus@epfl.ch, www.iglus.org

1 Introduction

Now that we understand the fundamentals of what constitutes a smart city, and what is dig-
italization, we explore a bit more in-depth some of the systems that are being disrupted due to
the development of the digital layer. In this block, we introduce the definitions of the main con-
cepts presented in the lectures. Afterwards, we conceptualize the transition from traditional energy
system into smart urban energy systems, delving into the context and the transformation of these
systems, as well as understanding what ”smart energy systems” mean in a smart city. The reading
will finish by applying some of these concepts to the real-life case of the Vienna Smart City.

2 Block 2 Summary

2.1 Definitions

To facilitate and streamline the understanding of these weeks’ lectures, below you will find the
definitions of the main concepts introduced during the block:

Electricity Generators: the facilities responsible for generating the electricity that will be dis-
tributed to consumers. Depending on the country, they can be privately or publicly operated.
They include a wide range of technologies, such as: wind, solar, nuclear, natural gas, coal, and
hydropower. They can also be combined with heat generation.

Transmission Systems Operators: entities responsible for transporting the energy throughout
a country or a region, using transmission infrastructure, such as the grid or pipelines. The energy
can be in the form of electricity or fuels. In the case of electricity, transmission systems operators
connect the generators to the local distributors using the electricity grid.

Distribution Systems Operators: entities responsible for developing, operating, and maintain-
ing an electricity distribution in a region. They connect the transmission systems to the end users
of electricity.

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 Utilities: are a set of basic services provided to consumers, such as water, sewage or elec-
tricity. These services are managed by entities responsible for maintaining and operating the
infrastructure necessary for their provision, as well as ensuring their quality and delivery.

Decentralized or Distributed Generation (DG): defined as the generation of electricity through

a series of small and spatially distributed generators, which connect to the grid to supply it with
electricity. The main contrast between DG and conventional generation, is that thanks to their
spatial distribution, electricity must travel much shorter distances to reach the final customers,
thus incurring less transmission losses. These systems often use renewable energy generators
that can be used in small scales, such as: solar, wind, or biomass, as well as other conventional
fuels that can be scaled down, such as small hydro.

Electrical Grid: is a network that connects: generators, consumers, transmission lines, distrib-
utors, and storage. The grid must be carefully managed to ensure it is balanced at all times. This
means that the electricity supplied must be equivalent to the current demand at any given time.

Prosumer: is a new form of electricity consumer, who is also an electricity generator. This is
done using DG, by which consumers can install small scale electricity generators in their house-
holds, such as solar, thus supplying electricity back into the grid.

Price Signal: defined as the information given to consumers through the pricing of electricity
that signals an increase or decrease of supply or demand. In practical terms, it means that prices
will change when supply or demand changes (e.g. prices go up when there is low supply and high
demand). They allow customers to manage their behavior to optimize their spending.

Smart Balancing: is the use of information and communications technology to optimize the
balancing of supply and demand. This can include, for instance, automatically turning off devices
to shave peak loads or smooth the fluctuations in demand.

Demand Side Management: is defined as the modification of demand behavior by consumers.

This can be done through a series of methods. One of the most traditional ones is by giving
economic incentives for consumers to use less energy during peak hours. Another example is
the utilization of energy storage to balance and smooth out intermittencies from renewable en-
ergy generation, which often do not match the demand profile. The use of ICTs could greatly
improve this process, by providing consumers with instantaneous data of consumptions, as well
as automating several processes in buildings, households and industries according to immediate
demand and supply.

Smart and Integrated Energy Services: the integration of energy services to other infrastruc-
tures, facilitated using ICTs. Since most other infrastructures and networks rely on energy (for
instance, sewage treatment is an energy intensive process, and the mobility sector requires en-
ergy for powering vehicles and the control infrastructure), it is possible to integrate these networks
to the energy network and ensure optimized and efficient operations through the use of the data
layer.

