Cities of the future:

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1 Sponsored by Cities of the future: Retrofitting and fitting infrastructure Written by

2 Commonwealth Bank viewpoint There is great momentum in the delivery of infrastructure strategies in Australia, in part due to better collaboration and flexibility between the various levels of government and the private sector. According to Michael Thorpe, Global head of Infrastructure and Utilities at the Commonwealth Bank of Australia, the key challenge associated with this is to minimise social dislocation, and ensure cities operate within a framework integrating where people live and where jobs exist or will exist. Mr Thorpe says that in order to maximise the sustainability of Australia s cities of the future, policymakers and businesses need to tap into emerging technologies including big data analytics to align infrastructure developments with consumer needs. Future trends such as the delivery of healthcare through home health services and remote diagnoses could fundamentally change social infrastructure requirements and coincidently improve the responsiveness of public services and citizen engagement. At the end of the day, infrastructure is judged by the value of services that it ultimately provides, the productivity gain to society, with integration being key. Through its global network of innovation labs, the Commonwealth Bank of Australia is helping to inform Governments planning process and associated development of infrastructure projects. We do have a lot of big data in terms of what we see throughout our businesses and we use that to provide additional insights in terms of where people might work, where they might live, and how people move around the city, explains Mr Thorpe. It helps Governments ensure that the infrastructure put in place is actually serving the customer needs in the most efficient manner possible.

3 Today s urban populations are expanding and growing in density at a pace that is difficult for many existing cities to match. Particularly in mature centres like New York, Singapore and Sydney, the need for smarter housing, mobility, waste management and energy efficiency is increasing, but the options to build new infrastructure are limited. As a result, these cities need to focus on retrofitting what has already been built. Australia is behind the pack when it comes to environmental sustainability. z How cities actually decide what to retrofit as opposed to what to build or rebuild, however, is a complicated question, says Henrik Madsen, professor in the department of applied mathematics and computer science at the Technical University of Denmark. It is often a financial consideration of whether retrofitting or constructing new buildings makes more sense. In general, retrofitting in most cities occurs because of a need to keep some of the old buildings for historical and cultural reasons, which may be one reason Europe is seen as being a leader in this area. Trying to retrofit infrastructure to meet the changing needs of our growing population is always going to be tough, adds Harry Quartermain. He is a principal for urban planning at Ethos Urban, one of Australia s leading urban solutions companies. Largely due to our low population density and high reliance on fossil fuels and private car transport, The Economist Intelligence Unit Limited

4 Building with technology Cities need to become smarter to meet broader economic and city objectives such as accessibility, jobs, affordable housing and healthy environments, says Tony Brennan, group executive, Lendlease Technology, Australia. A major opportunity for us would be to contribute to a government driven Smart Cities plan, where we can provide valuable input to ensuring future cities enhance liveability, drive economic prosperity and sustainability. Emerging technologies such as artificial intelligence (AI), the Internet of Things and big data analytics play an increasingly important role in improving existing infrastructure. We use AI and data mining to optimise retrofitting, says Mr Madsen. He says many countries frequently update energy consumption data to be able to get more detailed information on current usage. We are able to identify areas where the building[s] need the most urgent upgrades and aim for low hanging fruit, says Mr Madsen about the usage of such metadata. Then we look at individual buildings to get precise estimates based on statistics, and this leads to automated suggestions for how to upgrade the building. This is the advantage of AI, because we are able to see things [via data] instead of just visiting the building. In essence, the use of AI allows Mr Madsen and his colleagues to see inside the walls. A culture of resistance to change is probably the biggest challenge to retrofitting cities. In part, incumbents are lobbying for keeping things the same, and governments are also hesitant to try new ideas. I don t know why, says Mr Madsen. We have had these [new] methods for a few years and they are better than existing ones. z 2 The Economist Intelligence Unit Limited 2018

5 A regulatory challenge In Denmark, as in the rest of the EU, energy providers can get financial support for saving energy. But the numbers are based on traditional deductive methods, and not metadata. We are waiting for policymakers, including the Danish energy agency, to adapt to such evidence-based methodologies says Mr Madsen about the current lack of adoption of new technologies for monitoring. In Australia too, there is a lack of a clear government vision, in part due to a governance structure of state, federal and multiple local city councils involved in decision-making. Recognising the problem, however, the Australian federal government has started to use city deals, in which local authorities gain greater freedom, while local governments are also trying to minimise administrative burdens. Until recently Sydney had over 40 local councils and, until the introduction of the Greater Sydney Commission, no overarching metropolitan vision, explains Mr Quartermain. The work that the Greater Sydney Commission has done, along with the amalgamation of some local councils to form larger local authorities, has helped to form a coherent narrative on the direction that Sydney is going and, importantly, how we re going to get there. Yet, more work needs to be done. If you look at building sustainability in New South Wales as an example developers were incentivised and encouraged by legislation and regulation to build more energy efficient places, says Mr Quartermain. He says government needs to do more to remove regulatory barriers that can slow the rising benchmark of sustainability. z The Economist Intelligence Unit Limited

6 Moving forward In practice, Mr Madsen and his colleagues don t need much to evaluate whether building new infrastructure or retrofitting existing ones are more beneficial. What we need is metadata, like hourly readings and climate data, he says. Then we use actual energy consumption in combination with the weather data to understand the insulation of buildings and as we zoom in we can see if the window is dirty. Like for evaluating the cleanliness of windows, Mr Madsen and his colleagues can also use models to evaluate occupancy behavior and energy consumption to predict retrofitting needs. Such analysis can determine whether retrofitting or building new infrastructure is more costeffective. It can also help develop cities of the future in a more effective manner. Given the relatively recent advances in energy efficiency and micro-generation, there is no reason why more places cannot be positive contributors rather than consumers of electricity. Until governments are willing to incentivise this it will be [a] lost opportunity, summarises Mr Quartermain. z 4 The Economist Intelligence Unit Limited 2018

7 Key takeaways The decision whether to construct new buildings or retrofit existing ones often comes down to financial reasons that can be difficult to ascertain. Emerging technologies such as big data & analytics and artificial intelligence can improve decision-making regarding retrofitting. The main challenges towards using emerging technologies are regulatory; this is particularly evident in Australia given its governance structure of state, federal and sometimes multiple local city councils. The Economist Intelligence Unit Limited

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