The 20th century model of centralized energy production and distribution by a limited number of actors is evolving into a data-driven, multi-directional, market-based platform where the divisions between producer, distributor and consumer are becoming blurred and overlapping, write Alan Thomson and Stephen Cook
Many utility providers struggle to keep up with the pace of city growth
This article takes a closer look at energy in cities. Why focus on cities? First of all, more than half the global population lives in cities, and cities account for over half of global energy consumption and 40 per cent of greenhouse gas emissions, with the largest shares going to road transport, building heating and building electricity.
As the global population increases and the urbanization trend continues, cities will become ever more dominant consumers of energy and other global resources, and their impacts will spread ever wider. The UN estimates that 66 per cent of the world’s population will live in cities by 2050, while another study estimates that the global urban footprint (its physical extent) will triple over the 30 years to 2030, comprising an additional area of 1.2 million square kilometres.
Reducing the impact of urbanization through increasing urban energy efficiency and switching to clean, low carbon resources is clearly critical for cities to continue to thrive as engines of economic growth and human creativity.
City challenges and opportunities
Beyond these headline figures, the physical, economic, social and political complexity of these dense communities creates distinct challenges and opportunities, compared with peri-urban, rural and industrial settings, that merit investigation into urban energy.
Firstly, dense, mixed use urban forms can reduce the unit cost of transport and energy infrastructure and enable adoption of efficient transit systems and low carbon heating and cooling networks, but density can also lead to adverse effects such as urban heat island and reduce the availability of renewable resources such as solar and wind.
Secondly, cities face dynamic challenges including rapid urbanization, demographic change and economic change. Many city governments and utility providers struggle to keep up with the pace of growth, while others in contracting economies struggle to remain viable while providing even basic services.
Thirdly, the legacies of existing urban form, buildings and infrastructure tend to ‘lock in’ energy consumption patterns and available sources and vectors of energy. This legacy includes complex tenancy and land ownership arrangements as well as physical patterns of development. Rapid change can only occur through highly context-sensitive initiatives.
Finally, the governance of cities – many of which have considerable authority, influence and budgetary powers – can be critical to the design and delivery of locally appropriate, effective solutions for energy systems which also deliver other city drivers, such as air quality, economy and resilience.
Power systems today are undergoing a profound transformation, driven by the diversification and decentralization of power generation, coupled with the emergence of advanced power electronics which are capable of managing the increasing complexity and size of modern power systems.
The technological changes are in turn driving changes in the ways energy is bought and sold: the 20th-century model of centralized energy production and distribution by a limited number of actors is evolving into a data-driven, multi-directional, market-based platform where divisions between roles – producer, distributor, consumer – are becoming blurred and overlapping.
This convergence of actors participating in a dynamic energy market is referred to as transactive energy (TE). TE is formally defined by the GridWise Architecture Council as “a system of economic and control mechanisms that allows the dynamic balance of supply and demand across the entire electrical infrastructure using value as a key operational parameter”.
Although the idea of a market operating in a dynamic balance in response to supply and demand signals may appear unremarkable in the context of many other industries, the implications for our energy systems are profound.
Today, most grids are kept stable through explicit control by a central grid operator, which controls supply to meet continuously changing demand through the dispatch of generation assets in accordance with a pre-defined ranking of priority.
An energy market does operate, but the market transactions are mostly undertaken well before or well after the generation-consumption event. In the short term, demand is generally uncontrollable and unresponsive to the cost of supply.
The move to a real-time market-based model of electricity supply and demand means that system can no longer be “controlled” by a central grid operator. Instead, the network will migrate to an energy ecosystem which is kept in a state of dynamic equilibrium through the balancing effect of price signals established by millions of participants. The dichotomy of producers and consumers will evolve into a spectrum of roles which includes ‘prosumers’ which act on both sides of the market, along with additional roles for ancillary grid services providers such as ramping and balancing.
The complexity, density and diversity of energy consumption in cities makes them potentially key drivers and major beneficiaries of the transactive energy model.
In many rapidly growing cities, grid capacity and reliability is a major challenge, with grid constraints and supply outages a frequent occurrence. Landlords, businesses and residents either incur losses (e.g., from lower productivity or damage to goods and assets) or higher costs to provide on-site resilience, such as running diesel generators. Such local and ad hoc solutions can have other adverse impacts such as worsening air quality, odour and streetscape clutter.
Energy solutions for cities need to be highly sensitive to context
Credit: National Grid
These same cities have potentially the strongest value case for ‘leapfrogging’ to a TE model. A transactive energy system could improve system reliability and efficiency and unlock new investment to meet connected areas’ growing demand, and to extend access to those who have no electricity grid connections at all.