2.2 Transition Drivers

We can identify three main drivers in the transition towards smart urban energy systems. The
first driver is the evolution of urban infrastructure technologies in the energy sector, such as:
decentralized generation, renewable generation, electric mobility, housing technology, or district
heating. The second driver is climate change and a need for efficient use of natural resources.

With cities being responsible for approximately 75 percent of green house gas emissions [1]
and primary energy consumption [2], there is a significant push towards making cities more efficient
and less polluting. Third, digitalization is a key driver that acts as a vehicle to transitioning to smart

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 Figure 1: The Drivers of the Smart Urban Energy Systems Transition (Authors’ elaboration) .

urban energy systems.

2.3 Transition Evolution

Traditionally, energy has been centrally produced by big power plants, transmitted into cities
and then distributed among the several consumers, such as: households, companies, or service
providers. This corresponds to a linear progression from a centralized production to a decentral-
ized distribution. However, this landscape is quickly changing in all the steps of its supply chain.
In the production process, we see a shift from centralized to decentralized generation. While cen-
tralized generation still exists, it is starting to be shadowed by houses, factories and regions are
able to generate their own electricity and even feed the excess into the distribution grid. Finally,
because of renewables, we see a shift from planned production to intermittent generation, which
can be seen in both centralized and decentralized cases.

Additionally, due to this unbundling of the energy supply chain, the pricing of electricity has
changed. Instead of fixed prices, consumers now find price signals, which change according to
supply and demand. Individual electricity generators can choose to sell back to the grid when
prices are high and buy from the grid when prices are low, for instance. This has brought about
a new generation of technologies that can automatically react to these (such as refrigerators or
washing machines). These are core features of the smart urban energy systems.

2.4 Transition Layers

The electricity system is highly integrated (with all main pieces being connected) such as:
households, companies, distribution networks, and generators. However, they are also embed-
ded within a larger environment, the urban socio technical system (for instance, households pro-
duce waste, which can be turned into energy, and then can then be used by vehicles). All other
urban infrastructures are one way or another related to the electricity network. Therefore, the tran-
sition towards smart urban energy systems happens on all three smart city layers: infrastructure,
services, and data.

On the infrastructure layer, this means a transition towards a smart grid, which is capable to
handle intermittency and bi-directional flows. On the service layer, it means the creation smart

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urban energy services, which turn consumers into ”prosumers” and services gain additional lay-
ers of complexity: consumers not only buy electricity, but also store, manage, produce and help
balance loads. Finally, the data layer is what makes all this coordination possible.

2.5 Context and Actors of the Transition

To understand the challenges, we must first put the energy infrastructures into context and out-
line who are the main actors involved in managing them. As previously explored, one of the key
drivers towards smart urban energy infrastructure is a change in the energy landscape, towards
decentralized, intermittent generation and the change in pricing, towards price signals. However,
this driver can be broken up further into four key elements. The first key element is alternative
urban energy sources, such as: local solar or wind generation, geothermal, and waste to en-
ergy. The second is energy efficient consumption: houses, buildings, factories, transport, and
waste management, among others, are all becoming more efficient. Semi-off grid and completely
off grid operations are a third element; oftentimes electricity is produced and consumed locally,
without participating in the grid. Finally, new storage solutions for vehicles, houses and factories
constitute the fourth element of this technological driver. All these elements lead to challenges in
management of the smart urban energy infrastructures or smart grid.

Now that we understand the context in which this transition is happening, we can identify the
actors responsible for managing this new system. The first actor, which is closest to us, is the
prosumer. They not only consume electricity, but also produce it, and can be both households or
industries. Along those, we also find decentralized electricity producers, which can be prosumers
or simply producers on their own right (for instance, using waste to heat). Also alongside them,
we find storage operators (which can also often be transport operators). Moving up the ladder,
we find distributors. It is important to note here that urban electricity distributors with off and semi-
off grid operations may also come into play at this stage, and must be properly integrated and
coordinated.

Figure 2: TThe actors in the energy system and their relationships to each other (Authors’ elabo-
ration) .

