The importance of cities in shaping global climate action Cities are a key driver of global economic growth, which over the past half century has been powered primarily by fossil fuels (coal, oil and natural gas), as illustrated in Figure 1. Cities are responsible for an estimated 67-76% of global final energy use and contribute three-quarters of global energy-related carbon dioxide (CO2) emissions (Edenhofer et al., 2014; IPCC, 2018). To tackle the global climate challenge, the 2015 Paris Agreement calls for limiting the rise in the average global temperature to well below 2 degrees Celsius (°C) and ideally below 1.5°C compared with pre-industrial levels (UNFCCC, 2015; IPCC, 2018).

Importantly, the end-use sectors of transport, buildings, industry and heating hold huge potential for emission reduction through substituting fossil fuels with renewables and other low-carbon sources (Figure 2). These sectors have strong relevance to cities. Therefore, it is crucial that cities participate actively in helping to reduce global carbon emissions through effective local actions, and; the decisions that municipal authorities make regarding urban design, planning and energy infrastructure will have profound implications for future global energy and emission profiles.

For cities, reducing today’s emissions as part of the global effort to reach net zero by 2050 is only part of the challenge. Another big challenge is meeting the continued growth in urban energy demand, given that cities remain the engines of economic growth and that urbanisation is expected to continue. Between now and 2050, 2.5 billion people are expected to be added to urban settlements worldwide (UN DESA, 2018). Growth in the urban population – in addition to rising living standards and improved energy services for those who currently lack access to modern energy sources – will greatly increase energy demand in cities. The International Energy Agency projects that urban demand will drive as
much as 90% of future energy growth (Carreon and Worrell, 2018). The twin objectives of meeting rising energy demand while greatly reducing emissions will conflict if fossil fuels continue to dominate our energy systems. Reconciling these objectives in a meaningful way is a significant challenge facing cities.

Figure 4 illustrates the overall structure of coupling different sectors for enhanced energy system flexibility. For cities, the greatest potential of providing flexibility exists on the demand side and in end-use sectors such as buildings, transport and industry. The coupling can also take place between energy carriers on the supply side, for instance through powerto-gas, but this is beyond the scope of the study. Both approaches are instrumental to make the future energy system more integrated and flexible – a crucial enabler for scaling up the integration of variable renewable sources.

In essence, coupling different sectors, along with the support of intelligent energy management systems, can broaden the options for dispatching electricity generated from VRE sources with greater grid flexibility to the system. In turn, this enables increased shares of renewables in the energy mix, and thus reductions in energy-related carbon emissions. Importance of intelligent energy management systems in sector coupling Although the technological scope for sector coupling strategies is expanding, electrification remains a key means for coupling different end-use sectors, as illustrated in Figure 5.
Overall, there are two methods of electrification through which non-power sectors (on the demand side) and energy carriers (on the supply side) can be coupled with renewable power generation, particularly during periods of low demand when surplus renewable electricity is available. These are direct and indirect electrification.

Direct electrification – through the use of technologies such as heat pumps with various sinks, EVs with smart charging, and electric stoves, boilers and furnaces – can be a way to replace fossil fuel consumption in end-use sectors such as buildings, transport and industry. (Indirect electrification is discussed later in this section.) With the progressive electrification of end uses, urban energy systems have the opportunity to harness intelligent energy management systems that can be applied across a greater array of coupled sectors to increase efficiency.


This chapter highlights a range of sector coupling opportunities available for use in cities, with a special focus on the buildings sector. Specifically, it discusses the importance of energy efficiency in scaling up the use of VRE through sector coupling strategies; the opportunities for self-consumption of VRE; thermal energy storage as a sector coupling option to balance thermal energy demand and supply from variable renewable electricity. Electro-mobility and hydrogen are covered as both have emerged as promising technologies that can be applied in cities coupling different sectors. Lastly, the impact of urban infrastructure on applicability of sector coupling technologies in cities is also touched upon.

electricity consumption in buildings (UNEP, 2020; IEA, 2020b). Much of the thermal energy loss from buildings is through the building envelope (Nardi et al., 2018) (see Figure 8 for an illustration of heat flows through a building). Reducing such loss is crucial to minimise the need to replace fossil-based energy for space heating and cooling with renewable sources such as ground-source geothermal, solar thermal and heat pumps using various sinks. However, according to the International Energy Agency’s Tracking Buildings 2020, as many as two-thirds of countries have not yet issued standards for improving building energy performance (IEA, 2020c). This suggests that energy losses from building envelopes would remain substantial even for new buildings in some countries, unless building codes with stringent requirements for energy performance of the building envelope are put in place and enforced.

Improving the energy performance of the building envelope can be effective in minimising the energy demand for space heating and cooling. This can be achieved by adding adequate insulation depending on the climate zone, using low-emissivity glass, and sealing air leakage in new buildings as well as in old/existing buildings through retrofitting measures. In addition, the benefits of improving energy efficiency are obtained for the energy conversion of different energy carriers in the process of implementing sector coupling strategies, with the aim of improving overall system efficiency. Examples include power-to-heat through heat pumps, and EVs enhancing both engine and fuel efficiency in comparison to internal combustion engine vehicles. Moreover, this would increase the utilisation rate of power grids and reduce the need for and investment in transport fuel distribution infrastructure, thereby
increasing overall system efficiency.


