Smart tales of the city

The smart city industry is continually conquering new terrain. But as the global rollout of the digital electricity and gas meter (smart meter) proceeds apace, Elke Rauth discerns a project that shows disdain for the private sphere and puts the intelligence of governments and city-dwellers to the test.

Carbon neutral, resource-efficient and sustainable: it’s claimed that the smart city of the future is to be green. The “city for everyone” is supposed to defend against climate change, generate innovation that drives the economy, and offer a haven for happy, healthy living. The spinning of the smart city as a vision of paradise now passes for the predominant narrative about the future of cities, and this vision – to be implemented globally in copy-paste fashion – is winning over more followers all the time.

Photo: bygermina. Source: Shutterstock

China considers the creation of smart cities to be one of its primary urban development goals and dedicated the equivalent of 159 billion US dollars from 2012 to 2015 for smart city initiatives. Some 300 Chinese cities now call themselves “smart”. India has embraced the trend, too: in spring 2014 the newly elected Prime Minister Narendra Modi promised to catapult the country into a splendid technological future by building 100 smart cities, enabling the country to cope with the rapid pace of urbanization.

However, not all agree: “Having a stable roof over every head, public transportation running on every road, a toilet in every house – I would say that is the smartest city ever”, commented Rutul Joshi, a professor of urban planning at CEPT University in Ahmedabad, Guajarat, in response to the prime minister’s plans: “We have to redefine […] smartness”.1 Nor is Joshi alone in this opinion. Numerous critics have remarked that Indian cities have to provide for basic needs and infrastructure for humans, before embarking on high-tech flights of imagination. But Modi sees the strategy as a roadmap for the economic and ecological development of the country that will lead it into a better future.

Unlike China, however, India must rely upon international loans and investments in order to pay for the creation of smart cities. According to CNN, 100 billion US dollars have already been spent on the creation of a high-tech Delhi-Mumbai industrial corridor. A quarter of the investment money is from Japan; Singapore is also involved, and the British government has even offered special credit lines for UK companies to make investments in Indian smart infrastructure projects. Statements by Indian officials suggest that, thanks to the interest of international investors, financing smart city development is no obstacle. And this is no surprise, for most of the projects planned by the new Prime Minister are in Special Investment Regions and Special Economic Zones, where taxes and regulations have been relaxed to make them more attractive to investors.

The real obstacle to such ambitious plans seems to be people – especially those who stand in the way of the expansion goals. These include the poor living in informal settlements, farmers in rural areas, and the residents of the ever-expanding outskirts of the city: the projects will be built on the land where they make their homes. In the smart city there is no place for informality, Adam Greenfield observes in his book, Against the Smart City. Therefore the vision of the smart city does not consider or accommodate the informal labour market either – which, according to OECD estimates, constitutes 60 per cent of all employment world-wide; the International Labour Organization (ILO) suggests that in India the number may even be as much as 93 per cent. Through processing “big data”, the core activity of smart cities becomes that of submitting all areas of life to a regime of surveillance and measurement. This is supposed to optimize urban processes and enable planning with perfect efficiency. The city becomes a giant computer – and an enormous new business sector.

In Europe, too, an ever-growing number of large and small cities are jostling for access to the European Union’s strategically located smart city money pots. The EU has high hopes for the development and implementation of smart information and communication technology (ICT) – both with regard to the struggle for a competitive edge in the global economy, and in terms of stimulating growth in the ailing eurozone. Among Europe’s biggest cities, Copenhagen, Amsterdam and Vienna occupy the top three places in the smart city ranking compiled by urban and climate strategist Boyd Cohen, one of a circus of advisors who travel from city to city drumming up business for themselves. Runners-up in 2014 included Barcelona, Paris, Stockholm, London, Hamburg, Berlin and Helsinki.2 Vienna is determined to lead the pack in this race. In the summer of 2014, it passed a new smart city framework strategy: Smart, or “G’scheit”, as the Austrians put it, has been a characteristic of Vienna for centuries according to the mayor, Michael Häupl. As cases in point, Häupl has cited the high-quality Viennese water supply from the Alps via an aqueduct completed in 1873 as well as the municipal housing in the “Red Vienna” of the 1920s and 1930s, an internationally acclaimed model for low price housing supply. The official goal is to create a smart city for all – not just to become a leader in innovation and the “radical” conservation of resources, but also a model city in a social sense, as the smart city framework strategy proclaims: “We’re doing it for everyone. Not just for the rich! All the cities are doing the smart city thing right now. But we look out for the people.”