Continuing up the ladder in Figure X, we see transmission system operators. They supply the

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electricity to the city, and sometimes out of the city to be stored at facilities such as dams. One
step above the transmission, we encounter centralized electricity producers. Finally, we encounter
traders, who fluidify the consumption and prosumption of electricity by linking all actors together.
Managing and coordinating all these actors amongst themselves is the real challenge, yet due to
digitalization, it can now be accomplished. In fact, many of these actors could emerge to play a
significant role because of the catalyst effect of digitalization. This enables smart urban energy
systems to function.

2.6 Transition Implication

In terms of the transition towards a smart urban energy system, two main layers are implicated,
which are the services and the data layers. Due to the complexity of these implications, we analyze
each one individually.

2.6.1 The Services Layer

In the services layer, it is important to first define what smart urban energy services are and
who provides them. In addition to the three drivers towards smart urban energy systems, in the
services layers we can also identify four types of customers to these smart urban energy services:
households, buildings, commercial and industrial areas, and distribution and transmission grid
operators (who buy and balance energy). Which is how we can identify what are these smart
urban energy services that can be provided in the services layer. The first is smart balancing,
which is directed at distributors and transmission system operators. The second is demand side
management, provided to households, buildings, as well as commercial and industrial areas. They
provide, for instance, more efficient demand management in relationship to pricing. The last one
is smart and integrated energy services, which integrates different urban systems, such as: waste,
vehicles, batteries, and recycling to the electricity network. These are also offered to households,
buildings, industry, and commerce.

Figure 3: The services provided under Smart Urban Energy Systems (Authors’ elaboration) .

These services are provided thanks to digitalization, by a multitude of actors. Urban electricity
distribution companies (legacy operators) offer demand side management and to a certain ex-
tent also offer smart and integrated energy services by venturing into other networks (such as
transport by operating charging stations). Urban utilities, such as water, have also the power to
offer smart integrated energy services and balancing services (by linking consumption patterns of
households, for instance). Some of the actors are new operators in the urban business, such as
intermediaries. They produce the devices or have the information (such as telecommunications

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operators) about electricity consumption and can manage consumption and sell services to users
(such as customers, industries or the grid companies that need to balance energy). Finally, we
have peer-to-peer (P2P) operators, where consumers get together and perform demand side man-
agement and balancing. In all these areas, we can find newcomers, many coming from outside
cities to play in the urban infrastructure sector.

Figure 4: The actors in the new smart urban energy services (Authors’ elaboration) .

2.6.2 The Data Layer

This is the real novelty in the smart urban energy systems. The data layer can be divided
into two categories: the first is data generation, which happens between urban infrastructures and
the data layer. Data generation can be of three kinds: user behavior, generator data, and grid
behavior. The second are the smart urban energy services providers, which are placed between
the data layer and the services layer, since these services are offered on the basis of the data
generated.

There are two visions for analyzing the data layer in the context of smart urban energy sys-
tems. First is the integrated view of data generation and usage, which is held by electricity utilities
that have generation data and want to provide services based on it. Second is the data platform
view, which is fed by generators and then used by service providers to develop different services
to different customers. These two visions raise a series of questions. If the first vision prevails,
data becomes a good. The questions then boil down to issues of data ownership and how compe-
tition is maintained and regulated to ensure no market distortions and monopolies occur. If data
is viewed as a shared platform, then the questions change; instead of data ownership, the plat-
form ownership must now be sorted out. Additionally, regulatory issues also arise, regarding data
access, availability, transparency, and pricing.

2.7 Transition Challenges

From studying the transition from legacy urban energy systems to smart urban energy systems,
we can identify some key lessons and challenges for urban managers and policymakers, which will
be explored in-depth below. These challenges happen in all three layers and in five dimensions:
technological, economic, social, political, and jurisdictional.

