Innovation is the engine powering the global energy transformation towards a carbon-neutral future. This transformation focuses on how we produce energy but also on how we consume it. Both supply and demand must be transformed together and in co-ordination for a faster and more effective decarbonisation of the entire system. On the supply side, wind and solar technologies have experienced rapid growth in recent years, making available large amounts of clean electricity in power systems. However, the demand side has not evolved in parallel and– until recently, society has consumed energy following traditional fossil fuel-based approaches. Today, the transport and heating sectors still largely rely on fossil fuels.
According to IRENA’s 1.5°C Scenario, the share of direct electricity in total final energy consumption must increase from 22% in 2020 to 29% by 2030, and to 51% by 2050; this can be achieved with tremendous growth in electric-powered technologies, many of which are already available (IRENA, 2023). They include electric vehicles (EVs) and heat pumps, which can provide heat for buildings and many industrial processes. In addition, end-use sectors that are difficult to electrify directly can be decarbonised using “green” hydrogen produced by electricity generated from renewable energy, also known as indirect electrification.
With direct and indirect electrification, global electricity demand would triple by 2050, compared with 2020, under IRENA’s 1.5°C Scenario (IRENA, 2023c). This brings challenges to the power system and increases the importance of energy efficiency measures. However, given the enormous benefits of electrification for decarbonising end-use sectors, governments around the world should not see smart electrification as a threat but rather as a major opportunity to accelerate economic growth, improve energy security, reduce the growing impacts of climate change and achieve other important sustainability goals. Yet, electrifying the consumption of energy is a complex task that goes beyond the adoption of technology solutions and requires the involvement of all stakeholders across the energy value chain, from the power sector to end-use sectors. This comprehensive approach is known as smart electrification.
Smart electrification is a cost-effective decarbonisation pathway for energy systems that is based on the electrification of energy end-use sectors via the incorporation of large shares of renewables in power systems and the unlocking of the flexibility of sources.
Smart electrification enables (1) power systems to accommodate new loads in a cost-efficient manner and creates (2) flexibility in power systems, which allows the integration of a larger share of renewables, making power systems more robust and resilient. For end uses, electrification is (3) the most cost-effective solution for decarbonising these sectors.
Smart electrification with renewables creates a virtuous cycle. Electrification drives new uses and markets for renewables. This, in turn, accelerates the switch to electricity for end uses, creating even more flexibility and driving further growth of renewables and technological innovation. In this context, innovation can reduce costs and create additional investment and business opportunities; transform the policy arena; and accelerate the virtuous cycle. Therefore, innovation is the foundation for a global energy revolution and for the rollout of effective smart electrification strategies.
However, any innovation that is meant to contribute to the decarbonisation of future energy systems will not succeed if implemented in isolation. Innovative solutions, built upon combinations of individual innovations, should bring together the necessary elements to deliver a transformative impact on the way societies consume energy today. Therefore, these innovative solutions go beyond technology-based solutions and include innovations in market design and regulation, system planning and operation, and business models. Innovative solutions will consequently emerge from the complementarities of advances across multiple components of energy systems, leveraging the synergies of these innovations in a process called systemic innovation. Systemic innovation is essential to achieve an effective structural transformation of the energy economy and includes innovations in:
- Technology and infrastructure, which play key roles in facilitating the electrification of end-use sectors, and related infrastructure.
- Market design and regulation, including new market structures and changes in the regulatory framework to incentivise and shape the electrification of end-use sectors and encourage smart electrification.
- System planning and operation, including innovative ways of planning the coupling of the power sector with the end-use sector and operating systems to maximise the integration of renewable power generation and minimise the extra load on power systems.
- Business models that create the business case for new services, making power systems more flexible and accelerating the electrification of end-uses.
FIGURE S.1 Systemic innovation
This innovation landscape includes 100 key innovations that can play a role in transforming and decarbonising the energy use sector following smart electrification strategies.
It draws from a review of hundreds of innovative solutions that are emerging worldwide from start-ups, large companies, regulators and system operators, and that contribute to the smart electrification of mobility, heating and cooling, and hydrogen production.
TABLE S.1 One hundred smart electrification innovations across three categories
A “one-size-fits-all” solution for smart electrification does not exist. Optimal strategies and implementation of innovations will vary between countries and to account for system-specific attributes, including both the technical and economic aspects of a given power system and end-use sector, and social and cultural dimensions.
This work goes beyond an overview of promising innovations. It also provides guidance on how these innovation toolboxes can be used to build smart electrification strategies. To do so, innovations are grouped in “kits” that can complement one another. The kits are defined for the three end-use sectors based on the strategy’s ambition. First, the essential kit incorporates the innovations that are fundamental to start the transition to electrification. Next, more specific kits are defined to build on top of the essential kit, according to needs and objectives in each context.
FIGURE S.2 Toolbox for smart electrification strategies
This report is organised into three sections:
Each section follows the same structure:
- Status and pace of progress of electrification of end-use sector
This section provides a quick overview of where the sector is today in the electrification process, which path could lead to decarbonisation goals, and the importance of a smart electrification approach. It also summarises the main challenges and identifies the blind spots that are often overlooked and hinder the deployment of smart electrification strategies. - Toolbox for smart electrification strategy
This section includes the guidelines for implementation. Using the innovation toolbox, it illustrates how smart electrification strategies can be developed for different context specificities and needs. - Innovation landscape for smart electrification of end-use sector
This section lists and describes the key innovations for each dimension and explains why it is important. It also includes examples of how the innovation has been implemented.