How smart is smart?

Although there are many doubts about whether the ambitious vision of new, technology-driven cities will in fact be capable of handling the challenges of the future, one thing is certain: smart cities guarantee an immense revenue source for companies in the ICT industry. The consulting firm Frost & Sullivan estimates that the value of the global smart city market will be 1.56 trillion (!) US dollars by 2020.3 It is thus no surprise that major corporations such as IBM, Siemens, Cisco, Kapsch, Microsoft and many others, along with key players in the automotive industry, are competing for dominance in the smart city market.

Moreover, in their study “Smart cities as corporate storytelling”, Ola Söderström, Till Paasche and Francisco Klauser turn to the example of IBM to illustrate how the current narrative of the smart city arose from the profit-making strategies of global ICT corporations, who started to turn their attention to the city in the 1990s as part of a search for new, lucrative market segments (Söderström et al. 2014). Having identified cities as an enormous and largely untapped technology market, IBM invested what is estimated to be several hundred million US dollars (Townsend 2013, p. 31) in its “Smarter Planet” campaign. The goal being a new framing of discussions about the future development of cities, allowing the corporation to position itself as the logical choice of business partner for cities – an “obligatory passage point” (OPP) essential for the implementation of smart technologies.

IBM’s business strategy is two-fold. On the one hand, the corporation strives to secure comprehensive contracts for all areas of urban infrastructure. At the same time, teams of IBM experts assist under the company’s registered trademark Smarter Cities Challenge as “pro bono” consultants for 100 cities around the world. Working closely with urban decision-makers over the course of three weeks, they come up with development scenarios for all areas of municipal administration and planning. To receive the pro bono consulting services, cities have to apply and are selected by IBM. Thus entire cities become recipients of grants from a global ICT corporation with a vested interest in making a profit. On the whole this strategy has paid off handsomely: the “smarter cities” division of IBM generates some 25 per cent of the corporation’s entire business and has secured its position as the leading smart city player in sales and strategy (Söderström et al. 2014: 311f.)

In all of this, little heed is paid to the misgivings of data protection activists and independent IT specialists, who see the smart city as the next step along the way to total surveillance. They also warn about the high security risk that arises from the vulnerability of centralized urban infrastructures to digital attacks and cyber terrorism. Others consider the embedding of corporate interests in the fundamental infrastructure of the city to be “selling out” to the powers of the free market.

In a similar vein, urban researchers do not tire of pointing out that such a one-sided vision of the future, focusing almost exclusively on the potential of technology, has many similarities with the functionalist vision of the city that has long since proved a failure. The belief that cities can be steered and controlled like giant machines and that a “good life for everyone” will finally become possible only when we have enough data at our disposal seems extremely naive – and yet it is precisely this approach that, together with the magic “big data” formula, lies at the core of smart city strategies (cf. Greenfield 2013, Townsend 2013).

The smart meter: Putting intelligence to the test

The dominance of corporate interests in the transformation of cities into smart cities – and the neglect, in actual fact, of the purported goals of sustainability, resource conservation, protection against climate change or increasing social equity – can be seen in the first global product rollout of the smart city industry in cooperation with local municipalities: namely, the conversion of the electrical and gas infrastructure to “smart metering” systems, a process currently taking place all over the world. Existing analogue meters are replaced with digital ones, in order (so it is argued) to make it possible to intelligently control the energy supply as well as reduce resource usage. Although the advantages touted by the industry are more a matter of marketing than something that has been demonstrated in independent scientific studies, and although smart metering does not actually deliver on any of its advertised goals, governments are undeterred in completing the rollouts. This, in spite of the vigorous protests of “No Smart Meter” initiatives in many countries. In Austria, for example, the data protection activist group ARGE Daten, as well as the Chamber of Labour, the Medical Association and the Tenancy Association, have expressed reservations about the adoption of smart meters. Even many of the electricity providers, such as the Vienna municipal utility company and its director Marc Hall, warn about adopting this technology too hastily and see many potential problems for security, data protection and consumer relations.

In spite of valid arguments against the conversion to smart meters, the Austrian Ministry of Economics continues to promote it as the only possible option. The costs for the conversion are estimated at between one and three billion euros; Vienna alone accounts for some 360 million of this. Siemens, Kapsch and Telekom Austria are only a few of the companies waiting to profit from the project.

