Cities lead the way on clean and decentralized energy solutions

With urban energy use growing rapidly, cities will be key to a sustainable energy transition.

Stockholm, Frankfurt and Seoul, among others, show how this can be done. They all aim to increase their energy supply from renewables, increase the number of electric vehicles and provide renewable heating and cooling solutions for buildings. All three have set ambitious targets:, Stockholm aims to be fossil-fuel free by 2040, Frankfurt seeks to achieve 100% renewable energy supply by 2050, and Seoul aims to be 20% self-sufficient in sustainable electricity by 2020.  

A critical challenge for reaching ambitious renewable targets is that different parts of the energy system must be linked much more closely together. High shares of variable renewables for instance can only be achieved if there are effective options for system flexibility such as smart grids and demand response, for example through batteries or thermal storage integrated in district heating. Meanwhile, electric vehicles and heat pumps reach their full potential when run on clean electricity. In addition, high levels of energy efficiency in buildings and industry are a must.

It is at the city level where the different parts of the energy system can be linked together. The heat sector is a key focus of the strategies of Stockholm and Frankfurt, with both cities emphasizing the important role of their district heating systems. These allow the integration of a range of options, including coupling with the electricity sector through heat pumps and power to heat, using the generation from variable renewable power sources at times of low demand to heat water for the district heating system. Heat solutions will vary from place to place and it is important for governments to recognize the important role of municipalities in shaping heat sector developments.

Cities are also keen to encourage the shift to electric vehicles, which can help cut air pollution. EVs can work in tandem with the deployment of renewables, for instance by using car batteries as a way to balance variable renewable power generation. Governments, local authorities and industry all have a role to play in this transport shift and linking it closely to the energy transition.

These questions were debated at the recent annual workshop of the IEA’s Renewable Energy Working Group held recently in Paris. More than 180 government officials, industry representatives and energy experts, discussed the contribution decentralized, local energy solutions can make to drive renewables deployment and decarbonize energy systems.

A shift to decentralised renewables offers opportunities for new players in energy markets. Sonnen GmbH and Vivint Solar, for instance, said they offered consumers lower prices than existing utilities thanks to PV-based solutions that include battery storage or smart home energy management. While these new business models challenge the traditional large energy utilities, many of those such as ENEL Green Power, Iberdrola and ENGIE, said they too were pursuing similar innovations.

But while companies and cities are moving ahead, current market design and existing regulations are not yet ready for a more decentralized energy model. Fossil fuel subsidies, lack of a carbon price, diverse fiscal regimes or uneven cost sharing for electricity grid costs are all obstacles that mean there is no level-playing field. A more integrated approach to policy making is needed, linking the power, heat and transport sectors.