The Utilities of Cities

The care and feeding of cities is likely the world’s largest business; it’s certainly one of the fastest growing. With an additional 2.5 billion people headed to cities in the next 30 years, providing these ‘customers’ with energy, water, transportation and waste management is critical for local government, as well as a huge opportunity for the private sector. Utilities are big business.

The next five to ten years will see enormous change in the utility sector. How services are combined – does it make sense to have the same utility supply communications infrastructure along with electricity, gas and lights and water supply? How much of a ‘foreign’ company will be allowed to provide local services? What is the best mix of public private partnerships? How will improved efficiencies be measured and rewarded contractually? How can ICT be used more effectively in improved service delivery in the more basic services like water, waste and district heating? How do utilities facilitate services to the urban poor?

Local (basic) service provision makes up 15% to 20% of the global economy – about twice the share of health care. Today there are more than 500 accredited teaching hospitals around the world – you want to be a doctor you will need to intern in at least one of them. And yet, there still is not a single ‘teaching city’: a place where nascent urban practitioners can learn in a hands-on urban setting. Smart businesses, countries, cities and universities are responding.

Cities are allocating a growing share of their budgets to data collection and systems monitoring. Rio de Janeiro and Kunming have recently built great examples of city services management centers. With large data sets and complex algorithms cities can improve traffic, increase security, and better target maintenance and key service delivery. New companies and utilities are emerging almost everywhere responding to the push for greater efficiencies.

Hurricane Sandy highlights a developing concern among most city and utility managers. As local service delivery grows in complexity, its vulnerability grows even faster. Flooded subways, power outages, fuel and food shortages, disrupted distribution networks, cities are particularly vulnerable to disasters. Building urban resilience is a critical challenge that utilities need to incorporate into their parallel demands of increased public service provision, often with diminishing budgets.

Utilities like GDF Suez, Veolia, Sempra Energy are often the sure and steady, ‘plain vanilla’, companies investors look for in mixed portfolios. In the next decade utilities will be anything but plain or staid. Major advancements in utilities (public and private sector), of all sizes in all geographies, are underway – cities desperately need their utilities to embrace the coming challenges.