The value perspective on decarbonization

The World Economic Forum’s Kristen Panerali explains how creating net zero carbon cities improves lives.

Buildings, energy infrastructure, transportation – to make cities carbon neutral, the cooperation of all stakeholders in all urban areas is a key element. When we shift away from a narrow cost perspective and embrace a broader value perspective to include aspects such as job creation and public health, Kristen Panerali argues, the climate won’t be the only winner. Grid edge technologies, as enablers of systemic efficiency, are an integral part of this effort.

 

By Marc Engelhardt

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When it comes to decarbonizing cities, there are two basic questions: why is it important? And: how should it be done? Kristen Panerali, the head of the Electricity Industry and the Net Zero Carbon Cities program at the World Economic Forum (WEF), has the answers for both questions: “First of all, cities are the epicenter of global energy demand and CO2 emissions: More than half of the world’s population lives in cities, 78 percent of the world’s primary energy consumption takes place there.”

 

Cities account for more than 70 percent of all carbon emissions, according to estimates of the World Bank from December 2020, “including buildings, energy and transport.” Which leads Panerali straight to the answer of the second question. “So you have buildings, energy infrastructure, and transportation – now, how do you create more interconnections between these different segments?”

When we talk about systemic efficiency, we’re talking about a mechanism that encompasses clean electrification, smart energy infrastructure and digital technology.
Kristen Panerali

Systemic efficiency

In a way, you have to take a step back and look at the city as one ecosystem with complex, but intertwined parts, says Panerali: “The city ecosystem is an energy demand center, with significant energy consumption from business, buildings and transport aggregated in one location.”

 

You have data centers or a coffee roastery in town? Use the excess heat to power the local district heating infrastructure. City dwellers are increasingly using electric cars to go to work? Make sure that they are being charged at the best time of the day in order to optimize the system. “So when we talk about systemic efficiency, we’re talking about a mechanism that encompasses clean electrification, smart energy infrastructure and digital technology – to pull it all together in a much more interconnected way.”

It sounds so natural. But when Panerali talks to stakeholders in the city ecosystem, they often say that, so far, they mostly operate in isolation. “The utilities aren’t talking to the building environment, and building owners aren’t talking to the mobility environment. Yet it’s important to focus on solutions that have multiple impacts.”

 

One of the main reasons is that in increasingly electrified urban areas, the demand side is becoming much more prominent when you want to reach net zero. “Right now electricity supply follows demand load. Eventually this will be a two-way system underpinned by digitalization. Smart energy infrastructure will include homes and cars, creating more flexiblilty so energy can be used at the optimal time.”

Right now electricity supply follows demand load. Eventually this will be a two-way system underpinned by digitalization.
Kristen Panerali

In 2017, the WEF was predicting that grid edge technologies would transform the world of energy. Only four years later, they have become part and parcel of the city ecosystem, and an integral part of systemic efficiency, as Panerali describes it.

Ultra-efficient smart buildings

Think about a building equipped with a technology that adapts the cooling and lighting according to occupancy at any given moment – or a building that features management systems and demand aggregators and can therefore provide grid flexibility and other services.

 

Such ultra-efficient buildings are key to reach a zero-carbon city, according to the WEF’s recent study, “Net zero carbon cities: An integrated approach”. Such smart buildings can also share their renewables-based electricity with local communities or feed it to the grid. It makes sense to focus on buildings, since they are the source of approximately 40 percent of global greenhouse gas emissions, with three quarters stemming from building operations and 10 percent from construction and materials.

When making commercial or policy decisions, many leaders are shifting from only focusing on cost, to measuring full value creation. 
Kristen Panerali

Ultra-efficient, connected buildings should feature a smart energy infrastructure, including smart meters, a secure and cost-effective distribution grid and charging stations for electric cars. Their building materials should be low-carbon and high-performance; their clean electrification backed by zero carbon energy.

 

That necessitates investments for sure, as Panerali points out. “But when you look at the bigger picture, which is the city ecosystem as a whole, the view is shifting from a cost to a value perspective – and if we get stakeholders to accept that shift, it will help move things along faster.”

Adopt the value perspective

During the first wave of the pandemic, a group of CEOs from the WEF were discussing how the clean energy transition delivers value not only in terms of emissions reduction, but also for the economy and the energy system. This led to the creation of a new framework to help decision-makers evaluate solutions. The System Value framework is comprised of a dozen dimensions, with each dimension representing an outcome that delivers value across economic, environmental, societal and energy system considerations. When applied to a city, outcomes such as emissions reduction, air quality and job creation are often deemed the most important.

 

It’s the kind of perspective that is only possible if you look beyond the silos and take a systematic approach. “We’re too often just focused on the cost aspect of solutions, and do not take into account job creation or the massive savings possible in the health system,” Panerali emphasizes.

The System Value framework recommends a range of recovery solutions, including those applicable in the city ecosystem. 

 

In Europe, the decarbonization of cities would result in 680,000 jobs by 2030 in areas such as smart charging infrastructure, installation of efficient electric appliances and other demand optimization initiatives. In the process, 243 megatons of CO2 emissions would be cut. Plus human health benefits due to improved air quality would amount to €14 billion.

 

In Brazil, the potential for jobs would be more than one million by 2025 in the smart building sector and grid modernization, amongst others. The reduction of CO2 emissions could add up to 45 megatons, while the human health benefits could be up to US$3.4 billion. 

Cooperation is key

To make cities carbon neutral, cooperation of all stakeholders is a key element, according to Panerali. This is also because addressing the essential core elements – the expansion of renewables, grid upgrades and interconnection as well as efficiency regulations – are mostly in the hand of others.

 

“The challenges are too big to be addressed by one sector, or one group of stakeholders. At the Forum, we are focused on multi-stakeholder action, thus we bring together the various sectors and leaders from business, NGOs, city and national-level government.”

 

Decarbonizing cities is important, for sure. Doing so while creating the most system value for society in the process is even more important.

June 13, 2021

 

Author: Marc Engelhardt is a business journalist and book author who reports on global developments in economics, science, politics and energy. He has worked as a correspondent for a number of media outlets including the Neue Zürcher Zeitung, ARD and Die Zeit.

Picture credits: Getty Images, World Economic Forum, Siemens

Kristen Panerali heads the Electricity Industry at the World Economic Forum. She has 25 years of experience in the government and energy-related private sector, and is now focused on enabling public and private sector activity to identify the most effective policies, actions and cooperation to accelerate the energy transition. She has an MBA from IESE Business School in Spain

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