Why urban efficiency is key for India’s smart cities

India’s Smart Cities initiative to build 100 smart cities across the country has been highly praised. India’s urban population is expected to grow in the coming decades, with a 2014 McKinsey & Company report stating that 44% of India’s consuming class is expected to be residing in 21 high growth affluence clusters by 2025.

In addition to the Smart Cities initiative, the government is also aiming to provide energy access to all by 2022. India has also committed to the COP 21 Intended Nationally Determined Contributions (INDCs), to reduce 30% to 35% of Co2 emissions.

Urban clusters contribute about 70% of India’s GDP and it is expected that these numbers will increase. Most of these urban clusters revolve around industries that are set up near the cities or on the outskirts which are given priority for access to electricity. As we plan to develop these cities the pressure on the energy grid is expected to increase.

While there are programmes to generate renewable energy, along with other sources of energy, this needs to meet the demand of the new cities and simultaneously ensure that we provide energy access for all. In meeting these twin objectives we may come across two scenarios:

Scenario 1: Energy is provided to Smart Cities to meet the demand and ensure that the urban population is taken care of. This may come at the cost of another section of the population, which is often left behind

Scenario 2: Both the objectives are met, however the results may not be to the satisfaction of all the stakeholders.

The availability of the electricity supply continues to remain an area of concern, particularly in rural areas, where consumers get supplies for less than eight hours a day in certain states.

Although 67% of rural households were reported to have access to electricity in 2009–10, their per capita consumption of electricity is only around eight units per month, which is one-third of consumption in urban areas. This is due to poor quality electricity supplies, and reflects significant unmet demand.

Energy efficiency is key to smart cities

The International Energy Agen­cy (IEA) reports that in comparison to renewables, energy efficiency (EE) is more effective at reducing CO2 emissions. EE is responsible for 38% of CO2 reductions, whereas renewables only accounts for 30%. So while we talk of solar and wind, we must remember that energy efficiency has much higher impact.

It is also interesting to note that EE pays for itself. It does not rely on new technology, but technologies that already exist. We believe that this method can decarbonize the economy and we can decouple the GDP from this.

The world’s cities hold the key to limiting global warming to 2 degree Celsius. Urban efficiency must gain significant importance in our quest to limit global warming.

It is estimated that 25% of energy demand comes from buildings. In addition to this, 70% of the buildings India will need by 2030 are yet to be built.

NITI Ayog estimates that energy demand from buildings alone will increase 10 times in the next three decades. Energy consumption for space heating, water heating and space cooling accounts for over half the energy used in the buildings sector. Efficient heating and cooling of buildings is the best opportunity to improve the energy efficiency of buildings. There are a number of technologies available today that can reduce the energy consumption by more than 25% in buildings.

India is one of the leading producers of a range of fruits and vegetables. However the country also experiences a loss of produce due to inefficient infrastructure. The increase in urbanization is expected to directly increase the requirement of fruits and vegetables.

To meet this increase in demand an efficient cold chain infrastructure is required. If not we will further increase our contribution to CO2 emissions. It is vital that this infrastructure is built in a sustainable manner with technologies that are environment friendly.

Energy to GDP of cities

It is estimated that 20 to 40% of the population in India lacks access to electricity. According to the IEA, access to energy “plays a strong role in poverty eradication, reducing infant mortality, improving educa­tion, improving gender inequality, attaining environmental sustainability, and accelerating global economic growth and prosperity.”

The World Economic Forum’s EAPI (Energy Architecture Performance Index) report notes that countries and regions (India included) have taken steps towards progress. However they have struggled to maintain a balance in their energy systems and have been forced to make difficult choices and trade-offs.

A key factor that is taken into account in the EAPI is energy intensity (the GDP per unit of energy use) under the economic growth pillar. Energy intensity is a measure of the energy efficiency of a nation's economy.

India's energy intensity has been declining over the years and is expected to decline further.

The development of infrastructure and systems to create smart cities will have implications on energy intensity. The demand for energy from cities will increase, as well as an increase from rural areas as they get access to electricity.

One of the easiest methods to meet this demand is to improve the energy intensity or energy efficiency.

Urban efficiency should be linked with the energy intensity of the cities to help understand how this can be improved and therefore have an impact on the intensity of the country.

An area that needs to be explored by city planners and administrators is to link the GDP generated from the city to the energy consumption, and to define energy intensity for cities.

Defining a target energy intensity to be achieved by each smart city will be a welcome step towards sustainable, liveable and climate friendly smart cities in India.

Ease of doing business

While urban efficiency and energy intensity play a vital role in developing smart cities, the key to the success of this initiative will largely depend on the efficiency of the bureaucracy at the city level.

Traditionally the cities or ULB (urban local bodies) have had little power in the decision making process. Most of the projects implemented in cities have been largely driven by the centre or state except for a few examples (TNUDF, Tamilnadu Urban Development Fund is one such public private partnership model which has seen some success).

It must also be noted that most of the ULBs have limited capabilities to raise finances on their own, and the development plans of a city require the approvals of state and central governments.

The government is attempting to navigate this problem in regards to the Smart Cities missions, with the introduction of an SPV. This will have the central, state and ULB as stakeholders but will be run professionally by a CEO.

There are still questions to be answered on the structure of the SPV and the powers that the SPV/CEO will have. As well as how the existing infrastructure in cities will be handled.

To work towards having climate friendly, sustainable and energy efficient smart cities, it is important to decentralize powers with clear mandates.

One of the mandates that can be given to the CEO of ULB could be to achieve a particular level of energy intensity in his respective city.

Our report, Reforms to Accelerate the Development of India’s Smart Cities, is available here.