2016 Dream Commitment: Smart Communities

A report from Innovation Norway on the challenges and opportunities within the area of opportunity that is smart communities.

Innovation Norway Postboks 448 Sentrum, 0104 Oslo, Norway www.innovasjonnorge.no www.drømmeløftet.no

Original Norwegian language version published 28 September 2016 Front page photo: Choreograph/Thinkstock

Editors Ellen Rakneberg Olav Bardalen

Innovation Norway Contributors

Anita Krohn Traaseth Arne Borgersen Frank Langva Gaute Hagerup Geir Ove Hansen Guri Bjønnes Hotvedt Hilde Hukkelberg Håkon Nyhus Inger Solberg Karin Ammerud Sørensen Leif Knudsen Line Magnussen Mona Skaret Per Annar Lilleng Per Christer Lund Per Melchior Koch Rodin Lie Tina Nordlander Tor Mühlbradt

A massive thank you to everyone else who contributed to the work on the report, including Asplan Viak, the Municipality of Bodø, the Brønnøysund Registers, Bærum Smart Cities, Cisco, DOGA, Enova SF, eSmart Systems AS, the Research Council of Norway, Forsvarsbygg, the Municipality of Gjesdal, the Municipality of Hvaler, IKT Norge, Insam AS, the Norwegian Ministry of Local Government and Regional Development, Microsoft, Nordic Edge , Smart Innovation Østfold, the Norwegian Smart Grid Center, the Municipality of Oslo, OREEC , Sintef Byggforsk, Sintef Energi, Snøhetta, the Municipality of Stavanger, Tekna, the Municipality of Trondheim, Vannklyngen and more besides.

Dream Commitment: A voluntary initiative on innovation policy

In 2015, Innovation Norway and its partners arranged 84 open debates in Norway and abroad. The initiative attracted more than 3500 people from industry and the community to debate the future of the country. We also received vast amounts of written input. Key issues were:

How can Norway prepare for a time in which the importance of the oil and gas industry will decrease, with regard to both business activities and earnings?

All essential challenges also represent an opportunity for business development, conquest of new markets and new economic growth. How can Norwegian industry help solve major global and national challenges?

Six areas of opportunity were identified as part of the Dream Commitment. These are areas that span existing industries and sectors and where Norwegian expertise, technology and commodities meet global challenges and new market opportunities. The six areas are:

• Marine environment • Clean energy • Bioeconomy • Healthcare and welfare • Smart communities • Creative industries and tourism

Can we replace lost export earnings by developing new, internationally competitive and knowledge- based industries? This report looks at the challenges and opportunities linked to the area of opportunity that is smart communities.

Summary of recommendations More than half of the global population currently lives in cities and urbanisation is continuing. There is a need for smarter solutions to ensure that cities remain attractive places to live and work and to ensure efficient and sustainable utilisation of resources. This necessitates excellent solutions for transport and communication, consumption of energy and water, waste management, security, welfare services, planning and decision-making processes.

Many cities around the world are currently struggling with pollution, lack of social services, too few homes and homes of a poor standard as well as inadequate infrastructure. The UN's 17 Sustainable Development Goals identify the challenges that must be resolved in a sustainable society. The EU's seven major societal challenges also does this. These challenges also point the way to new market opportunities, particularly within smart cities and smart communities in general. Achieving smart solutions in urban and societal development could contribute to achieving several of the sustainability goals.

Public-private sector interaction with residents Close interaction between the public and private sector is an essential requirement for realising the opportunities associated with smart communities. The development of smart communities is interesting to both national and international authorities as it provides the opportunity to harness an unreleased service innovation potential, among other things by increasing the quality of services to users and, not least, streamlining operations.

Norway has developed a welfare society based on an oil and gas industry that will become less important in the future. At the same time, Norway has excellent conditions in place to achieve the ambition to develop smart communities. Several major international players look at Norway as a country that can be suitable as a test bed and to pilot solutions. Such advantages may be linked to the population being early adopters of new solutions, having excellent infrastructure, technological advantages and well-developed public services. The key barrier is inadequate and not very comprehensive strategies on the part of the authorities. Norway has extensive positive experiences of collaboration and partnership between the public and private sector, something that the ongoing initiative to develop smart communities can also benefit from. Common denominators will be societal functions in which public authorities supply services for which digitisation technologies allow for smart solutions. The development of smart communities cannot be driven only by technological development. Smart communities require smart residents and the behaviour and needs of smart residents are visualised through compilation and analysis of big data. The data must be analysed in real time, i.e. in such a way that it provides a meaningful expression of the situation at the time of the data being received. This is in order to give the residents a say when it comes to the development of smart communities.

Trisected baseline Smart communities utilise areas of opportunity that can be measured using a trisected baseline: economy, environment and society. In order to succeed with a public-private sector collaboration, it must be economically profitable to develop and operate solutions in smart communities, as the initiatives will otherwise be short-term only. The initiatives must have a sustainable quality that reduces the climate and environmental issues that we currently experience in urban areas. And last but not least, smart cities must facilitate human enjoyment. Smart communities must be good places for residents to live.

Smart communities provide new business opportunities. The areas of opportunity span traditional industries, disciplines, technologies and policy areas. There is major global awareness of the need to develop cities and societies with more sustainable and efficient solutions. According to the analysis institute Frost & Sullivan, the global smart city market now represents a market opportunity exceeding NOK 13,000 billion over the next five years. This makes cities attractive centres for innovation, creativity and economic development.

Innovation Norway wishes to play an active part as a facilitator and supporter of innovation and business development aimed at smart communities. Of several initiatives, the following must be emphasised:

1. First and foremost, the development of smart cities and societies must increase quality and reduce costs for public services. At the same time, focus on the development of smart cities and societies must promote solutions that deliver on a trisected baseline: economy, environment and society. Smart cities and societies can comprise anything from smart buildings, smart transport, smart healthcare, smart controls, etc. – areas of responsibility that are currently split across several different ministries. We need a more centralised effort to realise the ambitions to implement smart cities and societies.

Innovation Norway recommends that authorities assign a single ministry the overall, coordinating role to implement a national direction and associated goals and action plans for the development of smart cities and societies.

2. Technology and data represent some of the foundations for the development of smart cities and societies. The public sector generates vast quantities of data that are extremely valuable if they are efficiently made available for the development of new services, products and business models for the development of smart cities and societies. Legislation and framework conditions must be developed so that we can open up commercial use of public data, while also complying with requirements relating to data security and privacy.

Innovation Norway recommends a common national platform for the exchange of data across sectors and industries, for which the Brønnøysund Registers and the Agency for Public Management and eGovernment (Difi) should take coordination responsibility. The stakeholders must take shared responsibility for privacy and information security and legislation must be adapted for such exchange of data.

3. The well-developed Nordic collaboration is an essential platform for the development of Norway's commitment and export of knowledge and solutions within smart cities and societies, internationally. The Nordic countries should collaborate more to develop complete, Nordic system solutions and increase their shared, international visibility.

Innovation Norway will contribute to ensuring that smart cities and societies become a joint area of development in the Nordic partnership, so that international companies view the Nordic region as the most attractive development/test venue for smart cities and societies.

4. If we are to fulfil the possibilities represented by smart cities and societies, we need increased demand for innovative solutions from the public sector and improved public/private sector collaboration on new solutions. From 01/01/2017, procurement regulations will allow

for innovation partnerships in which industry, local authorities and government agencies collaborate to develop innovative solutions to essential societal challenges.

Innovation Norway, the Supplier Development Programme and Difi will pilot innovation partnerships between the public and private sector within smart cities and societies during 2017.

5. Achieving the ambitions of smart cities and societies requires greater collaboration and coordinated investments from the instrument policy system.

Innovation Norway will take the initiative to invite other public funding agencies to partake in more coordinated investment for skills development, research, innovation and market development associated with smart cities and societies.

6. The growth in the global market for smart cities and societies is major and Norwegian companies across the entire country are already positioning their solutions. Innovation Norway's role is to be a driving force in the success of Norwegian companies, nationally and internationally. In order to achieve a reinforced and more strategic investment in smart cities and societies, we require a more systematic overview of the development needs and players within and outside Norway.

To reinforce the efforts within smart cities and societies, Innovation Norway will have completed a survey of key Norwegian companies, academia, pilot and development projects within the smart communities sector in Norway and the most relevant international markets by the end of January 2017.

In addition, there is a range of instruments and resources as well as a regional system providing excellent links to municipal smart city initiatives and related networks and development processes. Not least there is also an international system that can be used to establish links to initiatives abroad.

The rapid developments in the area and the substantial potential for business development provide the basis for stronger and more strategic commitment. Strategic, not only in terms of the individual services that are developed and used but also in terms of how these are combined and independently learn from one another. Compilation of data may contribute to increased innovation across industries and structures and provide new solutions to old problems. New markets could develop here. Global solutions can be adapted to local conditions, successful local solutions can be expanded to global venues. We can see that Norwegian innovation environments and innovative companies have excellent foundations for further growth. The ambition must be to increase the number of Norwegian companies that experience global success. Through its initiatives, the specific role of Innovation Norway will be to contribute to increased economic growth for Norwegian industry on the basis of strategies for restructuring and renewal of Norwegian industry.

