Climate Change & Climate Action Energy & Environment
EnergySource July 3, 2019

Urbanization and the growing demand for cooling in a warming climate: Buildings as a critical resource

By Robert F. Ichord

One of the key drivers of increasing global electricity demand is urbanization. Although urbanization rates in industrial countries are generally above 75 percent, urbanization is still in a relatively early stage in developing countries. This is especially true in South Asia, Sub-Saharan Africa, and Southeast Asia, where electricity growth is rising rapidly and the share of people living in urban areas is less than 50 percent. India, the third largest electricity system in the world with a population projected to increase to 1.6 billion by 2040, is expected to reach only 46 percent urbanization by that same year.

New buildings in urban areas will increase electricity consumption, especially through demand for air conditioning and ventilation in such hot and tropical environments. BloombergNEF (BNEF)’s New Energy Outlook 2019 estimates that air conditioning use will double in emerging countries by 2050, with air conditioning consumption reaching 5376 TWh, or 12.7 percent of projected global electricity demand.

Today, buildings are the largest consumers of electricity, with over 50 percent of global electricity consumption, outpacing the industrial sector. Even in the United States, where buildings account for 75 percent of electricity consumption, 2018’s large increase in total electricity consumption, 3.7 percent, was partly attributed to higher demand for cooling. And there are new studies raising concerns about the health threats of “extreme heat waves” and “urban heat islands.”

The recent EEGlobal 2019 Conference organized by the Alliance to Save Energy addressed the potential for buildings to play a role as a flexible electricity system resource that can reduce generation investment requirements and alleviate pressure on transmissions systems that are already being challenged by the strong growth of variable renewable energy generation. US Department of Energy (DOE) Assistant Secretary for Energy Efficiency and Renewable Energy Daniel Simmons emphasized the priority that DOE is placing on buildings and their interaction with the electricity grid, and several sessions addressed the global cooling challenge and the potential for grid-interactive buildings.

The growth in the demand for air conditioners, chillers, and fans and its impact on electricity demand is a large and growing global phenomenon. The International Energy Agency states that electricity to power cooling in buildings is the fastest growing end-use sector at almost 3.5 percent annual growth globally. In India and China, space cooling has almost doubled since 2010. Cooling demands in emerging and developing countries, given the expected increases in urbanization, suggest that this use could account for as much as 40 percent of final electricity demand in some countries by 2050. Only about 8 percent of buildings in the tropics currently have air conditioners and most of these are much less efficient than those in industrial countries

The expanding cooling load has major implications for power systems, not only in the Southern Hemisphere but also in North America and Europe, as we have seen with the soaring temperatures this summer. Countries face major challenges in system planning and the mobilization of investment to meet changes in load curves and daily and seasonal patterns of demand and supply. This peak cooling load is coming at a time when power systems are becoming more complex due to the un-bundling of monopoly state utilities; the introduction of generation competition and third-party access; and the growth of intermittent renewables, distributed systems, and interconnected regional grids. The financial viability of utilities in developing countries—due largely to problems of poor collections, inadequate tariffs, and high debt burdens—remains a major constraint to meeting growing electricity and expensive, peak-load demands.

The global challenge of increasing demand for cooling requires action from governments, utilities, and building owners to improve building energy efficiency; implement demand response measures; and establish the policy, regulatory, and market framework to better manage the power system. Lawrence Berkeley National Laboratory’s Natalie Mims Frick notes, “As the requirements for and complexity of a more flexible and resilient electricity system increase, all characteristics including peak demand impacts of energy efficiency must be considered in order to create a more reliable, affordable electricity system.” Battery and system storage options, which BNEF estimates will fall 64 percent ($187 per MWh to $67 per MWh) by 2040, will increasingly contribute to more flexible electricity systems, but will not be a sufficient solution to this problem.

Other than load curtailment or shedding, there are four major demand response approaches to load management: (1) load shaving (short-term appliance/system controlling, e.g., of air conditioners) that allows adjustment to maintain a sufficient level of reserves); (2) load shifting (e.g., strategies to change timing of loads, for instance through thermal storage or pre-cooling of buildings); (3) load shimmying (very short-term, minute-by-minute, control of loads, such as water heaters, to maintain frequency); and (4) load shaping (longer-term efforts to adjust and incentivize behavior to change the profile of demand to meet generation). Buildings can play an important role with respect to all four strategies. A range of tools and technologies are available to realize these goals, which can be grouped into policy, regulatory, market, and operational categories.

Policy: Governments need to establish a sound policy framework for encouraging energy efficiency in buildings and other sectors. For example, California has established, by law, an overall goal of cutting energy use in half by 2030. It also offers a variety of fiscal and tax incentives such as window rebates and tax credits. In developing countries, governments often provide investment and tax incentives for industrial/technology parks and export zones where companies can adopt new and efficient building methods and technologies. Policies to promote rooftop solar are being implemented in many countries and have important implications for the power system and the interaction between buildings and the grid.

Regulatory: Energy regulatory commissions and building authorities translate policies into specific regulations and standards to use “evaporative systems to cool only the structural envelope” of buildings, which would reduce heat entering the structure or maximize natural air circulation, increase the efficiency and the digital control of mechanical systems (e.g., heating, ventilation, and air conditioning (HVAC); freezers; lighting systems; and pumps), and optimize plug-load use and efficiency. Countries are developing building codes and requirements for building construction that reduce the solar radiation load coming into buildings (e.g., Indian cooperation with DOE laboratories) and require metering and audits of cooling systems (e.g., in Singapore). Regulatory decisions on the pricing of electricity at peak and off-peak times are extremely important. Con Edison in New York is pursuing a pilot program on Staten Island that will offer customers one of four time-variant, demand-based delivery rates or subscription rates and provide the necessity meters. Southern California Edison has critical peak pricing and real-time pricing options for non-residential customers or aggregators that have seasonal price schedules and/or offer incentives for agreeing to reduce loads during peak hours and scheduled events. The pricing plans of course require interval meters that provide frequent readings, e.g., every fifteen minutes.

Market: The growing establishment of competitive wholesale electricity markets opens up the possibility of demand and capacity bidding, especially for large buildings or demand aggregators. The Energy Market Authority of Singapore has developed a Demand Response (DR) program under which DR providers can receive one-third of the savings from the reduction in electricity prices as incentive payments. Singapore has about thirteen eligible demand aggregators.

Operational: Utilities can work with building owners to develop various types of plans for shifting, reducing, and interrupting loads during peak seasons and hours. Building owners can invest in advanced building energy management systems to reduce demand and allow digital control of key HVAC, ventilation, and other systems. Big data and artificial intelligence (AI) applications are emerging to provide comprehensive analysis of building energy use and real-time control of critical systems. India is demonstrating thermal storage and district cooling approaches. Rooftop solar and development of electric vehicle (EV) systems connected to buildings will also introduce new possibilities.

The pace at which these new technologies can be deployed remains to be seen and it will be challenging, but critically important, to introduce price and non-price incentives for building owners, especially in developing countries, to jump in and invest in these advanced systems. Power system planning is radically changing to recognize both the complexity of the supply/demand equation and the potential to use both buildings and growing urbanization as valuable economic and CO2 emissions mitigation resources. As the renewable energy transition progresses, the interaction of smarter buildings and grids will be fundamental to optimizing the potential of these clean energy resources.

Dr. Robert F. Ichord, Jr. is a senior fellow with the Atlantic Council Global Energy Center.

Related Experts: Robert F. Ichord, Jr.

Image: Air conditioning units lining a street in Singapore (photo by Kars Alfrink/Flickr).