On the streets of Amsterdam last week, major changes were afoot. The first of 1,200 households were gearing up to install an energy-saving system aimed at cutting electricity costs. Others were given fresh access to financing from Holland's Rabobank to buy everything from energy-saving light bulbs to ultra-efficient roof insulation. And on Utrechtsestraat, a major shopping avenue in the center of the Dutch capital, solar-powered panels on local bus stops were installed to transform the road into a "Climate Street" piloting clean technology.
The projects are Amsterdam's first steps toward making its infrastructure more eco-friendly. Other projects are expected to follow soon. They include 300 power hookups around the city to recharge electric cars, solar panels that will be installed on Amsterdam's historic 17th century townhouses, and infrastructure upgrades that will allow households to sell energy they generate from small-scale wind turbines or solar panels back to the city's electricity grid for a profit.
Amsterdam's recent green energy move comes as governments worldwide set aside billions of dollars to create "smart cities" that mix renewable energy projects and stiffer efficiency rules to cut overall carbon dioxide footprints. Other cities have shown interest in the idea, but so far Amsterdam remains the world leader, aiming to complete its first-round investments by 2012. That makes it one of the most ambitious adopters of the smart city concept, which has attracted attention from global policymakers hoping to glean lessons from Amsterdam's green experiment.
More Efficient Households
All told, the municipality, energy outfits, and private companies are expected to invest more than €1.1 billion ($1.5 billion) in Amsterdam's smart city programs over the next three years. That includes a €300 million ($420 million) investment by local electricity network operator Alliander in "smart grid" technology that uses network sensors and improved domestic energy monitoring to trim electricity use.
Also part of the plan: up to €200 million ($280 million) to be spent by local housing cooperatives on boosting household energy efficiency, and €300 million from companies including Philips (PHG) and Dutch utility Nuon to be invested in other energy-efficient technology. "We're in the right place at the right time," says Ger Baron, senior project manager at the Amsterdam Innovation Motor (AIM), a public-private joint venture that is overseeing the project.
The focus on cutting cities' emissions could have a big impact on the battle against global warming. As of 2006, more people now live in urban areas than in the countryside, and the sprawl surrounding megacities such as Mumbai and São Paulo is only likely to increase. Consulting firm Accenture (ACN) reckons cities produce almost two-thirds of total global carbon dioxide emissions through a combination of car fumes, household energy use, and industrial manufacturing. In the coming years, policy shifts from the U.S. and elsewhere will put even more pressure on controlling carbon output. "Until now, there's been an under-emphasis on what cities can do to cut emissions," says Mark Spelman, Accenture's global head of strategy.
That's why Accenture has teamed up with utilities in North America, Europe, and Asia to figure out the best way to reduce cities' carbon dioxide emissions. In the first project—a $100 million venture in Boulder, Colo., led by Xcel Energy (XEL)—some 60,000 households will be connected to a smart electric grid by this summer. In early trials, energy usage per household has fallen by as much as 50% thanks to real-time network monitoring by utilities and the installation of smart meters that let customers adjust their energy consumption by time of day or other factors. Over the next four months, Accenture expects to announce similar projects with up to three major European cities.
In Amsterdam, city planners already are on the case. Dutch grid operator Alliander, which is 30% owned by the province that includes Amsterdam, will spend €100 million ($139 million) annually until 2016 to upgrade its entire network to a smart grid. That will include installing new meters in homes that detail consumer energy use and relay the data back to utilities. By 2011, says Paulus Agterberg, Alliander's director of strategy and innovation, almost all of Amsterdam will be on a smart grid. "You have to spend your money [on infrastructure] in the right way," he adds.
Remote Energy Management
As the city's energy infrastructure gets a face-lift, local policymakers also are devising ways to maximize the new smart grid. By early next year, Amsterdam's planners expect to create a "virtual power plant," or infrastructure upgrades that will let households sell excess energy generated from domestic solar panels, wind turbines, and biomass plants back to the city for a profit. All told, the plan could add 200 megawatts of renewable energy, roughly the size of a large wind farm, to Amsterdam's electricity generation.
"The idea is to create household or neighborhood renewable power plants," says Maikel van Verseveld, an Accenture partner in Amsterdam who's participating in the project.
With the first programs up and running, attention now focuses on the next round of smart city upgrades. Central to the plans are 300 charging points across the city for electric cars. The first one already has been installed, with the remaining hookups—set to be placed in local parking lots and other public spaces—on track to be ready by mid 2010. AIM's Baron says Amsterdam also is in discussions with a large European mobile-phone manufacturer and software provider to develop technology that would allow people to control their household electricity usage remotely. That could allow consumers to switch appliances on and off while on the go. "The future is remote energy management," Baron adds.
Amsterdam's plans are ambitious, but they do come with a hefty price tag. According to estimates, it will cost $438 per household over 15 years to install smart grid technology alone. Additional outlays, particularly costs of up to $280 million needed to make the city's homes more energy-efficient, could be a tough sell for consumers already suffering in the economic downturn.
Yet by converting Amsterdam into a smart city, local planners expect to bolster the economy through public and private investment, as well as cut emissions by 40% by 2025. Says AIM's Baron: "The aim is to create innovation."