Contents

Dream Commitment: A voluntary initiative on innovation policy ...... 1 Summary of recommendations ...... 2 Contents ...... 5 Part 1: Smart communities – An introduction ...... 7 Smart communities – What is the purpose? ...... 7 What drives developments?...... 7 The major societal challenges ...... 7 The central driving forces...... 8 Innovation processes in smart communities...... 8 Definitions of smart communities...... 9 Potential for business development and employment ...... 10 Current activities in Norway ...... 12 Innovation Norway's commitment ...... 13 Part 2: Development opportunities within smart communities ...... 14 Introduction...... 14 Major societal challenges result in global market opportunities ...... 15 New communication technology, a key driving force ...... 16 Norwegian municipalities will become smarter ...... 16 Network of smart Norwegian municipalities ...... 17 Collaborating to develop smart communities ...... 18 Clusters, networks and conferences aimed at smart communities...... 18 Research and technological developments...... 19 Key areas within smart communities ...... 20 Smart buildings and homes ...... 20 Transport and mobility ...... 21 Distribution and consumption of energy ...... 23 Water supply and refuse collection ...... 23 Planning and decision-making ...... 24 Opportunities and barriers...... 25

Vast opportunities for increased economic growth...... 27 The role of national authorities ...... 27 Driving forces ...... 27 Public – private sector innovation partnerships ...... 27 Facilitating digital innovation ...... 28 Innovation Norway's role and commitment ...... 29 Purpose and role ...... 29 Knowledge foundations and skills development ...... 29 Network building...... 29 Development of instruments ...... 30 Initiation of pilot projects...... 30 Norwegian and Nordic innovative collaboration ...... 31 The role of the public funding agencies...... 31 Nordic collaboration ...... 31 Summary and recommendations...... 32 Smart communities provide new business opportunities ...... 32 Innovation Norway will play an active part...... 32 Recommendations ...... 33 A. Framework conditions for innovation policy ...... 33 B. Norwegian and Nordic innovative collaboration...... 33 C. Initiatives to reinforce Innovation Norway's commitment ...... 34 Appendices: Some examples of local authorities with specific smart city initiatives ...... 35 The Municipality of Bergen ...... 35 The Municipality of Bodø ...... 36 The Municipality of Bærum ...... 36 The Municipality of Gjesdal in Rogaland...... 37 The Municipality of Hvaler in Østfold ...... 38 The Municipality of Oslo ...... 39 The Municipality of Stavanger ...... 40 The Municipality of Trondheim ...... 41

Part 1: Smart communities – An introduction Smart communities – What is the purpose?

More than half of the global population currently lives in cities and urbanisation is continuing. There is a need for smarter solutions to ensure that the cities remain attractive places to live and work and to ensure efficient and sustainable utilisation of resources. This necessitates efficient solutions for transport and communication, consumption of energy and water, waste management, security, welfare services, planning and decision-making processes.

Efforts in this area have largely been based on the challenges experienced in major cities. But many of the solutions that are developed could also be relevant to smaller places. "Smart cities and societies" is often used as a term for such a broad approach. We have chosen to use the term smart communities.

The overall objective of developing smart communities is divided into two parts: • To establish safe and functional societies for each individual resident in which efficient and practical solutions based on the needs of the user are central.

• To develop efficient and sustainable solutions for societal functions, in which environmental impact, lower carbon footprint and efficient utilisation of resources are key elements. What drives developments?

The major societal challenges During the Dream Commitment process, many participants indicated the need to identify solutions to key societal challenges.1 This relates to global challenges such as population ageing, climate crisis, healthcare and welfare but also Norway's specific challenge: How can we replace the decrease in export earnings from the oil and gas industry with new business activities. Based on input from the Dream Commitment participants, Innovation Norway has identified smart communities as one of six areas of opportunity for Norwegian industry, i.e. an area in which key societal challenges intersect with Norwegian expertise and Norwegian advantages. 2 The areas of opportunity span industries, disciplines, technologies and policy areas. Debate on smart communities is often based around central societal challenges. Not least in terms of areas such as healthcare, environment, quality of life and climate. By organising our societies in smarter ways, we can contribute solutions to the challenges we are addressing here. Every country is looking for solutions to these challenges. If Norwegian companies can develop good solutions to key development needs based on proactive Norwegian investments, this could also provide excellent opportunities within a large and growing global market. In this way, smart communities could, alongside business activities in the other areas of opportunity, contribute to replacing the loss of earnings from the North Sea.

1 The Dream Commitment is Innovation Norway's national brainstorming on what we can do to ensure the necessary restructuring of the Norwegian economy. To learn more about the Dream Commitment and to read other Dream Commitment reports, please see 2The six areas of opportunity are: Marine environment, Clean energy, Bioeconomy, Healthcare and welfare, Smart communities, Creative industry and tourism 7

The central driving forces Developments in this area are driven through the interaction between social, cultural and economic challenges and opportunities on the one hand and technological advancements on the other hand. New and innovative technology combined with new ways in which to deliver services creates opportunities to fulfil the need for smart communities.

Central driving forces have been summarised in the figure below:

Figure 1. Driving forces. Source: Innovation Norway, Norway

New information and communication technologies are the common denominators in many of the solutions that are launched. Digitisation technology involves radical changes to the opportunities to streamline, coordinate and monitor societal functions. A number of interesting business opportunities can also be found here, linked both to the development of new, user-oriented technology and more comprehensive system deliveries. Major cities also provide economies of scale in terms of larger markets, more suppliers and greater service and infrastructure provisions.

The development of smart communities cannot be driven only by technology development. Smart communities require smart residents. The needs and attitudes of the end users must be central to the development of technologies and solutions. The technology also provides opportunities to involve residents more actively in the design and production of services. Residents become "prosumers," i.e. consumers who are actively involved in the development of products.

The development of smart communities has been added to global and national agendas. A substantial number of cities have defined themselves as "smart," but the majority are at an early stage when it comes to achieving their ambitions. Norway is not particularly advanced in this work, but we have several interesting initiatives on which to build and several relevant technological environments and companies. The ambitions and initiatives to develop smart solutions in cities and local authorities will be essential driving forces. Local authorities that also invite business and industry to collaborate on specific solutions will be key promoters. Innovation processes in smart communities New ideas for innovative solutions for smart communities can occur in companies, local authorities, among residents or within research and technology environments. A local authority could identify

8 initiatives that will ensure better communication services for its residents. A transport company could contribute to the development of a new ICT system that makes it easier to sell tickets and coordinate transport. Users of the transport systems could provide direct feedback as to how the services work in practice. A research environment could increase our understanding of how transport patterns are developed and thereby form the basis for new ways in which to distribute transport between the various transport options available. This works as an innovation system based on close and dynamic interaction between the parties. All of these parties learn from other people, companies and institutions and a great number of them also collaborate with other parties, across industries, sectors, technologies and disciplines as well as across the public, private and voluntary sectors.

New, smart and usable solutions are developed through innovation processes that

• emphasise collaboration between users and suppliers, • are open to external ideas and impetus, • often combine innovation in both products and services. Definitions of smart communities There is no single definition of smart cities or smart communities. A number of concepts and models have been developed, some broad and some more limited. Such initiatives are predominantly defined by two factors: • Digital technologies: Strategies and activities to develop smart communities are based on the use of digitisation technologies as the central tool for smart solutions. Use of sensors and analysis of large data volumes are two key elements in such solutions. • Geographically limited development processes: Smart communities are developed on behalf of local authorities, parts of the local authority or regions.

Common denominators will then be societal functions in which public authorities supply services for which digitisation technologies allow for smart solutions. Essential areas within smart communities will include transport and logistics, buildings and homes, technical municipal infrastructure, energy supply and solutions for public services and resident participation. Some definitions also include public/private sector services such as education and healthcare/social care. Links and interactions between the areas are key.

In the whitepaper Digital agenda for Norway3the following definition is provided:

"Smart cities utilise digital technologies to make the cities better places to live and work. Smart city initiatives aim to improve public services and residents' quality of life, utilise common resources in an optimal manner, increasing the productivity of the cities and also reducing the climate and environmental issues in the cities."

3 The Ministry of Local Government and Regional Development: Whitepaper no. 27 (2015-2016): Digital agenda for Norway 9

This definition has been set down in the following model:

Figure 2: Smart cities: Example areas of application and services: Source: Whitepaper no. 27 (2015-2016). At the center: Smart Cities, surrounded bu Transport and mobility, Energy efficiency, Infrastructure and surveillance, Open data and collaborative services and Databased decision support.

We will use this definition and model as the starting point for the further development of the area of opportunity. Potential for business development and employment The market for new smart solutions for urban development is considered to be substantial. Here we will reference some analyses that have illuminated the market opportunities: (1) According to the analysis institute Frost & Sullivan, the global smart city market now represents a market opportunity exceeding NOK 13,000 billion over the next five years. This makes the cities attractive centres for innovation, creativity and economic development. 4 A substantial share of the market is generated through government authorities, either directly through government investments or indirectly through investments based on comprehensive plans for urban development. A substantial share of the market relates to the need to develop more efficient solutions, based on the need for cost savings or the need for more energy-efficient and environmentally friendly solutions.