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2.7.1 Urban Managers

In terms of the infrastructure layer, it is important for managers within the technological dimen-
sion to pay attention to grid stability, when adding renewables, decentralized generation, and price
signals to the energy systems equation. From an economic perspective, it is important to sort out
the issue of cost allocations, to understand who will pay for the new required infrastructure. In
the services layer, managers must figure out what are the underlying businesses of smart energy
services, who pays for them, and whether a market exists for them (economical dimension). They
must also address the social dimension of user acceptance and uptake. Finally, on the data layer,
managers must establish data standards and ensure data interoperability and security (techno-
logical dimension), as well as the pricing of the data (economic dimension).

Figure 5: Summary of Key Takeaways for Urban Managers (Authors’ elaboration) .

2.7.2 Policymakers

For policymakers, the key takeaways regarding the infrastructure challenge are to understand
how to finance the costs of legacy systems (such as power plants and grids) that will be pro-
gressively less used (economic dimension) as well to understand the jurisdictional challenges of
the energy system; are urban energy systems independent? Which entity is needed to manage
and analyze them: cities, metropolitan areas, or some other? In the services layer, policymakers
must regulate services and prices through an economic perspective, as well as pay attention to
social issues, such as the universal services obligation; that is, sorting out the minimum amount
of services that citizens are entitled to, and for how much. Lastly, on the data layer, policymakers
must deal with the technological issue of determining access rights to the data generated, as well
as the economic issue of data ownership and pricing, as well as the financing of the new digital
infrastructure. Finally, they must also address privacy concerns (social dimension) and make the
decision of data as a good, or as a platform (political dimension).

2.8 Conclusion

In this section you have studied how energy systems are structured and how they evolved from
vertical legacy systems towards the distributed smart systems that are starting to emerge in cities
today. You also have learned who is involved in this transition and what some of the implications
towards smart urban energy systems are, particularly concerning the new services offered and
the data layer. Lastly, you have identified the challenges of this transition and the key takeaways
for managers and policymakers. To solidify this understanding, we focus on the city of Vienna,

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 Figure 6: Summary of Key Takeaways for Policymakers (Authors’ elaboration) .

in Austria, and learn how it is applying many of those principles to transform its urban energy
systems.

3 Case Study: Smart Energy Systems in Vienna

3.1 Background

Vienna, capital city of Austria, is a historic city, with evidence of settlements dating back to
centuries BC. It was founded on the shores of the Danube river, and throughout its history, it has
belonged to many empires and nations, which helped shape it into the city it is today.

Vienna covers an area of approximately 414 km2, with a population of approximately 1,800,000
inhabitants. This brings Vienna’s population density to approximately 4,300 inhabitants per square
kilometer. In terms of population, Vienna is one of the fastest growing cities in Europe, with a
population growth of 10 percent between 2005 and 2015, ranking 5th among the main European
capitals [3].

It has a GDP PPP per capita of over 53,000 USD, placing it within the top quartile of OECD
member countries [4]. The average household (with 2 persons, 0.8 cars and 75m2 of floor space)
in Vienna consumed 14,200 kWh/year, out of which: 9,200 kWh were directed to space heating;
2,700 kWh were used in water heating; 1,700kWh were used in transportation, and only 600 kWh
were used in appliances and lighting. The gross energy consumption of Vienna was of approxi-
mately 24,700 kWh/year, with a final energy consumption of about 22,400 kWh/year. Out of these,
5 percent were from renewable sources [5].

Additionally, Vienna has been internationally recognized as being a place for scientific research
and innovation, housing distinct universities and research centers, and investing heavily on sci-
ences. This is a useful precedent for setting up such an innovative program as a smart city project
[6].

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3.2 Smart City Wien

3.2.1 The Vision

The city of Vienna expressed its motivation for establishing a smart city to achieve “the best
quality of life for all inhabitants of Vienna, while minimizing the consumption of resources,” including
that ”this will be realized through comprehensive innovation” [7]. While their vision encompasses
all systems of a city, this vision is highly in line with the idea of smart energy, as energy is one
the resources most consumed by cities. And indeed, as we will see throughout this case study,
Vienna has established several initiatives aimed at making the use of energy smarter and more
integrated.

