As urbanization increases – an additional 2.5 billion people will live in cities by 2050 – cities and suburbs will undergo significant transformations to create sustainable living conditions for their residents. Energy and mobility are the twin pillars of these transformations, and both will require radical adaptation to meet the demographic and economic growth without increasing congestion and pollution. The question is whether policymakers and business leaders can harness and combine them in ways that maximize their benefits for cost efficiency, economic growth and environment footprint. The Fourth Industrial Revolution offers an unprecedented opportunity.

The Fourth Industrial Revolution in energy and mobility systems

Mobility is changing.

As electric vehicles (EV) become more affordable, some are predicting that they will constitute almost a third of new-car sales by the end of the next decade. Ride-sharing continues to surge, with estimates that, by 2030, it will account for more than 25% of all miles driven globally, up from 4% today. These changes are just the first hints of what is to come, as we will soon see autonomous vehicles (AV) and commercial fleets of EVs integrated as parts of everyday life. In the future, AVs will also cost significantly less per mile than vehicles with internal combustion engines for personal use – by as much as 40% – and could also reduce congestion and traffic incidents.

At the same time, energy is changing.

We are in the middle of a global evolution of energy systems, which are becoming cleaner and increasingly decentralized, with energy generated, stored and distributed closer to the final customers, through the acceleration of renewables and storage technologies. At the same time, digitalization allows customers and electricity system operators to control where, when and how electricity is being used, with new business models emerging. Finally, new and more energy uses are going to be electrified – mobility being one of the critical ones.

These trends have the potential to reinforce each other and actively contribute to making our cities smarter. Forward-thinking business leaders and policymakers must act now to lay the foundation for sustainable innovation in urban environments, in order to capture and combine these new trends.

A new approach to electrification of transport is required

Electric mobility is widely seen today as a way to improve air quality and meet climate goals, but rarely is it integrated in a comprehensive vision for smarter cities. EVs continue to be associated with traditional ownership and use models, and are still generally considered as just cars: innovative uses and services relating to batteries, or to integration with smart buildings, are ignored, or at least not explored enough. Charging stations are still developed with limited or no consideration for energy issues, or without exploiting a full range of digital technologies, overcomplicating the customer experience. Their locations will also inevitably change as we transition to shared and autonomous mobility.

Electric Vehicles for Smarter Cities: The Future of Energy and Mobility, a report from the World Economic Forum, developed in cooperation with Bain & Company, suggests following three general principles:

1) Take a multi-stakeholder and market-specific approach. The investment and infrastructure required to support electric mobility will vary significantly from one place to another. Any roadmap to electric mobility should be adapted to three main characteristics of the specific market: local infrastructure and design; energy system; and mobility culture and patterns. All relevant stakeholders should be engaged to collectively define a new paradigm for cities that go beyond the today’s industry divisions, in search for complementary municipal, regional and national policies.

2) Prioritize high-use electric vehicles. Electric taxis and public transportation will have a great impact in reducing carbon emissions. These types of vehicles are driven far more than personal-use vehicles, so commercial and public EV fleet development should be encouraged. For example, Schneider Electric and BMW are part of a consortium of companies in Bangkok that is partnering with King Mongkut’s University of Technology Thonburi to encourage the use of electric vehicles across Thailand, initially through car-sharing and a campus-based electric bus.

3) Deploy critical charging infrastructure today while anticipating the mobility transformation. EV charging infrastructure should be developed along highways, at destination points and close to public transportation nodes. This is critical for three reasons: first, to keep pace with current demand. Second, to address a range of anxiety issues by making charging stations accessible, convenient and easy to locate. And, lastly, to promote the adoption of EVs in commercial and private markets.

In Hong Kong, the local government incentivizes EV infrastructure developers by allowing them to integrate Octopus, a popular smart payment system also used to access public transport. This gives EV drivers a convenient and familiar way to purchase energy, and aims to encourage more people to drive EVs by ensuring the availability of a network of public charging stations.

The infrastructure should be deployed in combination with grid edge technologies – such as decentralized generation, storage and smart buildings – and integrated in smart grids, while at the same time offering a digital end-to-end customer experience. This will magnify the benefits of grid edge technologies: increasing reliability, resilience, efficiency, and asset utilization of the overall system; reducing CO2 emissions; creating new services for customers; and creating new jobs.

The convergence of energy and mobility

When these three general principles are followed, mobility assets and energy systems help each other.

EVs can be used as a decentralized energy resource and provide new, controllable storage capacity and electricity supply that is useful for the stability of the energy system. In markets where regulation allows EVs to be used as a source of flexibility, energy players start betting on this vision, with cars working as “batteries on wheels”. For example, in a pilot project in Denmark, Enel and Nissan set up the first vehicle-to-grid (V2G) commercial hub: by selling frequency-regulation services for system balancing purposes to the Danish transmission system operator, a car can generate around €1,500 in annual revenue.

New business models are possible, where the drivers and fleet operators of EVs could play as producer-consumers of energy services, such as vehicle-to-everything (V2X) and smart charging. These new energy services will create additional opportunities for revenue sharing between the vehicle owners and the energy suppliers that would reduce the total cost of ownership of the EVs and accelerate their market penetration.

At the EUREF campus on the outskirts of Berlin, the EV charging stations are integrated in the local micro smart grid with solar and wind generation. Schneider Electric has collaborated with the Innovation Center for Mobility and Societal Change to complete a micro smart grid that features artificial intelligence and machine-to-machine learning capacity that actively optimizes EV charging. It controls the charging demands to match the network capacity and sends energy surplus back to the grid, based on dynamic pricing. This creates a system where electricity is supplied, stored and potentially returned actively and intelligently. In this context, all new constructions at the campus are sustainable buildings and, as of 2014, the EUREF campus had already met the German government’s climate targets for 2050.

Designing a better future

The transformations happening in the fields of energy and mobility are inevitable, influenced by market factors and megatrends that are virtually unstoppable. Their convergence is the opportunity. Businesses have the chance to spearhead it in cities. Policymakers have the power to promote innovation and new ways of thinking in local governments that will make it possible.

On both fronts, the convergence of energy and mobility must be strategic, intentional and guided, if cities and citizens are to receive the maximum benefits.

The energy sector will have to accelerate the path toward a cleaner, more digitalized and decentralized system, yet one that is more connected and customer-centric. Enabling dynamic pricing and creating new roles for network operators by redesigning the regulatory paradigm will be vital to this strategy.

The mobility sector will have the opportunity to develop new business models based on service and sharing models, and the new uses and services associated with EVs as decentralized energy resources.

Urban planners will need the support of energy and mobility-relevant stakeholders to define the optimal location of the publicly accessible charging infrastructure.

All stakeholders will be critical to ensure a seamless customer experience, by supporting the deployment of a flexible, open and multiservice infrastructure.