4 Frost&Sullivan (2013) 10

(2) The consultancy and analysis institute Gartner5 has assessed the global smart city market based on the development of the number of IoT devices (objects with embedded electronics that can communicate over the internet) in various areas of application. The undoubtedly largest market can be found in the sectors smart industrial buildings and smart homes and will, by 2020, represent approximately 80% of all devices. Transport solutions and infrastructure amount to approximately 13%. (3) In its report Mapping smart cities in the EU6 the European Union has attempted to evaluate the socio-economic impact of investing in smart solutions. The key impact is linked to reduced energy consumption, time savings and reduced greenhouse gas emissions. There are few comprehensive cost-benefit accounts, but the assumption is that there is a positive utility value of investments in such solutions. (4) Navigant Research has developed an analysis of ongoing projects and future opportunities for earnings linked to Smart City Technology. 7 This shows substantial anticipated growth in this area:

Figure 4: Smart City Technology: Opportunities for earnings. Source: Navigant Research.

The report also provides an overview of ongoing projects distributed across key usage areas. The analysis comprises 235 projects from around the world, approximately 85% of which focus on issues linked to energy, transport or government.

5 Gartner (2015): Smart Cities will include 10 Billion things by 2020 – Start now to plan, engage and position offerings. 6 European Parliament (2014): Mapping Smart Cities in the EU 7 Navigant Research (2015): Smart City Tracker 4Q15. 11

Figure 5: Smart City projects by sector. Source: Navigant Research.

We can see that Europe is currently the most active region when it comes to the implementation of smart city development projects. But the market for smart city solutions will be global, not least with Asia as a major, growing market.

These analyses broadly illustrate the developments of the smart city market: It is a rapidly emerging global market. There are substantial market opportunities within multiple segments, especially relating to energy consumption, buildings and transport.

There is inadequate data to estimate the size and further development of the Norwegian market. There is also no systematic overview of which Norwegian companies could be defined for the business areas mentioned and subsequently there are also no good estimates for current economic growth in the area. Current activities in Norway Smart communities have been on the agenda in Norway for the last few years through commitments in several areas:

• Research on smart communities and central components within the area: Through its new programme area BYFORSK (city research), the Research Council of Norway and NTNU's Smart Cities investment provides key contributions here. • Several cities and local authorities have initiated development processes to identify smart solutions. • Business development through cluster and network initiatives based on collaboration between companies, research and local authorities as well as other public sector players. • Conferences and workshops aimed at raising awareness, exchanging ideas and networking. There is also technology and business development on behalf of a number of companies.

These areas are addressed in more detail in part 2.

Innovation Norway's commitment So far, Innovation Norway has been involved in some companies, clusters and networks focusing on solutions for smart communities but without a specific strategy for investments in the area. The rapid developments in the area and the substantial potential for business development provide the basis for stronger and more strategic commitment. We can see that Norwegian innovation environments and innovative companies could have excellent foundations for further growth. The ambition must be to increase the number of Norwegian companies that experience global success. The specific role of Innovation Norway will be to contribute to increased economic growth for Norwegian industry on the basis of strategies for restructuring and renewal of Norwegian industry. Based on the above, we propose that Innovation Norway's commitment should be to develop new business opportunities and business areas based on technological solutions and service deliveries aimed at the following purposes/areas:

• Efficient distribution and consumption of energy based on an increased proportion of renewable energy • Efficient design and operation of buildings • Safer and more environmentally friendly transport and communication solutions • Efficient and sustainable solutions for water supply, waste management and refuse collection • Solutions for user participation in the planning and decision-making processes.

We will also reference some initiatives within an area often referred to as "smart healthcare," an area that has been included in a number of smart city initiatives. Digitisation technologies are used increasingly within the healthcare sector, especially within diagnostics and welfare services. Nevertheless, we will not provide a detailed analysis of this area but refer to the report from the area of opportunity 'Healthcare and welfare,' which provides a more detailed assessment of this field. We also refer to the area of opportunity 'Clean energy' for a broader background on our discussion on the distribution and consumption of energy. The report on clean energy will be presented during autumn 2016. There are also other sectors and societal areas that are part of smart communities but are not addressed in this report. Many of the basic ICT tools and system solutions aimed at smart communities are also relevant within other areas of applications such as industrial production. Companies that offer solutions for smart communities may therefore have industry or other sectors as their markets. In the further development of Innovation Norway's commitment, we must be especially attentive to such opportunities for synergy. This is an area of opportunity that spans industries and sectors.

Part 2: Development opportunities within smart communities

Introduction

The figure below provides an overview of the key driving forces, development processes and market segments within smart communities. It shows that the innovation processes within smart communities are defined and controlled by a number of different factors, including societal challenges, the strategic choices made by local communities and government as well as technological driving forces. The area of opportunity also represents a number of market opportunities from smart buildings to services for planning and decision-making.

In the following we will provide brief information about each of these factors.

Figure 6: Model for smart communities. Source: Innovation Norway

Major societal challenges result in global market opportunities

Figure 7: The UN's Sustainable Development Goals The UN's new Sustainable Development Goals8 and the EU's identification of seven major societal challenges9 are leading the way to new market opportunities within smart cities. Achieving smart solutions in urban and societal development could also contribute to fulfilling several of the sustainability goals.

9. INNOVATION AND INFRASTRUCTURE. An example of a relevant challenge can be found in the UN's main target 9: "Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation." Infrastructure is the underlying structure that must be in place in order for society to function. Examples include roads, airports, railways, power supply, water and sewage systems and broadband. Infrastructure is a prerequisite for population growth and increased productivity and for improvements to education and healthcare. Industrial developments that have been implemented in an inclusive and environmentally friendly manner are, according to the UN, the main source of increased earnings and improved standards of living. Future infrastructure must be developed in a smart, environmentally friendly manner in collaboration with other stakeholders and society.

11. SUSTAINABILITY AND COMMUNITIES. Another example is the UN Sustainable Development Goal 11, which is "Make cities and human settlements inclusive, safe, resilient and sustainable." Many cities around the world are, among other things, currently struggling with pollution, lack of social services, too few homes and homes of a poor standard as well as inadequately developed infrastructure. The main challenge here is to acquire and maintain access to work and good standards of living without having a negative impact on land and resources. These challenges, which are very well documented, describe specific needs that allow for innovation and major new global market opportunities. In spite of these challenges needing to be met through

8 9 https://ec.europa.eu/programmes/horizon2020/en/h2020-section/societal-challenges 15 tailored solutions adapted for the specific needs of the various markets, there will also be a need for some basic common solutions within transport, infrastructure, water systems, energy and information technology. New communication technology, a key driving force The development of smart communities is largely based on sensor-based communication technology. ICT allows for new solutions and technological development is most likely the key driving force in this field. The Internet of Things (IoT) is a term that defines physical objects equipped with software or sensors that can be connected to a network. As such, IoT is an essential requirement for smart solutions. This allows for the collection of data from a vast number of devices and the data can then be compiled into usable information. This could be information relating to e.g. traffic situations, communication services, power consumption, water quality, health conditions and a number of other matters. The extreme increase in digital data, storage capacity and processing power is another key starting point and together amounts to Big data. The data must be analysed in real time, i.e. analysed in such a way that it provides a meaningful expression of the situation at the time of the data being received. Big data represents the residents' say when it comes to the development of smart communities. Big data is increasingly linked to machine learning, which means that forecasts or decisions are made by the computer based on algorithms developed using empirical data. Visualisation and simulation technologies also contribute to efficient use of data in decision-making, innovation and learning processes. There are many areas of application from efficient operation of buildings, vessels and other transport solutions through more efficient fish farming and energy production to the streamlining of public services and the use of healthcare and welfare technologies. As such, the development of smart communities can draw on technological solutions that are generic or were developed for other sectors such as oil and gas. There are substantial business opportunities in the development of technological solutions. The greatest potential for impact can still be found in smart utilisation of digital solutions within established sectors and value chains, including solutions for urban and societal challenges. Norwegian municipalities will become smarter

Several Norwegian municipalities have ambitions for developing smart solutions for infrastructure and services. Smart city investments in Bergen, Bodø, Bærum, Gjesdal, Hvaler, Oslo, Stavanger and Trondheim are addressed in Appendix 1. This is not an exhaustive list of initiatives that have been established and several local authorities are at the starting line for similar investments.

Here we provide an overview of some important elements in these investments.

The smart city initiatives are in an early development phase: The initiatives were predominantly initiated during the last couple of years. This means that the more specific activities are in a very early phase. Some projects have still managed to yield visible results. But in many cases we must still refer to the stated ambitions rather than specific solutions.

Smart city strategies and smart city projects: A small number of the local authorities have developed or are in the process of developing more comprehensive smart city strategies, i.e. strategies covering all central sectors that it would be natural to include in this work. Stavanger is an example of a local authority that is in the process of developing a comprehensive smart city strategy. The Municipality of Hvaler is also working on smart

16 solutions within several sectors. So far, most municipalities have established more sector-oriented smart city projects.

Large and small local authorities: The largest cities can be found in the overview of smart city initiatives, something that reflects these local authorities' need to identify solutions to typical major city challenges linked to transport and communication, air quality, welfare and safety. But we also see commitment from smaller local authorities, the Municipality of Gjesdal being a good example.