Additionally, they have established very clear objectives in terms of their desired resource effi-
ciency: Vienna, expects to curb CO2 emissions by two thirds from current levels by 2050 (bringing
it down to one tonne per capita, a reduction of 80 percent from 1990 levels). They also want to
drop primary energy consumption by a third by 2050, bringing it down to 2,000W per capita (similar
to the proposed 2000W Society), as well as decrease use of motorized individual traffic from 28
to 15 percent by 2030. Lastly, they aim to reduce by 1 percent per capita the energy consump-
tion in existing buildings for space heating, cooling, and water heating every year [7]. Many of
these targets relate directly or indirectly to energy, such as reducing CO2 emissions, which can
be achieved by moving towards renewable energy.

Figure 7: Self Sufficient Hotel, one of Vienna’s Smart City Programs [8]. .

3.2.2 The Drivers

The main drivers behind Vienna’s transition towards a smart city were: the need to curb re-
source consumption in face of climate pressures (sustainability), the need to deal with urban
growth while ensuring quality of living (urbanization), and the need to foster innovation. In this
context, they saw the necessity to change many aspects of the city, including the restructuring of
the energy systems. Digitalization was a tool they utilized to solve all these challenges, including

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the ones related to creating improved and resource efficient energy solutions.

3.2.3 The Solutions

While Vienna has a range of different proposed projects for its smart city, we focus on the
ones dealing directly with energy networks. These cover all three layers of smart sociotechnical
systems: infrastructure, data, and service. We explore an example of the intersection of the
infrastructure and the data layer, as well as one example in the intersection of data and services.

Citizen’s Solar Power Plants

Vienna is a highly urbanized city, and most of its residents live in apartments within the city.
Even though the option of producing their own renewable electricity may seem enticing to many,
most do not have the capabilities to install any form of generation in their homes, such as small
wind or solar. The city of Vienna found an innovative solution to this challenge, and that is the
Citizen’s Solar Power Plants project, a perfect example of how infrastructure and data can work
together to provide innovative solutions for urban energy problems.

Under this project citizens can purchase whole or half solar panels which will be placed on a
solar power plant facility on the outskirts of the city for EUR 950 (or EUR 475 for half). The city
is then responsible for building, managing, and operating the entire infrastructure necessary to
supply this energy. The city rents the panels from the owners, and the energy produced is fed
into the grid. Panel owners receive an annual profit of 3.1 percent on their investment on their
accounts at the end of each year. After 25 years, the city repurchases the panels and the original
amount invested is then returned to the owners.

While under this model, there is no feed in tariffs; it has proven to be economically feasible.
There are already two operational plants in the city, with well over 4,000 panels. In Donaustadt the
first plant provided electricity to over 200 households. This is part of a larger goal of Wien Energy,
the city owned utility, who aims to provide 50 percent of the city’s energy from renewable sources
by 2030 [9].

Such infrastructures would have been difficult to build a few years ago. However, using renew-
able energy, combined with the ability to track owners and their bank information, the city could
establish an attractive scheme for the citizens, who can make small investments that pay annu-
ally while supporting sustainable initiatives, without the hassle of having to deal with operations,
maintenance, and installation. Using the data layer has allowed the process to be streamlined,
making it possible for it to be scaled up efficiently. Proof of that is that all panels were sold out
within a week of the launch of each of the first two plants, and within 24 hours of the launch of the
third [9]. There are now over 15 Citizens’ Solar Power Plants in the Vienna region [10].

This also takes care of one of the key smart energy challenges for managers and stakeholders,
which is funding the infrastructure that needs to be put in place. By creating a new business model
in which citizens can crowdfund solar panels, the city has found a way to expand and promote
renewable energy solutions, while giving citizens the chance to profit from it and have a real stake
in the process by turning them into investors.

