Energy management solutions for districts
Self-sufficient districts are the declared goal of climate policy. But what are the characteristics of climate-neutral districts? What are their benefits and how can they be achieved? What are the challenges and barriers? From a technical point of view, such districts are possible, but there are not only technical challenges.
Introduction and technological basics
Definition of an Energy-Self-Sufficient Neighborhood
Energy-self-sufficient neighborhoods use renewable energy sources such as solar, wind, and biogas to generate heat and electricity without relying on additional energy sources from outside the neighborhood, thereby achieving complete energy independence and self-sufficiency. The goal is to achieve a positive annual energy balance—that is, to produce not only enough energy but even more than is needed within the neighborhood itself. This is intended to significantly reduce climate-damaging CO₂ emissions.
Cities are responsible for 70 percent of global CO2 emissions and account for over 65 percent of global energy consumption. Urban measures are therefore crucial for climate protection and can make a significant contribution to meeting the EU’s targets: achieving climate neutrality across the EU by 2050 and reducing greenhouse gas emissions by 55 percent by 2030.
Technological Fundamentals
Energy-self-sufficient neighborhoods are technically feasible. Renewable energy sources such as photovoltaics, solar thermal energy, geothermal energy, and bioenergy from solid and liquid biomass have long been known and are used for electricity and heat generation. While geothermal energy provides a largely consistent supply of energy and bioenergy can be deployed as needed, photovoltaics and solar thermal energy produce electricity and heat in varying amounts depending on location and weather conditions. On a bright, blue midsummer day, photovoltaics often generate significantly more electricity than is needed, and solar thermal systems heat water to a much higher temperature than, say, on a cloudy, cold winter day, when people need more light and are more likely to want a hot shower than in midsummer. That is why the question of how to store energy is of central importance not only for achieving the energy transition but also for the stability of the power system and the power grid.
One storage method is batteries, but they offer only limited and insufficient capacity. For this reason, various companies and research institutions are working on the development of innovative storage technologies that will make it possible to store electricity from renewable sources over the long term. For example, there are approaches for “Power to Gas” conversion, a technology in which electricity is converted into hydrogen or methane gas. Another option is “Power to X,” the production of synthetic fuels, energy sources, and raw materials from electrical energy. Chemical energy storage using reactive metals such as aluminum, silicon, titanium, calcium, magnesium, or sodium also appears to be a viable option. And at the German Aerospace Center (DLR), researchers are exploring so-called Carnot batteries, which have been around for nearly 100 years. In this process, a heat pump powered by renewable energy heats a medium (water, salt, or stones). A steam turbine can then convert this energy back into electricity as needed.
Planning, implementation, sector coupling
To make neighborhoods energy self-sufficient, the building infrastructure must first be designed accordingly. Whether it involves new construction or the renovation of existing buildings, high-quality construction with high energy efficiency is essential, as are the necessary systems for utilizing renewable energy.
A second requirement is energy-efficient building systems, but energy consumption should also be as energy-efficient as possible. However, for many energy-efficient buildings to become an energy-self-sufficient neighborhood, information and communication technologies (ICT) must be integrated to intelligently link the various systems, thereby transforming numerous different individual technologies and components into an integrated, interoperable, and energy-efficient overall system. In the process, different sectors—such as electricity, heating, and mobility—are interconnected.
Sector coupling can help mitigate the challenges posed by the fluctuating supply of solar energy. Sector coupling significantly reduces the need for electricity storage systems, since the fluctuating generation of solar power no longer needs to be balanced solely within the electricity sector; instead, the heating and transportation sectors, among others, can provide the necessary flexibility to offset these fluctuations. For example, excess electricity can be stored as heat, cooling, synthetic fuels, etc., without the need for expensive electricity storage systems.
Thanks to sector coupling, renewable energy can be increasingly utilized in the heating and transportation sectors, where fossil fuels have been used almost exclusively until now. These fossil fuels can be avoided if surplus electricity is used to power heat pumps and electric vehicles. In particular, the integration of the electricity and heating sectors using heat pump heating systems is important, as these are considered the most efficient form of combined heat and power.
According to Russell McKenna, head of the Laboratory for Energy System Analysis at the Paul Scherrer Institute (PSI) and professor of energy system analysis at ETH Zurich—who has long studied the topic of self-sufficiency—the concept can most effectively be implemented at the level of settlements, neighborhoods, or small communities. This is because, at this scale, it is possible to produce and store a kilowatt-hour of energy more cost-effectively than in a single building. Furthermore, certain technical solutions—such as district heating networks or large-scale heat storage systems—are only feasible once a certain scale is reached.
And there’s yet another advantage to pooling the energy needs of many households: demand peaks are better balanced. A single household’s electricity consumption is generally very irregular and difficult to predict. A small energy system serving just a few households would therefore quickly reach its limits if, by chance, several households had high demand at the same time. When 100 or more households are served, demand peaks balance each other out, and the demand profile becomes more predictable.
Financing and funding
The transition to climate-neutral cities and municipalities, as well as the development of energy-self-sufficient neighborhoods, costs money—not only for local governments but also for private companies and individuals. Both the federal government and the states provide funding for the energy-efficient retrofitting of existing buildings and the development of energy-self-sufficient neighborhoods. In November 2025, KfW’s “Energy-Efficient Urban Renovation” funding program was relaunched; however, the funds had already been exhausted by May of this year.
KfW provides support for the development of integrated neighborhood plans for energy-efficiency retrofits, as well as for sustainable mobility and green infrastructure. In addition, KfW covers the costs of hiring a retrofit manager. The retrofit manager oversees and coordinates the planning and implementation of the measures outlined in the plans.