The implementation of the technology is a response to the energy efficiency directive of the EU, which requires that member states introduce intelligent metering systems “to assist the active participation of consumers in the electricity and gas supply markets”. The directive requires up to 80 per cent of households to be equipped with smart meters by 2020 if “the roll-out of smart meters is assessed positively” or “is found to be cost-effective”.4

The Austrian regulatory office E-Control arrived at the requisite “positive assessment” based on a cost-benefit analysis by PricewaterhouseCoopers in 2010. The PwC consultants’ 90-page study examined four different scenarios for the introduction of smart electric and gas meters; in every case, it found that the overall effect would be positive.5 ARGE Daten begged to differ, in a statement responding to the passing in 2010 of an electricity law based on the PwC study. In the statement, ARGE Daten told the Austrian Ministry of Economics and the Parliamentary Administration that the PwC study relied on “extremely questionable assumptions” about the potential for energy savings and the overall economic benefit of the technology. Nor is the data protection aspect addressed in even a rudimentary fashion in the PwC study. ARGE Daten considers the entire scheme to be “economically absurd and extremely dubious legally”.6

Here the data protectionists come to much the same conclusion as a study commissioned by the German Ministry of Economics and compiled by the consulting firm Ernst & Young in 2013. This study, running into almost 250 pages, offers a much more comprehensive cost-benefit analysis of the widespread use of smart meters. The authors conclude that the introduction of smart meters in 80 per cent of households, as dictated by the EU, would lead to a negative net economic effect and would, furthermore, “place an unreasonable burden on the majority of the customer groups” (Ernst & Young 2013, p. 217).

Despite resistance, in Austria the argument continues to be made that the EU directive leaves the government with no other choice than to implement the technology – and officials even go so far as to aim for a 95 per cent conversion rate by 2019. In Germany, on the other hand, the federal government responded to the results of the study by halting the rollout in private households in October 2014. “The installation of smart meters is not financially advantageous for households, for the expensive meters must be paid for by households in the form of fees”, the German State Secretary for Economic Affairs, Rainer Baake, is quoted as saying. The issue could be revisited if, for example, the use of electric cars were to become widespread. But at present it would only make the energy transition more expensive, he suggested.7 The EU directive requires the use of smart meters only after they have been found to be economically beneficial. In Germany, at least, the decision not to implement them does not seem to cause any great concern about contravening EU regulations.

Smart grids: The key to tomorrow’s electro-mobility?

However, the German government’s comment about electric cars puts the smart meter debate in a different light, pointing to the role of the automotive industries and their interest in the electro-mobility market. Smart meters are a necessary precondition for the implementation of smart grids, the intelligent energy and communication networks being developed to manage the decentralized generation and supply of electricity. The monitoring potential of smart grids seems to be aimed for a great part at the electro-mobility market – and the hugely increased demand for electricity that it is likely to trigger in the future. A single electric car increases the electricity usage of an average household by at least 50 per cent. Given that cars spend most of their time parked, an electric vehicle can generally be charged as and when surplus energy becomes available. It may seem surprising that private motorized vehicles are still considered as having a place in the city of the future; this may be attributable to the lobbying of automobile manufacturers, who see fewer and fewer opportunities for growing their business in Europe. But it is doubtful whether widespread private ownership of electric vehicles and the resulting increase in electricity usage are compatible with the sustainability goals advertised by the smart city. Furthermore as cities continue to grow rapidly, the enormous consumption of public space required for private transit will not be available in the near future.

Still, the basic idea behind smart metering seems quite sensible: by digitally monitoring each household, the meters promptly provide data on consumers’ electricity usage, in order to raise awareness and encourage habits that conserve resources. At least this is the theory. In practice, the effect of smart meters on electricity usage has so far proved to be insignificant. A four-year field study by the Fraunhofer Institute (2011) in eight German cities showed a savings potential of 3.7 per cent, or about 30 euros per year, for an average household. The authors of the study explicitly point out that the awareness of usage data alone did not lead to an alteration of behaviour patterns; the desired changes only occurred when this was paired with electricity saving tips. The test persons only demonstrated interest in the smart metering itself in the first two months, and only a small minority used the electricity usage information portal throughout the entire test period. On the other hand, there was a high level of interest in practical information on how to save electricity (Fraunhofer ISI 2011).