Purpose and input areas: The initiatives are supported both through the ambition of green development, i.e. reduced carbon emissions and reduced environmental impact and the need for improved and more efficient services for local residents within communication, welfare, participation, etc. Some of the most specific examples of smart solutions can be found within transport and communication. The municipality of Hvaler's full-scale system for the management of power supply and consumption represents another central area. We also see specific initiatives to develop smart solutions for buildings and homes.

Collaboration with business and industry: Most smart city initiatives emphasise involvement from business and industry in the development processes. The way in which this happens varies but includes fora for the exchange of ideas as well as more specific collaboration between public and private sector players for the development of specific solutions.

Resident participation: Several of the initiatives list resident participation in the development processes as a goal. This reflects that one of the key purposes is to develop improved service provisions and an improved environment for the local residents. It is also natural to utilise the opportunities provided by communication technology for direct participation in planning and decision-making processes.

Network of smart Norwegian municipalities Together with the Head of Industry in the Municipality of Stavanger and Nordic Edge in Stavanger, Innovation Norway has taken the initiative to establish a network of Norwegian smart cities. The network has taken inspiration from similar networks in Spain and Finland.

The purpose of the network is to accelerate the development of smart cities by creating a venue that works specifically on pilots and projects and creating a venue for the exchange of experiences that can be utilised further in strategies and urban development. As Innovation Norway has taken the initiative, the focus of the network will be aimed especially at how we can succeed in creating efficiency in the public sector while also creating innovative business activities. Several European countries have made major advancements within smart cities. By creating a Norwegian network for smart cities that develops specific skills based on pilots and experiences, Norway could quickly assume a leading position in Europe. In Europe, there are two particularly good examples of national city networks related to smart cities. In Spain, the network comprises an impressive 65 cities while the six largest cities in Finland have established a network. Common to both networks is that they work operationally for the purpose of learning from one another, developing best practice, inviting collaboration between the public and private sector and jointly providing input on national guidelines. Both Spain and Finland are global leaders in the smart cities sector.

Collaborating to develop smart communities In recent years, collaborative projects have been established with a primary purpose of developing business opportunities linked to the needs and ambitions of "smart cities".

Clusters, networks and conferences aimed at smart communities NCE Smart Energy Markets (Halden): This is an organised cluster collaboration originating from the technology environment in Halden. The cluster aims to become a world-class centre of excellence developing smart and sustainable energy and environmental solutions through innovation and business development. The core expertise of the cluster is the use of digital technologies. The work is based on close collaboration between industry, research environments and local authorities in the region. The cluster collaboration is increasingly aimed at the challenges and business opportunities within "smart cities".

Arena Smart Cities and Communities (Stavanger): This is a cluster initiative originating from Stavanger's smart city investment. The objective is to develop a Smart City cluster that supplies products and services to an international market and contributes to restructuring in the private and public sector. The goal is to establish new collaboration consortia and involve small and large Smart City stakeholders in joint development so that the home region of the cluster can become a useful test venue for economic growth and innovation.

The Norwegian Centre of Design and Architecture – Doga (Oslo) is a private association with the mission of stimulating innovation and efficiency improvements and increasing economic growth in Norwegian industry and the public sector. Doga’s focus is that sustainable smart communities require a change from focusing on technology to the user being at the centre. Doga believes that Norway will succeed at this as a consequence of the fact that new solutions, both at individual and system level, are user-oriented. Designers and architects provide processes and methods for this.

Nordic Edge Expo (Stavanger) is an international conference and exhibition with smart technology as the main theme. The conference was held for the first time in 2015. The event attracts politicians, technologists, entrepreneurs, investors, public sector employees, journalists, professors, students and others who have an interest in good solutions for the future. Nordic Edge Expo aims to become one of Europe's key venues for anyone working on new solutions that make cities, companies and peoples' homes smarter. Such solutions are an essential part of the answer to global challenges, especially in relation to the environment and increasing urbanisation.10

Fram Smart Cities: In 2015, Innovation Norway launched an expertise programme aimed at smart cities for the first time, the programme is called FRAM Smart Cities and eight promising Norwegian technology companies are involved. The ambition of the programme is to make smart and sustainable Norwegian technology more attractive and to increase the number of Norwegian companies experiencing international success. The programme lasts for one year and involves seminars in Spain and England. These countries have established specialist environments for urban innovation and major cities that act as test venues for technology companies wanting to test and showcase their solutions. These environments attract leading digital companies and therefore act as unique expertise and networking venues for Norwegian startups and SMBs.

Norwegian stand at Smart City World EXPO in Barcelona: The world's largest Smart City EXPO will be held in Barcelona on 15-17 November 2016, with visitors from more than 500 cities worldwide. For

10 18 the first time there will be a Norwegian stand, courtesy of Innovation Norway. The Norwegian stand has entered into a collaboration with the Danish and Finnish stands. The purpose is to create a strong Nordic brand externally and to enhance collaboration and interaction internally between the Nordic countries. Additionally, there are a number of initiatives in which industry players and academia have established long-term collaborations for the purpose of developing new business areas and opportunities within areas of relevance to smart cities. Research and technological developments The Norwegian investments in the development of technologies and system solutions for smart cities are currently in an early phase. Several other countries, Nordic countries included, have advanced further in this area. Nevertheless, Norway has a number of research environments and companies that focus on this area and Norwegian environments have good positions within a number of segments. With an active and comprehensive strategy for developing smart cities, Norwegian industry could have excellent opportunities for developing solutions that can be scaled and exported.

In recent years, research programmes and initiatives have been established for the purpose of focusing expertise and technology developments on the needs of smart communities:

The Research Council of Norway's BYFORSK programme In 2016 the Research Council of Norway established a comprehensive initiative in research and innovation for the cities of the future. BYFORSK will deliver new insight and new solutions that will contribute to attractive, sustainable and economically viable urban areas. The initiative will produce new knowledge for sustainable urban development. The cities of the future need knowledge-based solutions for planning and control, technologies and innovations that are compact, smart, energy and resource-efficient, environmentally and climate friendly, transport-effective and socially and culturally inclusive.

The Research Council of Norway's centres for environmentally friendly energy (FME) The FME initiative supports several centres that carry out research with the aim of innovation and economic growth in areas that are relevant to the development of smart communities. Among the eight centres designated in 2016, there are two that are particularly relevant:

Centre for intelligent electricity distribution (Host institution: SINTEF Energi) The centre will contribute to the digitisation and modernisation of the distribution grid in a cost- effective, flexible and resilient manner. The aim is for the grid to manage interaction with smart customers, electricity transport, solar cell systems and other forms of renewable energy.

The Research Centre on Zero Emission Neighbourhoods in Smart Cities (Host institution: NTNU) The centre will work on solutions for zero emission zones in smart cities. More efficient energy consumption, as well as production and utilisation of renewable energy will contribute to a better local environment and to achieving national climate targets. The centre will enable local authorities, business and industry, government agencies and researchers to work closely together to plan, develop and operate neighbourhoods without greenhouse gas emissions.

NTNU Smart Cities In 2014, NTNU established an initiative to identify and develop technologies and designs that fit with the smart cities concept. This project is referred to as the "EU shadow team" and aims to increase Norwegian participation in EU projects and networks linked to energy-efficient buildings/smart cities

19 and villages. The project is managed by NTNU and SINTEF Byggforsk and is funded by the Research Council of Norway's collaboration scheme.

EU projects with Norwegian participation In addition to the previously mentioned Triangulum project, we would also like to mention the following: • Space-Energy patterns for smart energy infrastructures, community reciprocities & related governance (University College Bergen) • PARticipatory platform for sustainable ENergy management (University of Bergen, SSH) • Smart decision support system for urban energy and transportation (Sintef Energi) • Implementing low carbon social urban tourism solutions and creating citizen empowerment through Smart City Hospitality (Vestlandsforsking) Key areas within smart communities Based on the models presented in Chapter 1 and 2, we will now provide brief information about the contents, status and development opportunities within the key areas.

Smart buildings and homes Smart buildings are about monitoring, management, control and intelligent functions in a building that will result in energy reduction, increased comfort and improved user experiences (sensor-based control systems, sun shading, fire protection, monitoring, doors/windows/garage doors). Local energy production (solar), as well as storage of energy and systems for energy consumption in proportion to energy price are also part of smart buildings.

In Norway, buildings account for 35% of energy consumption, 3% of greenhouse gas emissions, consume 50% of the materials and generate 25% of waste 11. The construction and civil engineering industry is the largest industry in Norway, with more than 200,000 employees. The newbuild market

11 Statistics Norway 20 in Norway amounted to NOK 136 billion in 2015, while the renovation, redevelopment and maintenance market amounted to NOK 140 billion. There is substantial potential for the development of new innovative solutions and business models.

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Smarthaus technology: The range of systems to monitor what happens in a building is diverse. Many of these are imported products and systems adapted to Norwegian needs. The aim is to achieve energy efficiency improvements or increased comfort to make everyday life easier.

One relevant area of application is safety for the elderly and disabled, where ICT aids can contribute to people being able to live safely in their own homes rather than staying at an institution.

