Much has been written about the impact on the smart grid market of Toshiba’s $2.3 billion acquisition of Landis+Gyr. However, I want to pick up on one aspect of the announcement that has had less coverage. As well as making it a leading player in the global smart grid market, Toshiba has said that it sees the acquisition as a key step in its plans to be a global leader in smart community development. Toshiba’s vision puts the capabilities acquired with Landis+Gyr in a broader context that includes closer integration with a range of energy, transport, and building services. This is a vision that needs to be understood not only with regard to Toshiba but also the ambitions of Japan’s other leading manufacturing, engineering, and electronics companies.
As we show in the recently published Pike Research Smart Cities report, there are immense opportunities for companies that can provide an integrated approach to diverse challenges facing cities and other communities as they struggle to balance the need for economic vitality with a concern for sustainable growth and a constant pressure to improve citizen services. Toshiba, for example, expects its smart communities business to be worth 900 billion yen ($11 billion) by 2015.
Toshiba’s vision is part of a broader drive by the Japanese industry to lead the world in developing and deploying smart communities. Japan has been developing a significant program for smart cities for some time. In 2008, the Japanese government established its Eco-Model City program, initially involving six cities, to which seven more cities were added in 2009. The cities selected offer a variety of population, geographical, and industry profiles from small towns focused on a single industry to Yokahama, with more than 3.5 million people.
Yokohama was one of the original six Eco-Model Cities but it also launched its own smart city project in 2010 in partnership with consortium of seven Japanese companies, including Toshiba, Nissan, Panasonic, Tokyo Electric Power, Tokyo Gas, Accenture’s Japan unit, and Meidensha. This is five-year project focused on three main areas of the city and spanning around 170,000 households. The goals for the project are to reduce CO2 emissions by around 64,000 t-CO2. It will involve the deployment of 27 MW of photovoltaic systems, a Home Energy Management System (HEMS) in around 4,000 households, and the deployment of around 2,000 electric vehicles. The project has a total budget of 74 billion yen (approximately $900,000) over five years.
The role of leading Japanese companies in the project is mirrored elsewhere. Panasonic recently announced that it is working with eight other companies on a 60 billion yen ($750 million) “sustainable smart town” development in Fujisawa City in Kanagawa Prefecture. In its home town of Toyota, Toyota Motor Company is leading the implementation of several demonstration projects around sustainable transport including a plug-in hybrid car-sharing system, the development of solar power-based charging infrastructure and the deployment of an Intelligent Transportation Systems to reduce traffic congestion and prioritize public transit.
Japanese companies are not just developing these concepts in Japan. They are also actively participating in smart city projects in the United States, France, Spain, India, and China. For example, Hitachi and Mitsubishi are working with the Malaga SmartCity project in Spain to demonstrate the viability of the Japanese approach to smart communities. The opportunity to export smart community technology and insights is a strong driver in the overall program. The common vision shared by the Japanese government and the country’s leading technology companies is shown by the creation of the Japan Smart Community Alliance (JSCA) to strengthen collaboration among interested organizations and to support the dissemination of information and preparation of roadmaps to achieve global standardization. JSCA has members from the electric power, gas, automobile, ICT, electric machinery, construction, and retail industries as well as the public sector and academia.
The collaborative approach between leading companies and central and local government is similar to the model that the European Commission is hoping to drive forward with its soon-to-be-launched Smart Cities Industry Initiative. The European Commission is already funding several demonstration smart city projects but the new initiative will provide an umbrella program to encourage the sharing of information and the development of more public-private partnerships.
Like the Japanese government, the European Commission sees the development of smart cities as an important element in its climate change strategy and a way of bolstering its clean technology and smart energy industries. In contrast, the United States still lacks any cohesive approach to smart city development at a national level. Whether this is a sign of strength or weakness is an interesting question that we will to return to in future.
Photo by xiquinhosilva/flickr/Creative Commons
Eric Woods is an analyst at Pike Research who focuses on the smart grid and green information technology.