The importance of cities meeting global climate targets is undisputed. Since the COP21 Paris agreement, many more cities have joined early leaders like Copenhagen and Stockholm in pledging to become carbon neutral. Boston and London, for example, have both recently announced the goal of becoming zero carbon cities by 2050.

To achieve such ambitious goals, cities will need to implement major changes to their energy systems by 2030. And given the speed of urban planning processes and infrastructure programs, cities and their partners need to instigate many of these projects within the next 3-5 years.

This transformation will touch every aspect of city services and infrastructure including energy generation and distribution, heating and cooling systems, building energy efficiency, transportation, water and waste management, and the efficiency of city services such as street lighting. At the same time, city operations are being transformed by digital technologies such as the Internet of Things (IoT), smart buildings, artificial intelligence, robotics, and automated vehicles.

Navigant characterizes the current transformation in the energy sector as the emergence of the Energy Cloud. The Energy Cloud scenario describes a radical transformation of energy markets as the one-way power grid gives way to a more dynamic network of stakeholders, technologies, and infrastructure. It envisions a world in which the power supply is cleaner and more distributed, where digital transformation embraces artificial intelligence, the IoT, and blockchain-enabled networks, and where widespread electrification of the transportation sector means that power supply and demand become increasingly mobile.

This transformation of the energy sector also provides the bedrock for the creation of the low carbon cities of the future. One of the most important developments for cities looking to transform their energy profile is the interlinking of the energy sector with buildings and transportation. A zero carbon city will need to address the role of fossil fuels in space heating and in transportation. Improvements in energy efficiency and the shift to renewable resources are essential steps but, more profoundly, the much closer connection between buildings and transportation and the energy grid will lay the foundation for a new Urban Energy Cloud.

• Building in the Energy Cloud: One of the most drastic changes in the technical infrastructure of the city will be the extension of building systems from standalone applications focused on the operation of a single building to hubs within a wider network of energy and environmental monitoring systems. Navigant Research expects that only 0.5% of the commercial building stock globally actively participates in the energy system today, but by 2026, more than 9% will be involved. This development will create new roles and opportunities for all players in the sector.
• The Age of Low Carbon Mobility: EVs will be the single largest addition of energy demand to the power grids of the developed world. By 2020, more than 4,000 GWh of electricity will be consumed by plug-in EVs annually in the U.S. alone. New services are already combining EVs with stationary storage and other renewable energy offerings to optimize regional supply and demand. The smart charging of swarms of managed EVs will enable greater concentrations of rooftop solar, as charging is staggered outside of peak times and will be matched to distributed generation.

The emerging Urban Energy Cloud vision is of a smart city that integrates large- and small-scale energy initiatives and solutions, citywide improvements in energy efficiency, distributed energy resources, and low carbon transportation. In the process, cities will become clusters of smart energy communities that can exploit the benefits of new energy systems.

To benefit from the emergence of the Urban Energy Cloud, city leaders and other policymakers should look to create platforms for collaboration and procurement. With such platforms, cities and other stakeholders can drive innovation (technology and business models), develop business cases, execute pilots, and form partnerships to implement and scale new energy solutions.

Cities also need to continue to raise the bar on traditional approaches to urban design and construction. This includes embedding smart and sustainable design principles in urban planning processes. The potential of digital technologies needs to be considered as part of any new development.

The city of 2030 will need to manage a much more complex set of interdependencies between diverse aspects of city operations, infrastructure, and platforms. This requires new networks for collaboration between cities, utilities, and other energy sector players, and for transportation providers, building owners, telecommunication companies, and technology suppliers. We anticipate that this will create a market worth more than $1.5 trillion over the next decade for smart services across urban energy, buildings, mobility, and other city operations.