New service providers: In many countries there are now service providers offering packages to building owners, comprising installation and maintenance of smarthaus technology and local energy production with an energy agreement that allows the building to be remotely controlled in accordance with energy requirements and energy prices.

New business models: When they have many customers, smarthaus technology suppliers can gather together enough buildings to act as an aggregator in the energy market, thereby achieving higher prices for electricity that is not used when there is a high load in the grid.

Another business model that has become popular abroad is the ESCO model (Energy Saving Companies) in which the ESCO supplier manages investments, operation and maintenance of the energy system in a building and enters into an agreement with the building owner to split the profit on the energy saving.

Digitisation: The building information model, BIM, is the tool used for the digitisation of the building process. It also makes it possible to estimate the effects of management, monitoring and optimisation of energy consumption. Norway is one of the world leaders within BIM and Statsbygg has implemented BIM as a mandatory tool across the entire building process from 2016. Transport and mobility Transport and mobility involves ICT-supported solutions for well-integrated transport and logistics services. It includes public transport, industrial transport, private vehicles, bicycles and pedestrians. The aim is to achieve the safest, most environmentally friendly and efficient solutions for transport.

Some examples of technology solutions that may contribute to achieving these ambitions include:

• Real-time information about the traffic situation on roads, relevant public transport services, etc. which could provide users with the basis for making effective solution choices. At the same time, the information could also provide useful feedback for transport operators for the development of services. • ICT solutions and sensor technologies are essential elements in the work to develop safer traffic, i.e. reduce the high number of fatalities and injuries in traffic. This includes solutions to prevent collisions, improve safety in the event of accidents and enable rapid assistance after accidents have taken place. Sweden is a pioneering country when it comes to developments in this area. • We can also see the emergence of service providers based on the use of ICT in combination with new business models: Examples of this include Blabla cars, Über and nabobil.no. Autonomous buses: Globally, Norway and California (USA) have advanced the furthest when it comes to testing self-driving electric buses in the market. The pilot projects in Norway

include testing the bus under Arctic conditions. Sensor technology in particular, could offer great opportunities for Norwegian industry.12 • In late summer 2016, Singapore started testing autonomous taxis. The aim is to have a complete, self-driving taxi fleet ready by 2018. 13

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Intelligent transport systems (ITS) are often used as a term for systems relating to the use of ICT for efficient traffic management in both the road and public transport sector. The purpose of ICT is to influence behaviour and improve transport solutions and traffic management in such a way as to achieve more efficient utilisation of the existing capacity in the infrastructure, improved traffic flow, less local air pollution and reduced emissions. Facilitation of electric cars and other solutions that can contribute to lower emissions is a clear goal in the development of smart transport solutions. At the end of 2015, the Norwegian parliament adopted an act on intelligent transport systems (the ITS Act). The act implements the EU ITS directive in Norwegian law and creates the legal basis for ensuring that ITS applications and services can interact both within Norway and across borders in the EEA. There is substantial room for development of new innovative solutions in this area, in the form of both simple, app-based solutions and large, integrated solutions.

12 Source: Acando Norge AS 13 Source: Bloomberg 22

Distribution and consumption of energy Smart energy solutions for cities and society include increased access to renewable energy, reliable energy deliveries, efficient utilisation of energy and systems that provide users with the opportunity to manage and influence energy consumption.

An essential element in the development of smart energy solutions is smart grid solutions, which are new systems for efficient distribution of electric power based on ICT solutions for the management and control of supply and consumption of electricity. A smart power grid, among other things, allows for automatic adaptation of electricity deliveries in relation to demand, reduction of consumer peaks by transferring some of the consumption during periods in the day where there is lower demand, better overview of the total consumption in homes and buildings, quicker identification and rectification of faults in the power grid, etc.

This is an area in which Norwegian innovation environments and companies have an excellent position and potential for further growth. An important reason for this is Norway's position as a major energy producer based on advanced technology, not least within renewable energy. We would like to highlight two areas where Norwegian environments have a great starting point: Within the smart grid field we can see several collaborative initiatives that contribute to the promotion of innovation and business development. The Norwegian Smartgrid Centre is a national centre of excellence for smart grid. The business comprises research, teaching, test and demo projects, business development and commercialisation. The centre of excellence has more than 40 members. The cluster organisations Smart Grid Services and NCE Smart Energy Markets also have key roles to play. The latter is also a partner in central EU-funded projects and has been essential to the development of specific plants that act as test and demo centres for smart grid solutions, such as the plant at Hvaler (Smart Energi Hvaler), for example. Norway has the world's highest proportion of electric cars per capita. This puts Norway in a good position to develop solutions for electric traffic systems, battery solutions, charging systems, etc. Norwegian transport companies are also running initiatives relating to the transition to electric means of transport.

Norwegian supplier of electric car chargers

Zaptec Charger AS from Stavanger develops new chargers and charging technology for electric cars. In July 2016, the company entered into a contract with Renault Norge (RBI AS) for the supply of portable electric car chargers (ZapCharger Portable). The contract has an initial value of more than NOK 70 million for supplying Renault in Norway. The technology developed by Zaptec is advanced, unique and patented and contains an electronic generator and built-in protection for the electronics in both the car and in the power grid. The development department at Renault in Paris chose Zaptec in a competition with technology environments across the entire globe. According to the press release, Zaptec solved a technical challenge that will set the standard for such chargers worldwide.

Source. Zaptec.com/newz/

Water supply and refuse collection Water supply and refuse collection comprises systems for water supply and refuse collection based on ICT-supported solutions for efficient utilisation of water resources, environmentally friendly solutions as well as quality control, recycling, etc.

In a global perspective, better and smarter water supply is a crucial contribution to improving public health, combating poverty, reducing conflict, safeguarding food production and general welfare. The growing global water requirement has been estimated to require investments in technological developments and infrastructure of nearly USD 800 billion by 2020. On the part of Norway, the need for investment has been estimated at nearly NOK 500 billion by 2030. In Oslo, which has one of the

23 highest rates of population growth in Europe, water rationing will be a topic in only a few years based on current consumption and capacity in the water supply. In order to increase the capacity of Oslo's water supply, there are major requirements for new technological solutions and that we consume water in new and smarter ways. The professional organisation, Norsk Vann, which represents 360 local authorities, has a high focus on the challenges associated with the water supply of the future and has initiated a number of important development projects. Two clusters, Clean Water Norway and Smart Water Cluster are essential development environments in this area. The use of sensor technology and digital technologies in monitoring systems is an emerging area. New solutions are being developed for waste management, based on reuse and utilisation of residual materials in other value chains. New principles for circular economy and smart technology solutions for monitoring, sorting and distribution would seem to offer good opportunities for business development.

Hvaler's digital water meters

The residents of the municipality of Hvaler in Østfold have had automatic digital water meters installed that record water consumption every hour. The data from the water meters is sent to a software platform that analyses and visualises the data in real time. The system has been developed by eSmart Systems AS - a company based in Halden, which has developed a resilient and scalable software platform that can receive, process, analyse and visualise vast quantities of data in real time. The platform enables the digital energy industry of the future, as well as smart cities.

Source: eSmart Systems AS

Planning and decision-making Planning and decision-making comprises services that can provide residents with efficient and user- oriented services that can contribute to active participation in planning and decision-making processes and that can provide a well-coordinated service provision.

Such services will have originated from the authorities' service provisions, but will increasingly be achieved through interaction between the public and private sector. ICT infrastructure, hardware and software will be essential tools for developing such services. There is substantial potential for the development of new business solutions. Common national components have been established to facilitate great services across companies in the public sector. These components already make everyday life easier for users, among other things by providing a common login solution for digital public sector solutions. The Altinn ID portal, national population register, Matrikkelen (land register) and register of entities (companies) are examples of such common national components. The Altinn platform has open interfaces with the opportunity to create new ones. Naturally, it is therefore available to both government agencies and business and industry for the creation of new and further development of well-established ecosystems. Among other things, this can be done through collaborative services that link private and public sector services together to form new products in business and industry. There is already a lot in place for continued digitisation and increased business development in this area. Nevertheless, to achieve stronger incentives there is a need for a clearer ambition from the authorities and, not least, a more coordinated effort between sector authorities. Open standards and open data will be essential to the development of commercial services.

For this area, we will also address the development of comprehensive systems for the monitoring of a number of societal functions: water supply and consumption, electricity supply and consumption, the situation on the roads, in public transport, etc. In this area we have Norwegian companies that offer solutions with substantial market potential, one example being F5 It AS from Stavanger.

From oil and gas to smart communities

F5 It AS: An IT company that, in recent years, has been working to transfer expertise from oil and gas industries to other sectors. They now see major opportunities within the smart communities sector. Together with the Municipality of Gjesdal and Lyse AS, among others, they have now established a pilot project. By developing a framework for the smart city, a digital framework for various technical solutions used by local authorities, now or in the future, they address the challenges experienced by local authorities when it comes to interaction between systems, communication with residents and digitisation. With the framework as the foundation, it is possible to connect to various technical solutions, such as those relating to energy efficiency improvements and management of buildings, environmental measurements, contingency relating to snow and flooding or healthcare and welfare solutions. The solution is open so that existing solutions can be connected and the company has an ecosystem mindset: local innovation can enrich the solution and other players can expand their market through F5 IT's smart city solutions.