In addition, there are individual measures such as subsidies for the energy-efficient retrofitting of residential buildings, subsidies for individual measures related to the building envelope, building systems (excluding heating), heat-generation systems, heating optimization, as well as specialized planning and construction supervision.
In 2020, the Austrian Federal Ministry for Climate Action, Environment, Energy, Mobility, Innovation, and Technology (BMK) conducted, among other things, a 30-year incremental cost analysis for an energy-plus neighborhood in a report on energy and environmental research (“Neighborhood of the Future – The Path to an Energy-Plus Neighborhood in Vienna” (2020)). According to the report, the additional investment costs compared to a conventional neighborhood range between 120 and 230 euros per square meter of net floor area. The investment required for local energy generation depends heavily on the mix of land uses in the neighborhood. For different consumption profiles—residential, office, and local retail—these costs are lower than for a purely residential development due to the potential for waste heat recovery. In addition, the report compared financing and maintenance costs with operational savings. This analysis revealed only minor additional or reduced costs ranging from -2 to 0.6 euros per square meter of net floor area.
Legal framework and practical example
Since energy in energy-self-sufficient neighborhoods is generated locally by multiple individual systems, a wide variety of stakeholders—residents, municipalities, industrial and commercial enterprises—must be involved in decision-making. This requires new infrastructure, business, and partnership models to establish an appropriate legal framework.
The legal framework for energy communities—such as those required in energy-self-sufficient neighborhoods—includes the EU Renewable Energy Directive (RED II), the Act on the Relaunch of the Digitalization of the Energy Transition (GND Act), the Renewable Energy Sources Act (EEG 2023), and the Metering Point Operations Act (MsbG). The sheer number of directives and laws that must be observed shows that forming an energy community is no simple task.
Nevertheless, there are already a number of examples of climate-friendly neighborhood developments and corresponding plans for additional projects. One example is the Bahnstadt Heidelberg. Since 2008, a passive house development spanning 116 hectares has been built here, featuring approximately 3,700 apartments, laboratory buildings, shops, daycare centers, and schools, as well as a fire station and a movie theater. Electricity and heat are supplied entirely from renewable energy sources via a wood-fired cogeneration plant operated by Stadtwerke Heidelberg.
On the 22-hectare site of the former freight yard in Stuttgart-Bad Cannstatt, the new Neckarpark residential and commercial district is taking shape, featuring 850 residential units, commercial spaces, parks, plazas, and streets. A forward-looking energy concept was developed for Neckarpark that utilizes wastewater as the primary heat source.
An energy-self-sufficient neighborhood is currently being developed on the redeveloped site of the former Graf-Stauffenberg Barracks in Sigmaringen. In the future, 75 percent of the energy consumed in the neighborhood is to be generated directly on-site, primarily from renewable energy sources. A “virtual power plant,” serving as the control center for energy and heat, forms the heart of the smart energy supply system. Here, decisions are made regarding which type of energy to use, depending on demand, time of day, and weather conditions. Intelligent storage technology helps ensure that the energy supply can be flexibly adapted to meet energy needs for heating, electricity, and mobility. Renewable heat is supplied by, among other things, a wood chip boiler, a solar thermal system, and a heat pump. The electricity needs for residential and commercial use, as well as for electric vehicle charging stations, are covered by photovoltaic systems. Two combined heat and power (CHP) plants reliably and energy-efficiently provide heat and electricity whenever the sun and wind are not available.
With its current total of about 110 residential units—including single-family homes, semi-detached homes, and townhouses—the Bedburg-Kaster Resource Conservation Community serves as a model neighborhood for the energy transition. Here, a neighborhood-owned solar array and a wind turbine with a direct connection supply green electricity, which residents can use in their homes even in the evenings or during periods of low wind thanks to battery storage. In addition, the neighborhood is connected to the public power grid. Green heat is provided by a combination of energy generated from wastewater heat recovery, heat pumps, a 10,000-liter thermal buffer tank, and an area of approximately 400 square meters covered with geothermal collectors. All components are intelligently controlled from the neighborhood’s own energy center, where the entire energy and communications infrastructure converges.
These are typically new development areas that are designed to be as energy self-sufficient as possible. This is because an largely open space makes planning easier. The greater challenge lies in redesigning existing neighborhoods, since space for new systems—whether for electricity and heat generation, storage, or control—is usually limited, and the use of rooftops for solar energy also depends on their orientation. In these cases, complete energy self-sufficiency is often unattainable, but at least a significant reduction in energy demand—and thus in CO2 emissions (up to 80 percent)—can be achieved.
Benefits and future developments
A first step toward energy self-sufficient districts was the introduction of tenant power. This involves PV systems or cogeneration units supplying a multi-tenant building with green electricity produced on site, which is sold by the landlord directly to the tenants. This model has evolved to include not only individual buildings, but also larger groups of buildings. As the number of buildings served increases, the economics of the projects improve and new opportunities arise to use electricity where it is generated—for example, for e-mobility or to generate heat from excess energy.
The advantages of district solutions are obvious. They are less expensive, as economies of scale and synergy effects reduce investment costs. They create secure supply conditions and make their own energy consumption more transparent thanks to smart meter-supported energy visualization.
Increasingly, future developments will have to take existing buildings into account and redesign them accordingly. But there is still a lot of work to be done to convince everyone involved: local authorities, businesses, residents, energy suppliers and the housing industry as well as private homeowners. Particularly when it comes to converting existing buildings, there is likely to be considerable resistance, as the so-called Heating Law (Building Energy Act) has already shown. And it will be necessary to develop appropriate financing models that are affordable for both tenants and private owners.