Such investments would focus on distributed energy systems (DES), such as renewable energy, energy storage, microgrids and demand management technologies. These systems can deliver value both locally – through cost savings and local resilience – and to the wider grid, through balancing and load control.
Recent research by Arup and Siemens, for example, indicates that the value to end users of DES investment is significant. Based on a series of modelled case studies around the world, operational cost reductions ranging between 8 per cent and 28 per cent and a return on investment between three and seven years were observed, compared to a business as usual scenario.
Delivering efficient buildings
In developed cities, TE offers a significant prize of a step change in building energy efficiency. Buildings in the US, for example, consume around 40 per cent of all energy and 70 per cent of grid electricity. Reducing this load is critical to the achievement of carbon reduction targets and is a potential major contributor to economic productivity, as businesses reduce operational costs and homeowners increase disposable income.
Applying distributed energy systems within a transactive energy model allows urban building owners to have better information on energy consumption, the tools to control and reduce energy and the access to a market which translates the energy savings and control investments to financial returns.
|A transactive energy model can ensure that energy investment in cities keeps pace with demand|
In all cities, the transactive energy model could enable integration of the electric grid with heating to deliver even greater environmental benefits, lower carbon emissions and improved energy resilience.
In temperate countries such as the UK, energy for heating amounts to almost half of final energy consumed, and peak heating demand (i.e., on a cold winter evening) is as much as five times the peak demand of electricity.
This heating demand is met today in many cities almost entirely by natural gas supplied directly to buildings, although centralized urban heat networks have high penetration in some cities in northern Europe and North America. Transitioning away from fossil fuel heating to renewable and low carbon sources will inevitably involve a transition towards electricity as the main input energy for heating systems, especially in cities, where alternatives such as biomass and solar thermal are less suitable, due respectively to air quality impacts and the density of energy demand compared with available roofspace for solar generation.
Cities can enable the electrification of heat in a way which limits pressure on grid networks by capturing available heat sources from within cities – from ground, air and water but also from sewers, tunnels and other urban infrastructure – and carrying the heat via hot water heat networks to where it is needed.
In the most cases, with a warm heat source and a low-temperature receiving system, heat networks could deliver four to six units of heat output for each unit of electricity (although multipliers of around three are more typical as average performances across the year). Heat storage, meanwhile, can be used to smooth peak electric loads and avoid times when grid capacity is constrained. Through these means, urban heat networks can effectively enable a low carbon transition while contributing to grid balancing through a transactive energy market mechanism.
Electrification of urban transport
Like heat, the transportation sector appears to be on a rapid trajectory towards electrification, especially in cities.
Although today’s stock of road vehicles is almost entirely made of liquid fuel-powered vehicles, electric vehicle (EV) penetration is rising rapidly. This is due to a mix of pull factors, including improving vehicle design, battery performance and falling prices, and push factors including policy support for EVs and restrictions on other fuel types to improve air quality.
Currently, EVs represent less than 0.1 per cent of total passengers cars in the world, but recent research by Bloomberg New Energy Finance forecasts that “continuing reductions in battery prices will bring the total cost of ownership of EVs below that for conventional-fuel vehicles by 2025”.
By 2040, Bloomberg projects that EVs will represent 35 per cent of global light duty vehicle sales. Such a volume equates to an 11 per cent share of the global electricity demand in 2015.
Such a rate of transition from petroleum-based to electricity-based transport will have a profound impact on the grid. The impact will, however, be greatest on urban energy systems, given that EV penetration will inevitably be most concentrated in urban areas, because cost and environmental benefits over conventional petrol and diesel engines are greatest in cities; and EV range limitations are less of an issue in cities, where most trips are only a few miles. The shorter range also makes EVs more viable for city-based medium-duty vehicles (e.g., delivery trucks and vans); and urban densities mean that deployment of EV charging infrastructure is more viable in cities.
Transactive energy can provide a critical means to ensure that generation and distribution infrastructure investment in cities keeps pace with the rising marginal demand of energy. TE can also provide price signals to secure premium payments from those whose need for recharging may be urgent, while rewarding those willing to postpone or spread out their recharge. Vehicle fleets may also be able to capture excess generation in low demand periods (e.g., overnight) and so increase utilization of wind as renewables take an ever larger share of the generation mix.
The article is part of a paper prepared by Alan Thomson and Stephen Cook of Arup on behalf of the World Energy Council.