People spend the vast majority of their time in buildings, from houses to offices, stores and schools. And while these buildings serve different purposes, they all have at least one thing in common: To keep the lights on, run heating and cooling systems, and use appliances and equipment, they require substantial amounts of energy. Buildings today account for about 30% of final energy consumption globally and more than half of final electricity demand.
The sector is growing rapidly, especially in developing economies. Expanding electricity access and rising incomes mean that more people are buying appliances such as air conditioners - and as temperatures rise, they're running them more often. However, with a greater focus on well-tested energy efficiency policies, energy consumption from the sector could be significantly reduced, all while maintaining - or even improving - the quality of energy services delivered. This would not only lower the building sector's emissions, but also save money for energy consumers.
Leveraging technologies that allow buildings to use energy more flexibly throughout the day could unlock even greater benefits. When buildings and grids can communicate with each other, stress during peak times can be mitigated and peaks in energy demand can be smoothed out. As global floor area booms, prioritising both efficiency and flexibility is crucial to the security and sustainability of the world's energy system.
Electrification and renewables growth are changing how buildings consume energy
Buildings are consuming more energy as economic activity increases and electrification expands, with more heat pumps running in homes and electric vehicles charging in garages. Between 2015 and 2022, residential heat pump sales tripled, and in 2023, electric cars accounted for one in five vehicle sales globally. Currently, most of electric vehicle charging takes place at residences and workplaces.
Adoption of these technologies is crucial to achieve net zero emissions from the energy sector by 2050 and limit global warming to the Paris Agreement target of 1.5 °C, however, it is also driving up electricity demand. Under the IEA's Stated Policies Scenario, which is based on today's policy settings, peak electricity demand in buildings increases in all regions of the world in the coming decades. In China, it doubles by mid-century, while in the European Union, it increases by two-thirds.
The rise is even more pronounced in countries with significant and expanding space cooling needs. By 2050, ownership of air conditioners in India is estimated to increase tenfold, leading to a sixfold jump in peak electricity demand in buildings. This increase could be cut in half with widespread adoption of more efficient building designs and tougher minimum energy performance standards for appliances, as envisioned by the IEA's Announced Pledges Scenario, which sees countries meeting national energy and climate targets in full and on time. In India, for example, these measures are projected to more than halve the contribution to peak demand from cooling and related stress on electricity networks.
At the same time, the deployment of wind and solar PV is accelerating globally as countries look to boost energy security and decarbonise their energy systems, making electricity supply much more weather-dependent. System-level surpluses and periods of lower generation are set to become more frequent due to daily and seasonal variations in renewable energy generation. Greater flexibility will be essential to manage these fluctuations.
Taken together, these developments will require major shifts in the way power systems are operated. For energy systems to function smoothly and efficiently, total energy demand from buildings will need to be reduced, while mechanisms for adjusting electricity demand throughout a day or season will become necessary to better match renewable generation patterns.
Buildings can provide more flexibility for the energy system
Buildings themselves can also be part of the solution. They can host various distributed energy resources, such as on-site renewable energy generation and storage, smart charging for electric cars, and other connected devices. And they can use energy flexibly if they are enabled to receive signals from the grid and can adjust their energy demand accordingly.
To realise this potential, buildings need to become both more efficient and more interactive with the grid. Energy efficiency should come first, reducing overall energy demand through high-performing building envelopes and efficient equipment. Next, buildings can be equipped with solar PV systems to produce renewable electricity and energy storage so they can retain excess supply until it is needed. Then, to facilitate interaction with grids, smart sensors, controls, intelligent analytics and other digital solutions can be integrated with building energy management systems or directly with the equipment.
Consumers stand to benefit from greater flexibility. By taking advantage of time-of-use electricity tariffs, for example, they can shift energy use to off-peak times when electricity is cheaper - flexibly operating electric vehicle chargers, water heaters and other appliances in line with the needs of the grid and price signals. As greater volumes of solar PV are incorporated into the grid, this might mean using more power during daytime hours. Such demand response measures can reduce household electricity bills by 7% to 12% by 2050 in advanced economies, and by almost 20% in emerging market and developing economies, according to IEA analysis.
Click here to read the full article by Ksenia Petrichenko, Energy Efficiency Policy Analyst and Anthony Vautrin, Junior Energy Modeller.