ICT Integration in Aspern District

While Vienna has not yet implemented a smart energy services project, which lie at the in-
tersection of the data layer and the services layer, the city has taken significant strides to find
suitable solutions for improving energy efficiency through the use of ICTs. One example of such

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an initiative is the exploratory investigation of ICT integration for buildings and electricity grid in
Vienna’s Aspern district, which is being carried out under the Smart City Wien framework. The
goal of the project is to investigate how ICTs can be deployed to increase energy efficiency in a
particular district of Vienna, which will be subsequently used as a testbed for their findings. Vienna
sees the integration of all the city’s energy systems, as well as their optimization, as a key aspect
of developing a smart city. Through the use of an ICT architecture (or data layer), many different
components of the city infrastructure can be integrated, such as buildings, grids, decentralized
generators and more. This integration will allow for the development of smart energy services,
such as demand side management and smart balancing (one example would be the use of build-
ings as energy storage units to balance the grid). The project not only takes into account the
networking of the buildings and the grid, but also data security aspects.

The next stage of this project is the actual implementation of these findings, which were sub-
mitted in 2014. The total planning area for this testbed is 240 hectares, which will be comprised
of 8,500 houses and 20,000 residents in 2030 [11]. In advance of this, many stakeholders have
been brought together already, such as building contractors, city management, utilities, and other
technological stakeholders (such as Siemens) [12].

3.2.4 Implementation and Challenges

One of the main challenges of implementing a smart city, and in particular a smart energy pro-
gram, is the governance aspect and the coordination of the involved stakeholders, which are a mix
between public and private actors. As such, Vienna adopted a two level strategy of implementa-
tion to overcome these governance and technical challenges (which are inherent to any innovative
project). The first is through policy, guiding the direction of Vienna’s development by setting polit-
ical priorities. The second level is a cooperation level, which calls for increased consultation with
members outside the local government, such as the national government, and the private sector.

One of the key steps to implement this two fold strategy was the creation of the Smart City
Wien Agency, which operates as the central point of the entire strategy and framework, both for
local public stakeholders and outside stakeholders. This agency is in charge of coordinating and
managing all these actors, as well as managing communication and project evaluation. Ultimately,
they aim to promote horizontal collaboration among the city’s administration, local businesses,
research centers, and the relevant industries [13].

3.2.5 Results and Future Plans

Many of the project’s regarding smart energy in Vienna are still on early stages of implemen-
tation. However, some positive results can already be observed. The uptake of solar panels by
the residents was overwhelming, and a huge stride towards 50 percent renewable energy use in
the city. Other projects in energy infrastructure have also reaped significant gains: the SternE
project, which aimed at making one the city’s main wastewater treatment plants 100 percent self
sufficient, is not saving 2700 tons of CO2 equivalent every year [14]. However, the adoption of
true ICT solutions is still in the early stages and the benefits are still far from being assessed. The
main step for Vienna now is to put their ideas and studies into action, through demos and testbeds,
which can then be expanded to provide comprehensive smart energy services to all citizens and
utilities.

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3.3 Conclusion

The innovative ideas put forward by the Smart City Vienna project are promising, and have
a huge potential to increase resource efficiency while improving the quality of life of residents,
especially when it comes to integrating energy services amongst themselves and also among
other urban networks, such as mobility. However, it is too early to tell whether they are on the
right path. And while the city brands itself as a smart city, there is reduced emphasis on the data
layer of smart cities, with a higher emphasis on the infrastructure layer. Many of the proposed
projects only superficially incorporate the potential of ICTs to streamline the services they provide.
As such, Vienna is not yet using the power of ICTs to its full potential to make the energy systems
smarter and more efficient. It remains to be seen whether they will choose their path based on
their exploratory studies and tests of ICT integration into energy related infrastructures.

References

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[11] V. Solitander, Aspern smart city research gmbh and co kg, B2Match.
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[13] Smart city wien: Framework strategy, Tech. rep., City of Vienna (2014).

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[14] Sterne – renewable energy in the main wastewater treatment plant, Smart City Wien.
URL https://smartcity.wien.gv.at/site/en/projekte/umwelt-klimaschutz/
sterne-erneuerbare-energie-hauptklaeranlage/

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