Source: F5 IT AS

Opportunities and barriers Based on the discussion above relating to driving forces, ongoing development processes and relevant segments within smart communities, we will now summarise some factors that could support or represent barriers to innovation and business development:

Several factors could provide positive stimulation for Norwegian business development:

• The need to restructure the oil-dependent Norwegian industry strengthens the basis for developing new business opportunities and business areas. • Increased requirements for energy efficiency improvements and environmental considerations provide incentives for the development of efficient technology solutions. • Norway has a good digital infrastructure and a population that are early adopters of new technology. • Norway has extensive positive experiences of collaboration and partnership between the public and private sector, something that the ongoing initiative to develop smart communities can also benefit from. • Several major international players look at Norway as a country that can be suitable as a test bed and to pilot solutions. Such advantages may be linked to the population being early adopters of new solutions, the excellent infrastructure, technological advantages in a number of areas and well-developed municipal services, etc. • The public sector is proactive in a number of areas. Among other things, they have promoted a successful and ambitious electric car policy.

Key barriers can be summarised as follows:

• Inadequate shared orders for comprehensive systems for smart communities from the authorities, including inadequate coordination across policy areas. • Inadequate orders across new, innovative solutions from public procurers.

• Laws and regulations that prevent sharing information from registers. • Competing technology platforms that form the basis for solutions that do not communicate. In summary, we would say that Norway still has excellent conditions in place to fulfil the ambitions to

Input to the report

At the end of April 2016, Innovation Norway invited representatives from the private and public sector to attend a mini-foresight on smart communities. During the workshop, we asked for input to develop the visions for the future Norwegian smart society - visions that could result in specific draft innovation policies on what Innovation Norway can do to reach our goals for a smarter society.

Participant involvement was excellent and plenty of great input was collected. Some of the input has also been included in the work on the report on smart communities.

Examples of input from the workshop:

• The public sector must be adapted to societal development • Improved interaction between the public and private sector • Many local authorities attempting to solve the same problem, someone needs to take overall national responsibility. • "Open data governance" is key for developing smarter cities and business development. • Improved collaboration between the Nordic countries • Public sector research and development contracts can contribute to the development of smart cities • More focus on exports at an early stage. • IN, Enova and the Research Council of Norway must initiate 20 projects showing best practice for

develop smart communities. The key barrier is in inadequate and not very comprehensive strategies on the part of the authorities. This was also a key conclusion from the Foresight exercise, in which participants asked for a clear, overall strategy from the authorities and asserted that it will take more than an "assessment of the needs for facilitation for smart city developments in Norway," as presented in the white paper Digital Agenda for Norway. 14

14 The Ministry of Local Government and Regional Development: Whitepaper no. 27 (2015-2016): Digital agenda for Norway 26

Part 3: Innovation policy recommendations

Vast opportunities for increased economic growth

The development of smart communities is an area with vast opportunities for innovation-based growth. An increasing number of cities are drawing up ambitions and strategies to develop smart solutions for crucial societal functions. These cannot be achieved without contributions from business and industry. A number of analyses show major growth in the global market for smart products and services. Norwegian business and industry have excellent conditions in place for being able to offer innovative solutions within some areas. Clear and proactive strategies for innovative collaboration and internationalisation will strengthen opportunities. Smart communities utilise areas of opportunity that can be measured using a trisected baseline: economy, environment and society. In order to succeed with a public-private sector collaboration, it must be economically profitable to develop and operate solutions in smart communities as the initiatives will otherwise be short-term. It must have a sustainable quality that reduces the climate and environmental issues that we currently experience in urban areas. And last, but not least, smart cities must facilitate human enjoyment. Smart communities must be good places for residents to live. The role of national authorities

Driving forces The key driving forces for developments in the area are the local authorities' ambitions and strategies, the development of digital technologies and society's need to meet the major challenges linked to welfare and sustainability. The public sector has an important role to play in the development of all three areas. The development of smart communities is interesting to national authorities as it provides the opportunity to harness an unreleased potential for service innovation, among other things by increasing the quality of services to users and, not least, streamlining the operation of the services. There is a need for a comprehensive policy that can stimulate innovation and market development. Both national public sector authorities and local authorities must be challenged to formulate clear objectives and strategies for innovative investments and services within their respective areas. Such a policy must support two central requirements:

1. The development of infrastructure and societal services in urban areas and regions based on clear requirements for innovative, sustainable and user-oriented solutions. 2. Active facilitation of business development through strong and coordinated investments in the development and use of digitisation technology. Public – private sector innovation partnerships Public sector investments and service procurements represent a major market for business and industry. But the majority of these procurements are based on tenders with the lowest possible price as the dominant criterion. This does not promote the development of new innovative and smarter solutions. One of the most efficient instruments to accelerate the development of such societal functions will allow for public procurements based on public-private sector innovation partnerships. This means that public sector clients define their needs and actively participate in a collaboration with private suppliers to develop good solutions. Changes to the procurement provisions are a key assumption for realising such needs. Embedding requirements for innovation into such orders does of course also

27 involve an increased risk of the development costs becoming too high and/or the solutions being insufficiently attractive for further commercialisation.

Innovation partnerships

Innovation partnerships are about simplifying the procurement of innovation while also providing the public sector partner with greater scope to implement the procurement. This is based on a Danish concept that provides a public sector partner with the opportunity to create innovative solutions in collaboration with private sector suppliers while also having the option to later buy the solution. This requires a limited challenge that the partnership can address. The process consists of five stages: requirement clarification, market dialogue, competition, development and finally, procurement of the best solution to the challenge. An assumption for the innovation partnership is that the public sector partner must have the resources to implement the process. Innovation partnerships can be used in connection with extensions within renewable energy, distribution grids or smart communities where there are limited challenges to which the current best solution does not satisfy the future needs for sustainable solutions from a life cycle perspective. This would then be a method for developing subcontractors for the national and international market. The concept can also be used in the private sector.

The public sector authorities must be willing to add incentives to ensure that socio-economically profitable solutions are achieved by actively participating as a partner in the innovative processes. The gains could be substantial, both in terms of more cost-effective services and in terms of improved quality of services. Secondly, it could form the basis to provide Norwegian companies with the opportunity to develop and test products and services with a view to commercial development in Norwegian and international markets. There are already great examples of this, where local authorities have saved large sums in their operating budgets through new, cost-effective solutions. 15 At the same time, it also means potential for growth for the company that wins the contract. Facilitating digital innovation Digital technology develops rapidly and specific areas of applications are opening up in more and more areas. The question is no longer if digital technologies will be used in the production of goods and services, but the speed, scope and consequences. The authorities have an important role to play in developments in this area by facilitating digital innovation. This can take place in several ways, cf.:

• Facilitation of the use of public data: The public sector generates vast quantities of data. Further use of such data can provide business and industry with the opportunity to develop new services, products and business models. This requires the development of legislation that permits such use. Policies must also be drawn up for the use of such data within various sectors. Transport and public transport and geodata are sectors that the government highlights as important in this context. • Strategies for the development of the exchange economy: New services and business models based on principles from the exchange economy are rapidly making their way into several sectors, not least within transport, which is an essential area in "smart cities and societies". There is a need for principles to govern the development of such services.

15 http://leverandorutvikling.no/arkiv/innovativ-anskaffelse-skapte-vekstrakett-article1276-740.

• Use of Big Data: The public sector has two roles to play with regard to the use of large quantities of data: Developing framework conditions to facilitate active and secure use of data and facilitate the use of vast quantities of data in the production of public services.

Innovation Norway's role and commitment

Innovation Norway's role and commitment within smart communities is in an early phase. Here, we propose an initial version of a strategic platform for developments in this area: Purpose and role Innovation Norway must be an active facilitator and supporter of the development of innovative solutions that can contribute to achieving the ambitions for smart communities. Innovation Norway's specific role will be to strengthen economic growth in the area by contributing to increased creation, innovation and business development. This must take place in close collaboration with local authorities and other public sector authorities and in interaction with other public funding agencies. However, public funding agencies are the primary target audience of Innovation Norway. Knowledge foundations and skills development There is a need to establish a better knowledge foundation for the initiative. Among other things, this must include: • More systematic knowledge about relevant initiatives within smart communities, the status of the work within the segments mentioned, development of digitisation technologies, etc. • An overview of companies and academia aimed at smart communities. • Systematised experiences from pilot and development projects.

Furthermore, an organisational solution must be established in Innovation Norway to efficiently contribute to skills development.

Network building In the phase in which Innovation Norway currently finds itself, it is essential to spend time and resources developing networks with relevant stakeholders in the area. In particular, this includes: • Norwegian municipalities with clear ambitions and strategies, cf. the overview in Chapter 2 and Appendix 1. The purpose of these links will be to identify initiatives that could provide a good basis for increased economic growth. • Corporate groups and fora aimed at the development of business opportunities linked to segments within smart communities, e.g. clusters, corporate networks and industry organisations. • Norwegian public funding agencies. • International programmes and fora, e.g. relevant EU programmes, Nordic programmes, conferences and collaboration platforms. There will be particular emphasis on focusing on the EU's substantial commitment to smart cities. • Innovation Norway's foreign offices will be key resources in identifying relevant environments, services and trends as well as establishing links. Norway is a small country and growth must therefore largely take place outside its borders. Companies are encouraged to utilise international business opportunities at an early stage. Networks, market insight, positioning, cost leadership and ownership are essential success factors for international growth.