The study by Ernst & Young (2013) arrived at an even poorer conclusion. It calculates potential savings of only 1.5 to two per cent in the average household as a result of smart metering. That the gains in terms of saving electricity are so small also stems from the fact that households are much less flexible than is typically considered: most users need electricity in the mornings and evenings. There are even doubts about the added value for consumers who require large amounts of electricity, such as businesses and industries. Given that companies need electricity during their regular hours of operation and production, their flexibility also seems to be limited.

The smaller the unit, the smaller the potential savings and the greater the burden of the costs of introducing the metering devices; thus smart metering also fails to make sense socially. But the devices continue to be advertised as a way to save, even though the high cost of conversion contradicts this: in Austria the conversion costs are estimated at 400 euros per household, while even generously calculated annual electricity savings would amount to only 30 euros. Nor should we forget the smart meter itself – it adds an additional three per cent to the annual electricity usage of the average household.

Since the estimated lifespan of a smart meter is currently only about eight years, electricity customers ultimately lose money on this venture. And at the same time, the decommissioned meters add to the piles of electrical waste being produced. In comparison, the electro-mechanical Ferraris meters, which continue to be used in many places, have a lifetime of at least 40 years. Is smart metering really a step towards sustainability? Hardly. Except perhaps as a self-sustaining source of income for the manufacturers of the technology.

Big data – big business – big risk

In addition to the business of manufacturing and maintaining smart infrastructure, another appealing profit-generating sector is big data, which lies at the core of all smart city projects: whoever has control over the highly detailed personal data provided by smart networks is sitting on the gold mine of the twenty-first century. Thus it is no surprise that the largest data collector in the world – Google – bought Nest, a US manufacturer of smart home devices, for 3.2 billion US dollars in 2014. This is the second-largest acquisition in the history of the company. It is also unsurprising that Nest soon began providing its new owner with data from households equipped with Nest devices, in spite of initial promises to keep customer data confidential. Today Nest also sells data to third parties. This is legally permissible, because customers agree to the terms and conditions regarding data usage at purchase. Furthermore, Nest’s smart thermostats have already been hacked – as have many other devices in the “Internet of Things”.

Smart metering has raised many concerns for data protection activists; and lawmakers have not, as yet, provided any real answers. For one thing, the short intervals of data-transmission provide detailed and precise profiles of the devices’ users. By measuring usage it is possible, for example, to draw conclusions about when people are at home or absent or how many people are living in a household. The data can even provide information about which appliances are being used when and which TV programme is being watched at any given moment.

As Andreas Bentz, a data expert at Smart City Living Lab T-City Friedrichshafen, states: “Smart meters divulge everything”. In an interview with the technology portal futurezone.at he argued that it is time to “finally stop making light of the topics of data protection and security”, because smart meter data can be “clearly traced back to specific individuals”. Bentz outlines a future scenario: “if, for example, I am able to determine that Mr. Müller turns on the light five times during the night and runs the water five times, it is possible that his life insurance policy provider comes to the conclusion that he may have prostate cancer and says: he has to use the toilet so frequently; I won’t continue his life insurance policy” (Wimmer 2011).

Because the laws determining access to and use of data are anything but clear, and because it has not been decided how electricity companies and consumers will have control over the data, it is to be expected that the data will be processed by third parties. Even if the express permission of the consumer were necessary, experience of smart phone apps has demonstrated that this permission can easily be gained through clauses in the terms and conditions of use. Either that, or special reduced electricity rates are offered under the condition that the user makes their household data available for analysis. This approach is also suggested in the smart meter viability analysis by Ernst & Young: “In addition, the data might be supplied in return for a reduction in the electricity price, so that the customer is more willing to make their data available and obtains an additional monetary benefit [from the meters]” (2013, p. 132).

IT-experts also express concerns about the security of smart metering. Digital usage monitoring and the transmission of this data are part of the Internet of Things; thus, they are susceptible to attacks by hackers. At the Black Hat Conference in Amsterdam in 2014,8 Spanish computer specialists provided an impressive demonstration of how easily the eight million smart meters in Spain might be hacked. Moreover, the hacker could cause a major blackout by simply turning off all the devices simultaneously.9 In general, security experts believe that digital infrastructure significantly increases the vulnerability of urban networks – both in respect to their need for maintenance as well as the susceptibility to external attacks by hackers or cyberterrorists.

