EUROCITIES is now leading the European Innovation Partnership for Smart Cities and Communities (EIP-SCC) action cluster on business models, financing and procurement for smart cities (AC BM).
We took the lead on 1 March, and the cluster will be chaired by Nathalie Guri, director of projects and knowledge sharing at EUROCITIES.
In this interview for the EIP SCC website, Nathalie Guri explains the plans for our upcoming work. Our primary objective is to ensure that the smart city agenda is driven by cities’ needs.
How do you envisage the future of the action cluster on business models?
EUROCITIES is the political platform for major European cities. Founded in 1986, we network the local governments of over 130 of Europe’s largest cities and 40 partner cities that between them govern some 130 million citizens across 35 countries. We engage in dialogue with the EU institutions across a wide range of policy areas affecting cities. The development of smart cities is one of our strategic priorities. We provide a platform for our members to share knowledge and ideas, exchange experiences, analyse common problems and develop innovative solutions, through a wide range of forums, working groups, projects, activities and events. Through our thematic forums and working groups, we aim to cover all complementary aspects of smart city development, ranging from environmental and mobility to social issues.
For our members, the challenge of how to transform cities into ‘smart’ communities has clearly become salient in recent years. Needless to say, the success of all these ambitious projects hinges also on the cities’ capacity to transform itself, work with new business models and their access to financial resources.
The action cluster on business models brings all these ambitions and tasks under a single umbrella. The AC strives to help cities learn about and create new integrated business models through innovative local partnerships and to promote the emergence of a European market for innovation able to open the floodgates to investment.
EUROCITIES can facilitate this process. Amongst other things, we organise regular exchanges with our members and external organisations on financing opportunities. Most recently, in early March, we met senior representatives of the European Investment Bank to discuss ways to facilitate cities’ access to loans in the future. We also have a working group dedicated to public services, where we assess all relevant aspects of public procurement. In this context, our aim is to help remove the remaining obstacles to cross-border joint procurement. Finally, our knowledge society forum likewise keeps smart city development and cooperation with industry throughout this process at the top of its agenda.
AC BM has a leading role to play: this cluster should become a sounding board and a megaphone for cities interested in pursuing a result-oriented and constructive dialogue with industry and the private sector. I believe the AC’s ultimate goal should be to make certain that the smart city agenda is driven by cities’ needs.
What are the first steps you plan to take as action cluster leader?
Since dialogue and the exchange of information lie at the heart of our work, my ambition as AC leader is to help create a European critical mass for innovation uptake by bringing the ongoing expert-level discussions within the remit of AC BM. I believe the AC can be an excellent platform for them to promote and share their ideas. I would also like to bring the financial experts of the Covenant of Mayors on board for future meetings of the cluster. The next such event will be hosted by Eindhoven this spring in the framework of the General Assembly of the European Innovation Partnership on Smart Cities and Communities (EIP-SCC). In the coming weeks, I plan to consult our members – and the AC members in particular – on their expectations and needs. No doubt, the upcoming EUROCITIES forums and working group meetings will provide great opportunities for this.
I also plan to bring a few key and relevant initiatives to the AC’s table. These include the Horizon 2020 CITYnvest project, which focuses on supporting and replicating successful innovative financing models for energy efficiency renovations in buildings, and the City Sustainable Investment (CSI) URBACT project, which strives to demonstrate the role financial instruments can play in efficiently planning, progressing and administering urban development priorities.
What is, in your opinion, the main challenge that smart cities projects face in securing a long-term return of investment?
Smart city projects are transformative by nature. Internally, i.e. at municipal level, they require consistent cross-sectoral collaboration, which in turn necessitates the presence of a solid governance structure. Simultaneously, the need is also there for a similarly open, solid and consistent external governance framework.
Why? Because if we agree that it is difficult to secure appropriate long-term return on investment in a single sector, then the challenge becomes enormous in the case of cross-sectoral investments. Smart city projects are known to be highly integrated and complex, and also challenging for both the municipal authorities and private investors.
For now, investment in smart city development remains scarce due primarily to the absence of cohesion among the potential partners. There are thousands of smart city initiatives and strategies out there, but the vast majority of these are pilot projects funded by research and innovation grants. Sustainable solutions are still few and far between. Municipal authorities may already have the vision, but many have yet to find a way to make their financial, regulatory and economic frameworks attractive to private investors.To complicate matters further, all actors have to do with the mismatch between the municipal authorities’ political mandate and the investment cycle, which is a key consideration for all investors, whether they are small or big.
To secure long-term investment, sound project plans are needed to demonstrate attractive financial results, as well as promising integrated solutions to create added value. It is also key for cities to establish a collaborative governance system with external stakeholders to exchange and work towards common goals. It is important for the actors from the public and private spheres to be strategic partners because thereby they can reinforce their dialogue on procurement matters (procurement of innovation and pre-commercial procurement), foster the development of the local market, and scale up smart city projects.
How should the activity of the action cluster be oriented, to deal with the mentioned challenge?
The action cluster should evolve into an important open forum for city experts and private sector – among them industry and banking sector - representatives. We need to establish a working group of financial experts. Working together, these experts should identify the major obstacles and propose suitable tools to stimulate adequate investment in smart city development. They should share information on financing opportunities, compare notes on their respective business models and organise trainings on the use of financial instruments.
This interview originally appeared on the EIP SCC website: eu-smartcities.eu/content/interview-nathalie-guri