SIEMENS

Cities are growing at a breathtaking pace worldwide. More than half of the world’s population already lives in cities, and this figure is set to grow to 70 percent by 2050. This trend is creating huge challenges for city managers, who will have to greatly expand municipal infrastructures because 6.4 billion city residents will need electricity, water, and transportation services in 2050, compared to 3.3 billion today. At the same time, cities will have to reduce their energy consumption and CO₂ emissions. At present, they already account for 75 percent of the energy consumed worldwide and are responsible for 80 percent of greenhouse gas emissions. Climate protection measures thus promise to be particularly effective in cities - and will open up market opportunities for green urban-infrastructure solutions.

The potential in this regard is huge. After all, a large part of the infrastructure in emerging markets and developing countries will have to be completely renewed, as these countries account for 95 percent of the world’s population growth. Many industrialized countries will also have to modernize their infrastructures. Business consulting firm Booz Allen Hamilton estimates that the world’s cities will have to spend around €27 trillion over the next 25 years to modernize and expand their infrastructures. Of this amount, €15 trillion will be spent on water management systems, €6 trillion on power grids, and €5 trillion on road and rail networks.

To allow cities to satisfy their infrastructure needs in a climate-friendly manner, they will have to employ energyefficient technologies. Using Munich as an example, the Wuppertal Institute and Siemens conducted a study that showed that energy-efficient solutions could transform a city with some one million inhabitants into an almost completely CO₂-free area (Pictures of the Future, Spring 2009, p. 6). Major reductions in CO₂ emissions could be achieved by expanding local mass transit systems and introducing technologies such as state-of-the-art building systems, traffic management systems, and electric vehicles. Growing demand for electricity could also be met in an environmentally-friendly manner by boosting energy efficiency. The systems that could be employed here range from combined heat and power plants to smart grids and techniques for transmitting electricity with minimal losses.

The German Environmental Ministry (BMU) estimates that the global market for environmental technologies will more than double between now and 2020, to over €3 trillion. This development will be boosted by the financial crisis. For example, London-based investment company HSBC estimates that around €300 billion or about 15 percent of the amount being spent on economic stimulus programs worldwide is flowing into the creation of green infrastructures, with about 68 percent of this sum being invested in energy-efficient technologies.

The energy-savings potential from buildings is particularly large, as they account for about 40 percent of global energy demand. Around 30 percent of this demand could be eliminated through improved insulation, controlled airconditioning, and efficient heating systems. According to the BMU, these measures would suffice to give the global market for building systems a major boost and increase its volume by more than €400 billion by 2030. The Federation of German Industries (BDI) expects the worldwide market for power plant technology to grow by five to ten percent a year. Demand is particularly high for more efficient and low-CO₂ plants. At the same time, the global market for renewable sources of energy is expected to grow three-fold or even six-fold over the next 15 years, expanding from €45 billion to as much as €250 billion.

To create “green” cities, city managers will have to invest huge sums in complex projects. Because municipal budgets will often not suffice for such tasks, cities will have to work with private investors. Each year, the private sector accounts for up to 15 percent of the investments made in infrastructure projects worldwide. Such investments are frequently made in the form of public-private partnerships (PPP), whereby companies not only supply products and services, but also conduct project management and provide long-term financing for a part of the costs. Siemens’ energy-saving performance contracting represents a special kind of PPP. Here, the use of environmental technologies is financed solely through the savings achieved in energy costs. To date, Siemens has implemented more than 1,900 such projects for buildings worldwide with guaranteed savings of €2 billion and a reduction of 2.4 million tons of CO₂. For the affected cities this means greener buildings - for free.