Smart resistance

In any case, there are at present no rational arguments in favour of adopting the smart meter. Nonetheless, the efforts of regulatory authorities at all levels of the EU and national governments are evidently geared – against all common sense – toward continuing with the planned rollout, which has already started to be implemented in many countries. One can only speculate about the reasons for this, but it seems likely that the close economic ties between policy-makers and the ICT industries play a major role.

What does seem certain is that the high implementation costs will fall upon the consumers. Anything else would be financial self-destruction for the grid operators entrusted with managing the rollout. Consumers will be required to pay for a device that saves almost no electricity and at most merely redistributes the load; that is socially unjustifiable on account of the high conversion and operation costs; that possesses an alarming potential for monitoring and surveillance of the private life of every single citizen; that severely increases the vulnerability of the city infrastructure; that has an estimated lifecycle of eight years and adds to the growing pile of electronic waste; and that, finally, creates conditions that enable providers to earn money selling the most sensitive personal information to third parties.

That consumers are expected simply to stand aside and let this happen is inexplicable. ARGE Daten is of the same opinion, and has fought successfully for the right of individuals to opt out in Austria. Residents can now prevent the installation of a smart meter by filing an objection with their grid operator; and the Austrian Tenancy Association provides a form that can be filled out for this purpose.10 In many other countries, too, No Smart Meter initiatives are mobilizing against the ongoing conversion. Indeed, resistance to this senseless sell-out of the city, from which only big players in the IT business will profit, is urgently needed.

Municipal authorities never tire of emphasizing that it is people who are at the centre of all their smart city efforts. Yet these authorities do not look particularly “smart” in adopting this first smart business idea. Instead of maintaining their sovereignty and protecting the interests of city residents (and voters), they are trying to press on with the introduction of the smart meter at all costs. It is highly doubtful whether doing so will strengthen confidence in any future smart technology project. Grand proclamations and PR smoke and mirrors aside, it seems that the smart agenda of local authorities sustains only what the smart city always was: an enormous business sector for ICT corporations to cash in on.

References

Ernst & Young (2013): “Kosten-Nutzen Analyse für einen flächendeckenden Einsatz intelligenter Zähler”, www.bmwi.de/BMWi/Redaktion/PDF/Publikationen/Studien/kosten-nutzen-analyse-fuer-flaechendeckenden-einsatz-intelligenterzaehler,property=pdf,bereich=bmwi2012,sprache=de,rwb=true.pdf.

Fraunhofer ISI (2011): “Smart metering in Germany and Austria: Results of providing feedback information in a field trial”, Working Paper Sustainability and Innovation no. S 6/2011. Karlsruhe. www.isi.fraunhofer.de/isi-wAssets/docs/e-x/working-papers-sustainability-and-innovation/WP6-2011_smart-metering-in-Germany.pdf.

Greenfield, Adam (2013): Against the Smart City. New York: Do projects.

Magistrat der Stadt Wien (2014): “Smart City Wien: Rahmenstrategie”. Wien. smartcity.wien.gv.at/site/wp-content/blogs.dir/3/files/2014/08/Langversion_SmartCityWienRahmenstrategie_deutsch_einseitig.pdf.

Magistrat der Stadt Wien (2014a): “Smart City Wien – Rahmenstrategie, Überblick”. Wien. smartcity.wien.gv.at/site/files/2014/10/140924_KF_SCW_gesamt_DE.pdf.

PricewaterhouseCoopers (2010): “Studie zur Analyse der KostenNutzen einer österreichweiten Einführung von Smart Metering”, www.e-control.at/portal/page/portal/medienbibliothek/strom/dokumente/pdfs/pwc-austria-smart-metering-e-control-06-2010.pdf.

Söderström, Ola, Paasche, Till and Klauser, Francisco (2014): “Smart cities as corporate storytelling”. In: City 18, no. 3, 307-20.

Townsend, Anthony M. (2013): Smart Cities: Big Data, Civic Hackers and the Quest for a New Utopia. New York: W. W. Norton & Company.

Wimmer, Barbara (2011): “‘Intelligente Stromzähler plaudern alles aus'”, interview with Andreas Bentz, smart metering and smart grid expert from T-Systems. futurezone.at/science/intelligente-stromzaehler-plaudern-alles-aus/24.571.995

Published 25 February 2015
Original in German
Translated by Brenda Black
First published by Dérive 58 (2015) (German version); Eurozine (English version)

Contributed by Dérive © Elke Rauth / Dérive / Eurozine

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