Governments can help cities deliver innovative and people-centred solutions to drive clean energy transitions

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Report for G7 shows how urban planning, digitalisation and grid investment can help cities manage the impacts of climate change and growing energy demand

Reducing emissions in cities is essential for the world to meet its energy and climate goals – and digital solutions that manage consumption patterns and optimise infrastructure can play a significant role, according to a new report by the International Energy Agency (IEA).

Empowering Urban Energy Transitions: Smart Cities and Smart Grids – the third report in the flagship series from the IEA’s Digital Demand-Driven Electricity Networks Initiative (3DEN) – was presented at the G7 Climate, Energy and Environment Ministerial Meeting this week in Turin, Italy, and acknowledged by ministers in their communique. It explores a large range of innovative projects and initiatives to improve power systems in cities around the world and provides insights on emerging best practices.

The report finds that cities need to raise their level of ambition in areas such as energy efficiency to meet the targets set at the COP28 climate change conference in Dubai. While a small number of cities are stepping up through sustainability and carbon dioxide (CO2) reduction targets, more need to come forward. Cities currently account for around three-quarters of global energy consumption and 70% of greenhouse gas emissions, and their contribution is set to rise. Despite this, only one in five cities has set a target to reach net zero emissions.

Meanwhile, cities are getting bigger, with urban growth by 2050 set to be equivalent to adding the combined land area of Germany, Italy and Japan. Climate change is also posing new challenges as cities become larger and more densely populated – particularly during heat waves. In the hottest regions, electricity consumption can double in warm months versus milder ones, with cooling accounting for over 70% of peak electricity demand. This – in addition to the growing electrification of the energy sector in cities, as more people use technologies such as heat pumps and electric cars – places strains on electricity distribution infrastructure.

The report finds that digital solutions, including those that make electricity networks more flexible, can help. However, greater investment is needed. On a global net zero pathway, annual investment in grids worldwide needs to more than double by 2030 to USD 750 billion. Approximately 75% of spending would need to go towards expanding, strengthening and digitalising distribution grids, including in cities, to improve system efficiency and manage more complex flows of electricity and data.

According to the report, better alignment of planning timelines is important to reduce the risk of power outages and cut backlogs for new electricity connections for renewable assets, electric vehicle chargers, businesses and housing developments. Misaligned planning can delay the deployment of renewable energy, constrain efforts to improve energy efficiency and lead to higher electricity costs for consumers, it notes.

Improved access to and use of data for decision making would also support faster and more targeted implementation of energy and climate goals and help align city and power system planning. Digital solutions and systems can be particularly powerful in cities, where high-density environments create economies of scale and can optimise infrastructure and create new opportunities. The number of connected sensors and devices is set to rise sharply by 2030, according to the report.

Empowering Urban Energy Transitions highlights the role of G7 countries in fostering innovation through greater international collaboration. It suggests creating enabling environments at the city level for scalable pilot projects, and notes that integrated urban and power system planning – together with improved data sharing – are crucial to maintain electricity security and prioritise people in clean energy transitions. The report also explores the value of 3DEN pilot projects administered by the United Nations Environment Programme (UNEP) in Brazil, Colombia, India and Morocco, which leverage advanced digital technologies to improve energy management, enhance affordability and manage grid flexibility.

As national policy makers consider how to best enable secure clean energy transitions in cities, the report suggests four key themes for them to consider:

  • Placing people at the centre of policy making in order to build for the future
  • Supporting data-driven integrated planning to ensure that grids are fit for purpose
  • Addressing specific areas of focus to create a supportive environment
  • Pursuing the benefits of fostering strengthened international co-operation

The IEA will host a webinar to present the report’s findings on 16 May.

3DEN is the IEA’s initiative to accelerate progress on power system modernisation backed by Italy’s Ministry of Environment and Energy Security. After a successful first phase, the initiative will continue into a second phase of work starting from 2025.