Background Rising living standards and decarbonisation policies boost electrification of buildings in EMDEs Electricity demand in buildings is set to increase strongly in emerging markets and developing economies (EMDEs) owing to rising living standards, greater energy access and widespread ownership of electrical appliances. Furthermore, decarbonisation and clean-air policies promote the electrification of heating and the phase-out of traditional biomass for cooking. The IEA estimates that under the Stated Policies Scenario (STEPS), energy demand for cooling in EMDEs will rise nearly fourfold between 2021 and 2050, while for electric heating it will more than double. Most of the growth in global cooling demand will come from EMDEs, where air conditioner (AC) ownership is significantly lower than in advanced economies (e.g. 7% across Africa versus close to 100% in the United States). In countries such as India, where residential buildings represent one-quarter of national electricity consumption, air conditioners are emerging as the largest single source of energy demand growth in buildings.

Value of digitalisation Consumers are taking a more active role in energy management Applying digitalisation to flexible loads is a keyway to enhance future power systems, with the value for users and the system overall covering multiple dimensions. The first dimension is scalability to any level of aggregation. Digital technologies and advanced data analytics enable the pooling of millions of distributed loads with diverse technical characteristics, allowing the system operator to use them as aggregated energy resources. Various demand response programmes all over the world involve large pools of households equipped with smart meters, giving consumers the opportunity to reduce their power bills by lowering electricity consumption during specific hours/days. In the United Kingdom, more than 1 million households took part in the National Grid’s demand response programme between November 2022 and March 2023, reducing power consumption by more than 2.9 GWh during gridstrain episodes in exchange for financial incentives.

Using digitalisation in buildings Smart HVAC systems provide considerable demand-side flexibility in buildings Heating, ventilation and air conditioning (HVAC) systems are the most promising source of demand response in commercial and residential buildings. While they claim a significant share of the electricity consumed in buildings and of peak electricity demand, they can be thermostatically controlled without significantly affecting occupant comfort, provided that the building is sufficiently insulated or thermal storage solutions are in place. Devices that introduce cyclical loads into a power system (e.g. heat pumps and air conditioners) can be curtailed or adjusted to lower or higher temperatures for short periods (from several minutes to a few hours) to provide loadshedding and fast frequency response, operating reserves, and other services to the grid. Preheating and pre-cooling strategies enable load-shifting by leveraging a building’s thermal inertia. Establishing flexible HVAC system operations can be done either statically under pre-set operational patterns, or more dynamically through digital technologies within a building’s energy management system. Sensors, thermostats and microcontrollers on heating and cooling devices connected to the energy management system permit both electricity consumption and user comfort to be maximised according to many parameters (room occupancy, preferred temperature and solar panel output, when applicable). Meanwhile, smart meters allow HVAC systems to react automatically to external signals (prices and weather data).

Case study: India Digitalisation in buildings improves flexible energy demand management In 2022, AC use during a historic heat wave caused an unprecedented spike in electricity demand in India, and further electrification and urbanisation could exacerbate power demand surges in the future. In fact, the IEA estimates that the buildings sector’s share in India’s electricity consumption will rise from one-quarter today to roughly half by 2040 in the STEPS scenario, mainly owing to an increase in the number of cooling appliances. The need for more efficient and smarter equipment is therefore urgent. Digitalisation can enable Indian consumers to use flexible loads more costeffectively and in a more grid friendly manner, taking market and weather conditions into account. With digital technologies, the operational patterns of flexible loads can be optimised to avoid summer peaks. For instance, heat pump water heaters managed by a smart controller can preheat water to shift evening power demand to off-peak periods. Our case study thus assesses the benefits of digitalisation in India’s buildings sector.

India’s net load curve for 2030 shows a peak during summer evenings due to rising cooling demand in the buildings sector, while at the same time massive solar PV deployment creates a deep net-load trough in the middle of the day. As the table below illustrates, using digitalisation enables the shifting of flexible loads to offpeak hours when solar energy production is abundant. The enhanced flexibility case indicates an approximately 13% reduction in highest net load and a raising of lowest net load compared to the base case. Flexible operation also decreases VRE curtailment, which in turn helps curb fossil fuel use and cuts operating costs by around 4%. Thus, more flexible demand management through digitalisation in buildings helps limit the steepness of net load ramping and reduces power system operational costs.

Policy Although the potential benefits of digitalising flexible-load management are enormous, many barriers to development still exist in EMDEs. The obstacles are technical (lack of access to smart devices, the Internet, or even grid connection); regulatory (unfavourable market conditions and retail tariffs); financial (high cost of capital, indebtedness of utilities); and human (lack of qualified staff). EMDEs should therefore develop policies that leverage the experiences of advanced electricity markets while taking into account their own development challenges to encourage cost-effective digital technology uptake.

Infrastructure-side interventions The precarious financial state of energy utilities, along with inadequate network planning and a high cost of capital (generally higher in EMDEs than in advanced economies) mainly explain the lack of investment in digital infrastructure. Furthermore, the structure of utilities (unbundled, regulated single buyer with private generator fully integrated) and the role granted to the private sector often condition investment flows towards distribution grid modernisation. For instance, national utilities struggling with cost recovery in many sub-Saharan African countries lack the incentive to invest in capital-intensive smart-grid projects, as policies promoting competition and economies of scale in the distribution sector are insufficient. Moreover, because of cross-subsidisation, fears of income loss and off-grid defection can make energy utilities reluctant to promote demand response programmes to their high-paying consumers (industrial or commercial) and to expand distributed energy generation resources.

Source:http://IEA