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The smart lamppost: A tool for rethinking town and country planning

08/10/2019

Digitalisation is disrupting our daily lives. This is also true for the street lighting market as it paves the way for new use cases by turning the lamppost into a smart asset.

The smart lamppost goes beyond its traditional function of providing light and turns into a platform for additional services having a positive impact on the people in its vicinity. The services of a smart lamppost may include public wi-fi, environmental monitoring, public safety, photovoltaic power, digital signage, geo-fencing, intelligent transport, electric-vehicles charging…

The smart lamppost becomes a tool of development in both cities and rural areas, a means to address two of the populations’ major pain points- access to electricity and access to connectivity. Electricity improves safety for people and (small) businesses which in turn translates into higher economic activity, more jobs, and ultimately the strengthening of the social fabric.
Connectivity allows people to access banking services advancing financial inclusion, new healthcare, and new education notably in rural areas.

Emerging Martkets are the right place to implement leapfrog solutions

A smart lamppost implies a two-dimensional leapfrog in emerging and developing countries:

  • A technological leapfrog: Thanks to solar panels and batteries, the smart lamppost can provide energy in remote areas circumventing the need to extend the national grid which, in most cases, would be extremely costly;
  • A business model leapfrog: The revenue stream from additional services can (partially) finance the smart lamppost, thus alleviating the burden on public sector budgets.

Where do investors fit on this disruptive path?

The fourth industrial revolution is expected to generate trillions in economic value, but also requires large investments. A recent paper from the UNEP FI stated that the remaining financial gap to meet the SDGs is estimated at around US$2.5 trillion per year until 2030, with Africa representing nearly half of it1. According to a PwC study quoted by the WEF, artificial intelligence
could generate an additional US$15.7 trillion in economic value by 20302. The EU estimates its digital market could contribute €415 billion per year to its economy3.

New types of assets are emerging with distinct characteristics:

  • They are impact-driven. In the case of the smart lamppost, a single solution can achieve multiple impacts;
  • They allow for counterparty risk enhancement. In the case of the smart lamppost, risk is shifted from solely public counterparty towards private entities;
  • They allow for asset and geographical diversification. Investors can extend their portfolios to include new types of smart infrastructure assets in geographies perceived as risky;
  • They embed some liquidity risk as of today. In the case of the smart lamppost, the market potential is huge but today, volume of assets remains too small and might lead to insufficient liquidity for investors.

Impact is becoming a major driver of investment decisions. With impact-based business models, the delivery of positive impacts is no longer a nice-to-have, but a condition of success: the smart lamppost builder cannot afford to deliver a sub-standard product or associated functionalities that fail to materialise.

In summary, where traditional or current models are cought in a vicious circle or positive impacts are simply not a part of the equation, new impact-based business models help break free and create investment opportunities. While these models do not come without their own share of concerns and required checks and balances, they hint at hitherto untapped opportunities to promote solutions and financing to reach the SDGs.

GASCA, a concrete example of an impact-based program

Societe Generale, together with five other partners recently launched the Global Alliance for Smart Cities in Africa4 - a multi-skilled alliance founded by top African companies and global players sharing a common vision around the importance to build sustainable innovative solutions. The founding members of the alliance are:

  • R20 – Regions of Climate Action: A not-for-profit international organisation founded by Arnold Schwarzenegger that works to support sub-national governments around the world to develop and secure financing for green infrastructure projects;
  • The Leonardo DiCaprio Foundation: Advisor and supporter to collaborative partnerships, the Foundation supports projects around the world that build climate resiliency;
  • Africa Development Solutions Group (ADS): A pan-African group, including manufacturing assembling operations in Africa and Solektra International, a leading company in solar energy solutions (PV, LED) investing in economic growth and employment in Africa;
  • JCDecaux: The number one outdoor advertising company worldwide partnering with 4,031 cities in more than 80 countries, invented a model providing cities with street furniture and public services (such as bus shelters, city information panels, automatic public toilets, recycle bins) at no cost, financed by qualitative advertising spaces;
  • Signify (formerly Philips Lighting): World n°1 lighting company with the purpose to unlock the extraordinary potential of light for brighter lives and a better world;
  • Societe Generale: Societe Generale pledged to play a driving role, along with private and public sector players, in sustainable development in Africa, notably by leveraging on the Bank’s know-how in energy and infrastructure financing as well as its unique expertisebin impact-based finance.

GASCA contemplates a first implementation of the lamppost programme in Rwanda. Home to Smart Africa Alliance and the acclaimed Transform Africa Summit, Rwanda is a critical player in advancing digital technologies over the continent and is at the forefront for village development through its “Green Village Programme”.

Are investors ready to explore impact-based assets?

 

(1) UNEP FI. 2018. Rethinking Impact to finance the SDGs. 
(2) WEF.2019. Globalization 4.0 Shaping a New Global Architecture in the Age of the Fourth Industrial Revolution, https://www.pwc.com/gx/en/issues/analytics/assets/pwcai-analysis-sizing-the-prize-report.pdf 
(3) WEF.2019. Globalization 4.0 Shaping a New Global Architecture in the Age of the Fourth Industrial Revolution, https://ec.europa.eu/commission/priorities/digital-single-market_en 
(4) Societe Generale website. 2019. https://www.societegenerale.com/en/NEWSROOM-Creation-of-a-Global-Alliance-for-Smart-Cities-in-Africa-to-provideaccess-to-clean-energy-and-connectivity

 

 

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