New Financial Models Enable Smart City Digital Transformation

Posted: September 18, 2020

In a report by professional services firm Deloitte entitled The Challenge of Paying for Smart City Projects, the authors assert that a new financial framework for smart cities is necessary to accelerate smart city rollout. In this report, Deloitte says “As cities look to upgrade their infrastructure with smart technologies, paying for those projects presents a significant challenge of introducing smart technologies on a wide-scale basis. Constrained by tight budgets, cities need to identify business models that can help to attract private financing to make the introduction viable and financeable.”

A new model that is emerging is a private-public partnership model known as performance-based contracting. Under this model, a commercial vendor installs and implements a smart city solution at their own expense, then shares in the savings the city experiences because of the project.

One such solution is a Smart Building energy management solution that allows facility and campus managers to lower their carbon footprint and reduce energy consumption costs by up to 35%, all while avoiding the upfront risk and cost usually associated with a capital upgrade project. Cities stand to reap big rewards from more sustainable management of their real estate and workspaces.

Barghest Building Performance (BPP), a Singapore-based energy management specialist, leverages AVEVA technology and this novel performance-based contracting approach to implement a comprehensive energy management solution and deliver a continuously-monitored optimization service to its facility management customers.  BPP assumes the cost risk for the project on behalf of the customer, and then shares in the financial rewards when energy savings are realized.

This approach is enabled by technology available today from AVEVA, but “10 years ago, the cost to install sensors, pull data, compute on site, and then remotely monitor that was far too high to deliver an energy management solution like ours with a business model like ours,” said Poyan Rajamand, CEO, Barghest Building Performance.

“AVEVA allows us to build the solution on-premise and also to build a secure scalable cloud platform to pull data from our system as well as customers' existing systems,” continued Rajamand. “…several of our customers have won energy management awards thanks to our solution.”

“The ability to access data remotely at a very low cost, to compute that data, and to translate that into actions have unlocked tremendous value. Now you have the exact same equipment operating better because of a digital transformation.”

At AVEVA, we are also working with new ways for cities to acquire and license industrial software while lowering their upfront capital expenditures by offering a new feature-rich subscription program.  This approach offers cities complete flexibility in the purchase, design and utilization of their industrial software systems.

An industrial software market-first end-to-end subscription offering, AVEVA Flex heralds a new era in commercial and technical flexibility, giving cities the freedom and autonomy to access our comprehensive software portfolio as, when and how it’s needed. This subscription model helps drive agility for the cities and infrastructure provider who use our software and reduces the barriers to digital transformation.

“AVEVA Flex eliminates traditional barriers to adoption by ensuring that customers can choose from a scalable set of solutions which are cyber-secure, based on industry standards, and support full asset and operations lifecycle capabilities such as design, visualization, supervisory control, AI, AR/VR, MES, asset performance, maintenance and condition management while only paying for the capabilities needed today,” said Craig Resnick, Vice President, ARC Advisory Group. “This simplifies consumption of new capabilities and helps make digital transformation more easily digestible.”

By taking advantage of performance-based contracting and new, flexible software licensing models, there are more smarter ways than ever for cities to embark on a digital transformation journey.

Further information about Digital Transformation solutions from AVEVA and how these novel financial models can help jump start your Smart City journey can be found at our Infrastructure website.