Innovation and changeDigital TransformationAuthorities should look to private sector financing of smart city projects, report says

Authorities should look to private sector financing of smart city projects, report says

Study estimates that €6.2bn could be raised in the UK from sources of private sector finance

A new report issued by Siemens says that the private sector could provide over €6bn (£4.5bn) of finance for projects with clear returns on investment.

A growing number of global cities are approaching smart transformation through a series of smaller projects, typically costing a few thousand to a few million Euros. Siemens Financial Services (SFS) has conducted a global study across 13 countries to assess the potential accessible funding that their top 40% of cities could be raising from private sector asset finance for these smaller-scale ‘SmartStart’ investments.

Public sector budgets are often insufficient to take advantage of the benefits of smart city development. As a result, alternative forms of finance from the private sector have become a priority. The SFS study estimates that €6.2bn could be raised in the UK from sources of private sector finance to fund SmartStart investments.

The study identified a selection of nine early stage smart initiatives that have a track record for delivering dependable return on investment and are currently being financed through asset-financing arrangements. These are:

  • building controls (energy efficiency)
  • improved medical technology
  • citizen self-service online
  • vehicle routing
  • parking systems
  • road pricing
  • mobile workforce enablement
  • e-bus and e-vehicles
  • low-energy street lighting

Asset finance arrangements are well-suited to funding SmartStart projects, the report says. It adds that such financing can often be self-funding through the savings they deliver, helping to unlock more finance for other smart city transformation initiatives. Different financing techniques can be used according to their suitability for specific projects.

“Cities around the world are increasingly engaging in smart development to improve efficiency of local services, enhance sustainability, improve the lives of their citizens, and develop their competitiveness and private sector asset finance allows cities to make the full range of SmartStart technology investments in a timely manner,” said Chris Wilkinson, head of sales for public sector, Siemens Financial Services. “By diversifying their sources of funding for smart investments, cities can benefit from the resulting savings and improvements to citizens’ services without any delay.”

The SmartStart model estimates the volume of accessible private sector finance that a city can draw upon to fund its SmartStart investments. In each case, case studies and supplier research was assembled, along with asset and urban population densities, to assess per capita investment costs. The resulting data was then used to estimate funding volumes accessible to SmartStart at a country level. Interviews were also conducted with city financial managers in the USA, Europe, China and India to validate the estimates.

The full paper is available at http://www.siemens.com/smartstart

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