Development of instruments Innovation Norway administers a number of instruments that are relevant to developments in this area: • Ordinary financial instruments for innovation and business development. This includes borrowing and grant schemes. The environmental technology scheme will be particularly important in the development of the initiative. • Instruments for innovative collaboration, especially OFU contracts and corporate networks. • Skills development, especially the FRAM programme. • Consultancy services, especially through the foreign offices and EU consultancy. • The cluster initiative, which can provide a good basis for long-term development processes in collaboration between business and industry, academia and public sector user environments. Organised fora to define needs and conceptualise solutions, piloting activities and international collaboration are some of the instruments that may be included in a cluster collaboration. • Invest in Norway, which should be able to play a key role in promoting innovative and "smart" cities/regions as attractive prospective locations for international companies.

Both limited frameworks and established policy (prioritisation, selection criteria, etc.) could reduce the opportunities to establish initiatives with greater impact. There is a need to review the respective options to identify barriers and look at the opportunities for strengthening the initiatives. Innovation Norway, as well as relevant national, EU and international programmes must be showcased better to the target audience. Initiation of pilot projects As part of the development of a comprehensive commitment, Innovation Norway should initiate one or two pilot projects linked to selected cities/regions with clear ambitions to become smart cities and that consider collaboration with business and industry to be an essential strategy. The purpose is to support processes that could stimulate innovative collaboration and business development. This should take place by utilising a broad range of the relevant instruments available to Innovation Norway in order to test how the instruments can best support this area.

The pilot projects may include:

• Development of strategies for systematic collaboration between cities/local authorities, business and industry and academia. • Establishing venues, facilities and "living labs" for user-oriented ideas development and conceptualisation. • Network building with relevant environments and initiatives in Norway and abroad. • Utilisation and further development of Innovation Norway's established innovation instruments, e.g. with an aim to establish "innovation partnerships". • Increasing knowledge in business and industry and on the part of local authorities as to how the funds from the Research Council of Norway, Enova and Innovation Norway can be used to finance development projects within smart cities. • Strengthened investments in companies within digitisation technology, including funding for early phase development and connections to development areas. • Active utilisation of Nordic and European programmes and fora for smart communities.

Norwegian and Nordic innovative collaboration

The role of the public funding agencies Fulfilling the ambitions of smart communities requires broad and well-coordinated investments from the public funding agencies. There is a need for knowledge development, technological developments, development of infrastructure, entrepreneurship and innovation and business development in established business and industry.

The public funding agencies will have their specific roles to play in this initiative:

• The Research Council of Norway's new multidisciplinary research programme BYFORSK will be a key contribution to the development of knowledge in the area. It is crucial that other public funding agencies also utilise the initiative, by obtaining new insight and by being an active contributor to the knowledge platform. A well-coordinated initiative between public funding agencies in which instruments, expertise and networks are utilised in a comprehensive initiative will be an important assumption for success. • Innovation Norway will be the key contributor to stimulating the development of new products, services and business models. This can take place through established financing programmes and instruments that promote innovation through partnerships. • SIVA has an important role to play in this area, by establishing physical infrastructure for testing and demonstration and also for entrepreneurship. The realisation of the "Norwegian Catapult" proposal, promoted by SIVA in close collaboration with Innovation Norway and the Research Council of Norway, will support the development of solutions for smart communities. • ENOVA offers funding and consultancy services within energy and climate initiatives, including areas that we have defined as part of smart communities, such as building and transport. Smart communities is an area in an early development phase. The challenges that must be met are complex and the area of opportunity is broad and extensive. The public funding agencies are also in an early phase of their commitment but are now drawing up more proactive and comprehensive strategies. There is a need for the agencies to now also develop more coordinated efforts, in which both the public sector and business and industry can utilise the synergies between the roles and instruments administered by the agencies. Nordic collaboration The well-developed Nordic collaboration is a crucial platform for the development of the Norwegian commitment within smart communities. Several collaboration fora and programmes have been established to stimulate collaboration within research and innovation, with Nordic Innovation as a key instrument:

There are several reasons for such a collaboration: The Nordic countries, especially the Scandinavian countries, largely share a well-developed culture for collaboration, both within and between companies and between the public and private sector. Shared ambitions for more sustainable solutions are an important part of this perspective. The Nordic countries are very advanced when it comes to infrastructure, buildings, smart grid, sensor technology and other relevant areas. The countries are also quick to adopt new technology, which means that international companies often use the region as a test market.

These are advantages that could be important for innovation and business developments linked to smart communities. In some areas, Sweden, Denmark and Finland have made further progress in the

31 development of smart communities. It is important for Norway to develop some areas where it can be a leader so that Norway also becomes attractive in such a Nordic collaboration. Naturally, Nordic companies will compete in the markets concerned, but the "Nordic model" can also create the basis both for collaboration on the development of system solutions and for international marketing. This will ensure greater strength in development processes while also ensuring that "Nordic" can raise greater international attention.

Nordic Built Cities is an example of such a Nordic collaboration. Through support from Nordic Innovation, projects showing best practice for the development of climate-smart Nordic total solutions based on digital technologies and material technology are stimulated for use in smart cities.

The joint Nordic stand during the Smart City Expo in Barcelona in November 2016 is another example of the interest in Nordic collaboration.

Innovative Nordics is a joint Norwegian-Swedish initiative that looks at the basis for a stronger Nordic collaboration on innovation in order to strengthen competitiveness in global markets. This could also be a platform for joint initiatives within smart communities.

Summary and recommendations With a starting point in the 2016 Dream Commitment and based on dialogue with a number of companies, local authorities and organisations, our conclusion is as follows:

Smart communities provide new business opportunities There is major global awareness of the need to develop cities and societies with more sustainable and efficient solutions for essential societal functions and that are safer and more functional for residents. Solutions for smart cities and societies are driven forward through:

• Rapid development of digitisation technology • A number of specific initiatives to develop smart cities and societies in which partnerships between public sector clients and business and industry are key. The market opportunities for smart products and services are rapidly increasing. Norwegian business and industry have excellent conditions in place to utilise the scope, based on Norway

• having a strong position within some key technology areas, especially in relation to renewable energy and energy distribution, • being advanced in terms of infrastructure for and use of digital technology, • having excellent conditions in place to develop partnership-based innovation environments and processes.

Innovation Norway will play an active part Innovation Norway's role is to support the development of new business opportunities and business areas based on technological solutions and service deliveries aimed at smart communities.

In this work, Innovation Norway can draw on a broad range of instruments and resources, especially:

• Instruments for innovative collaboration between companies, R&D environments and the public sector. • A regional system providing excellent links to municipal smart city initiatives and related networks and development processes.

• An international system that can be used to establish links to initiatives abroad. Recommendations

A. Framework conditions for innovation policy Public sector authorities have a key role to play in fulfilling the ambitions for smart communities. There is a need both for a comprehensive national strategy and improved facilitation of innovative processes that can contribute to fulfilling society's needs for new solutions.

Today's society generates vast quantities of data which will continue to grow in years to come. In order to succeed in harvesting the major business potential that can be found in the utilisation of data across industries and the private and public sector, Norway should establish a common national platform for the exchange of data. This would provide business and industry with great opportunities to develop innovative new services, products and business models across traditional silos. Norway has an advantage in the form of good digital infrastructure and a population that are early adopters of new technology. In addition, the Norwegian Tax Administration, the Brønnøysund Registers and other public sector agencies have already paved the way for this type of shared mindset.

• Innovation Norway recommends that the authorities assign a single department the overall, coordinating role to implement a national direction and associated goals and action plans for the development of smart cities and societies.

• Innovation Norway recommends a common national platform for the exchange of data across sectors and industries, for which the Brønnøysund Registers and the Agency for Public Management and eGovernment (Difi) take a coordination responsibility. The stakeholders must take shared responsibility for privacy and information security and the legislation must be adapted for such exchange of data. • Innovation Norway, the Supplier Development Programme and Difi will pilot innovation partnerships between the public and private sector within smart cities and societies during 2017.

B. Norwegian and Nordic innovative collaboration A strengthened initiative to develop smart communities requires broad and coordinated effort. Innovation Norway must utilise the opportunities for collaboration with both Norwegian and Nordic innovation partners:

• Innovation Norway will take the initiative to invite other public funding agencies to partake in more coordinated investment for skills development, research, innovation and market development associated with smart cities and societies. • Innovation Norway will take the initiative to ensure that smart cities and societies become a joint area of development in the Nordic partnership, so that international companies view the Nordic region as the most attractive development/test venue for smart cities and societies.