By the end of 2019, more than 60% of the Chinese population was living in cities and towns. These areas (including their surroundings) consume 85% of the country’s total energy supply. The industry sector accounts for most of this consumption (71%), followed by the buildings sector (19%) and the transport sector (10%), altogether contributing to around 70% of China’s energy-related CO2 emissions (SGCERI, 2019). At the 75th UN General Assembly in September 2020, Chinese President XI Jinping
announced China’s aim to achieve carbon neutrality by 2060. Although this is a national target, local authorities are contemplating how they could contribute to achieve it, and how they can sustain continued urbanisation against this backdrop. Over the past decade, China has dramatically scaled up its renewable electricity generation capacity, particularly from variable sources such as wind and solar. Installations are set to continue to grow, according to the country’s draft 14th Five-Year Energy Plan and long-term carbon neutrality goal. This has placed demand on electric power grids to be much more flexible than they currently are, and poses a challenge for grid operators. However, it also presents an opportunity for cities to scale up local VRE applications and to make demand more flexible through sector coupling technologies and strategies – not just to support grid stabilisation, but also to take advantage of cheap electricity generated from VRE when demand is low, an economic gain.

Figure 12 provides a conceptual overview of the opportunities for sector coupling applications. IRENA’s Planning Platform for Urban Renewable Energy performed the overall analysis based on data collected on-site and provided by local experts, combined with data available from satellite imagery and GIS-based analysis, as well as meteorological data, to evaluate the potential of the sector coupling opportunities. More details are presented below.

Potential for energy demand reduction through efficiency measures. This includes, firstly, the building envelope retrofitting potentials (building materials and insulation layers) and retrofitting rate (targeting different building uses and construction ages); and, secondly, an evaluation of the energy and emission savings potential through efficiency measures for appliances and lighting. The study estimated energy savings up to 37.1% by 2050 according to the retrofitting strategy (renovation rate per building type and construction period) and retrofitting targets (new building codes, improved energy performance of building envelope and efficiency measures for electrical appliances). The cumulative energy consumption savings over the studied period can reach up to 67 million tonnes of coal equivalent in 2050 when combining building envelope retrofitting (3% annual rate for buildings built before 2010 and 2% for buildings built before 2020), performance building insulation for new buildings (thick insulation,
triple glazing) and appliance efficiency measures (up to 25% more efficient electrical appliances). When the energy efficiency measures on the demand side are optimally combined with supply-side solutions locally (e.g. the combination of heat pumps with rooftop solar PV, electric battery storage and thermal energy storage), carbon emissions emitted for energy services are expected to decrease by around two-thirds.


Already today, electricity generation in Costa Rica is close to 100% from renewable energy sources – mainly from hydropower, followed by geothermal, wind, and smaller shares of biomass and solar. The country has set a new target to achieve total decarbonisation by 2050 However, huge challenges remain, as oil accounts for 65.8% of the national energy mix, consumed mostly by the transport and industry sectors (83.2% and 12.4%, respectively) (MINAE, 2018). In 2018, energy-related CO2 emissions in Costa Rica reached 7.63 million tonnes (a near doubling from the levels of the 1990s), of which three-quarters come from the transport sector (IEA, 2020d). If measures are not taken, the country’s emissions are estimated to increase 60% between 2015 and 2030, and 132% by 2050 (Rivera, Obando and Sancho,
2015). Electrification of the transport sector can offer a realistic option for decarbonisation. In the forthcoming IRENA study on Costa Rica (IRENA, forthcoming-b), different pathways are analysed to achieve total electrification of the transport sector and increase the use of renewables in the industrial sector. However, one of the key findings demonstrates that without taking the necessary demand- and supply-side measures, and taking advantage of sectoral coupling opportunities, this goal will not be possible.

Key findings on sector coupling from the case studies
In an overall planning study for districts of the Greater Metropolitan Area of Costa Rica, IRENA analysed how municipalities could play a key role in achieving the country’s decarbonisation goals. The study explored how districts could support national renewable energy planning through the deployment of distributed generation to cope with the electrification of end-use sectors, which provide opportunities for sector coupling. Different long-term scenarios were evaluated, including a net zero carbon emission (NZC) scenario that accounts for the most ambitious targets for the years 2035 and 2050. The detailed study of the districts under the different scenarios shows that reaching near net zero emissions is technically possible, with a 90% reduction of emissions in cities by 2050 through the deployment of solar PV, energy storage and heat pump technologies, combined with electro-mobility. Increasing this ambition is also possible with larger penetration of solar PV and energy storage at the city level, combined with grid upgrades and green hydrogen strategies.

The integration of distributed energy systems allows the renewable energy share in cities to increase by between 14% and 40% by 2035, depending on the city, compared to the current national targets. Meanwhile, for most cities, decarbonisation will result in savings of up to 18% by 2050, compared to a scenario of continuing the current policy and action levels. One of the key findings is that scaling up the use of local renewable energy resources, together with imported renewable energy from the national grid, would require a large investment in grid infrastructure. However, this can be minimised by optimising the flexibility of the energy system through demand response measures and, most importantly, power-to-X applications that enable sector coupling and smart management.


The energy transition has shifted from a niche movement to the global mainstream. The need to halve worldwide emissions by 2030, and to reach net zero emissions by 2050, has been recognised not only by national leaders participating in global climate talks, but also by local authorities tasked with developing future urban infrastructure. Cities have been given a greater role in both climate mitigation and adaptation, while more and more cities across the globe are joining the race to net zero. Renewable energy resources are expected to scale up significantly over the next three decades. The direct use of renewables can help reduce emissions from end-use sectors such as transport, buildings and industry – all of which are closely relevant to cities. Importantly, these three sectors can benefit greatly from the power sector by applying sector coupling technologies and strategies to provide energy services that otherwise would not be met with electricity. In return, higher shares of variable renewable energy sources can be integrated into the power mix as a consequence of enhanced grid flexibility.


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