C. Initiatives to reinforce Innovation Norway's commitment Innovation Norway is currently involved in the development of clusters, networks and individual businesses aimed at the opportunities within smart communities. However, knowledge and experiences are fragmented. Innovation Norway's commitment must be strengthened and focused. In addition to the recommendations in item A and B, we propose the following strategic initiatives to upgrade the efforts:

• To reinforce the efforts within smart cities and societies, Innovation Norway will have completed a survey of key Norwegian companies, academia, pilot and development projects within the smart communities sector in Norway and the most relevant international markets by the end of January 2017.

Appendices: Some examples of local authorities with specific smart city initiatives

The Municipality of Bergen The municipality has not developed its own smart city strategy, but in May 2016 the city council presented the Green strategy, which is a plan for how Bergen can become fossil-free by 2030. 16 The overall objective of the plan is for Bergen to be a future-oriented city that facilitates a climate-smart society. According to the Green strategy, Bergen will be a natural centre for strategic development and innovation. The municipality will do its best to facilitate more business establishments, new industry, green growth and a higher rate of residential property development. The report notes that it is especially important to facilitate new establishments and innovation.

Picture from the opening of the waste network in Bergen – 2015 (Photo: Marius Solberg Anfinsen.) In order to realise the ambitions, the municipality has implemented several smart city initiatives in 2016, including:

• Stimulating the development of new innovative services, for example within mobility, inspired by the investments in "Mobility as a Service" in Helsinki. • Participating in The Norwegian EU Network on Smart Cities and Communities - a project funded by the Research Council of Norway's ENERGIX programme for the 2016-2018 period.

16 35

The Municipality of Bodø In 2014, the Municipality of Bodø initiated a smart city initiative together with NHO, the Norwegian Public Roads Administration, Nord University and the Research Council of Norway. It has established a pilot project in which work is undertaken, among other things, on the development of a smart city strategy.

Bodø, Photo: Thinkstock Examples of initiatives that have been launched: • Autonomous door-to-door solutions: Together with partners in SINTEF, NTNU, the Research Council of Norway and Intelligente transportsystemer Norge, the municipality is working to establish a consortium in which Bodø will be a national pilot for the development and testing of autonomous door-to-door transport solutions, a real alternative to the car. • Large-scale investment in smart welfare through a welfare technology programme. • Resident participation: Through the New City - New airport project, the municipality has trialled new methods for resident participation. • The deployment of new intelligent transport solutions in City Package Bodø (public transport and infrastructure package worth NOK 3 billion). The Municipality of Bærum The municipality has developed an innovation strategy and is now working to establish a strategy for a climate-smart municipality. In 2015, the municipality won a European award for its planning work at Fornebu. The award was for good facilitation of sustainable urban development.

Photo: The Municipality of Bærum

SmartCity Bærum 17 - a partnership between the municipality and the private sector - works on various initiatives in which business and industry also contribute to initiating and creating new and innovative solutions. Fornebu is one of the areas the municipality wants to highlight as a "window display on modern environmental thinking". Bærum Smart Citis and the municipality have, among other things, initiated the following projects :

• SmartParkering Sandvika: Approximately 120 sensors have been installed for municipal street parking in Sandvika. The data will be used in a dedicated cloud solution that the municipality is establishing in collaboration with various stakeholders in SmartCity Bærum, including Q-free and Easypark. • Two car pool companies have been established in the area. The car pooling schemes can be used by employees and residents at Fornebu. • Powerhouse, - Norway's first refurbished plus house office building In addition to being a traditional service provider, the municipality will become an information provider. The Municipality of Gjesdal in Rogaland The municipal council in Gjesdal (population 11,800) has unilaterally resolved to use the smart city concept as a development strategy. The starting point was the development of the new Ålgård town centre and the idea that the municipality must facilitate overcoming the challenges of the future.

17 www.smartcitybaerum.no. Smart City Bærum is a partnership between the municipality and the private sector in Bærum. The goal is to reduce energy consumption and greenhouse gas emissions through joint projects and cooperation. 37

Illustration: Muncipality of Gjesdal

The municipality focuses on the entire organisation being connected and involves residents, business and industry and research environments. Collaboration with the research environments in the region has been a central part of developments in the smart city work. Examples of initiatives that have been launched:

• Feasibility study for the development of better mobility solutions, including seamless connection of buses and electric bicycles, work to reopen the Ålgård Line and investigating other possibilities. Participation processes in the development of the city centre and municipal services. • Welfare technology installed in Flassabekken assisted living facilities. • Work on open data in collaboration with the Municipality of Stavanger. The municipality has uploaded a number of datasets to a shared portal and is working to include additional service areas. • Collaboration with F5IT 18 and Lyse on a project to develop a Smart City Hub to integrate smart control of municipal buildings, mobility solutions in the city centre, contingency functionality, monitoring of air and water quality, sharing schemes, opportunities for dialogue with residents, etc.

The Municipality of Hvaler in Østfold The municipality collaborates with several public and private sector companies. It is also involved as a partner and/or demonstration and test area in more than 30 research and development projects. Together with Frederikstad Energi and NCE Smart Energy Markets, the municipality has established the framework programme "Smart Energi Hvaler". The municipality has developed a new smart city strategy.

The illustration on the next page shows examples of initiatated projects:

18 http://www.gjesdal.kommune.no/aktuelt/smarte-gjesdal-i-media. 38

Source: NCE Smart Energy Markets

The Municipality of Oslo So far the municipality has yet to develop a comprehensive plan or smart city strategy. There is a pronounced need for the municipality to consider the various smart city concepts in context and across sectors.

The municipality has launched multiple smart city initiatives. For each project, the municipality is involved with numerous parties, regionally, nationally and internationally. They are also involved with several applications to Horizon 2020's smart city programme.

Oslo barcode, Photo: Thinkstock

Examples of initiated initiatives: • City Reporting App, via which the general public can report inadequate lighting, potholes, waste, inadequate snow clearing, etc. to the local authority. • Pilot testing of several different parking sensors placed in municipal street parking spaces around the city. • Oslo climate barometer: In collaboration with Microsoft and eSmart Systems AS, the Municipality of Oslo is working on the Oslo Climate Barometer project, which is part of the smart city initiative. The project will collect climate and environment data such as cyclist and pedestrian counts, charger usage for electric cars and air pollution. The data will be analysed, correlated and presented in a visual dashboard. The project will be presented at the Smart City conference Nordic Edge Expo in Stavanger in October. • Driverless cars: facilitation of first-generation technology for driverless cars • Digital user services: facilitation of needs-adapted digital user services

The Municipality of Stavanger The City Council of Stavanger set down in the Action and Economy Plan for 2016 that the city will create a smart city strategy. 19 The work started in April and the strategy will be presented to the City Council in December 2016. On an overall level, the aim of the smart city work is to create better and more efficient services for residents and contribute to new business and industry and new jobs through new solutions and new markets being developed by local business and industry and academia.

Stavanger, Photo: Thinkstock

19 http://www.stavanger.kommune.no/no/Aktuelt/Samarbeid-og-teknologi-skal-brskape-s martbyen-Stavanger/

The Municipality of Stavanger has been a pioneering municipality in the work to develop smart cities. The municipality has implemented and is involved with several activities, including:

• The Horizon 2020/Triangulum project in which the Municipality of Stavanger, Rogaland County Council, Lyse AS, Greater Stavanger and the University of Stavanger are partners. The project aims to demonstrate smart city solutions, facilitate the replication of these in other European cities and contribute to the reduction of carbon emissions. • Parts of the city have sensors in waste containers notifying refuse collection staff when emptying is required. • An ongoing project to open up as much as possible of the municipal dataset, including collaboration with local business and industry on hackathons using municipal data. • The municipality is a partner in the development of the Nordic Smart City venue, Nordic Edge Expo. 20 • Member of the Arena Cluster, Norwegian Smart Care Cluster, based in Stavanger and involved in multiple pilot projects for the testing of welfare technologies.

Through the Triangulum project, Stavanger and other local partners (mentioned above) collaborate with local authorities, companies and research institutions in Eindhoven, Manchester, Prague, Sabadell and Leipzig, as well as the Fraunhofer IAO research institute. Smart City solutions are tested and demonstrated in Stavanger, Eindhoven and Sabadell for further use in the other cities. The collaboration between the six cities also provides an essential venue for the exchange of experiences and knowledge on smart city developments.

The Municipality of Trondheim The muncipality has not developed a separate smart city strategy, but looks at how smart city elements can be included in future action plans for climate and the environment, startup strategies, programmes for welfare technology and the programme for digital first choice.

In the programme for digital first choice, the municipality is taking a closer look at initiatives such as smarthaus technology, which in various forms is intended to be installed in municipal and private properties to increase safety, security and the efficiency of service provisions.

20 http://www.nordicedge.org/ 41

Trondheim, Photo: Thinkstock Together with NTNU, the Municipality of Trondheim is a partner in Climate KIC. Entrepreneurship and innovation are the driving forces for a greener world, based on positive collaboration between the public sector, established private sector companies and academia. The municipality is also well under way with a Horizon 2020 application - "Smart cities and communities". It is also considering entering into a project collaboration with the Municipality of Stavanger, the Municipality of Oslo, Brønnøysund Registers and Microsoft Norway on a smart city project with a focus on open data sources and digitisation. The municipality focuses on how R&D and the private sector can contribute to smarter and more climate-friendly cities and how this could lead to economic growth.