In the transition towards a low-carbon future in Europe, cities' actions are of major importance due to the prominence of urbanization, both in terms of population and in terms of greenhouse gas (GHG) emissions. As a result, we need city authorities to act, by using their competences as policy makers as well as energy users. However, cities are still not moving as fast as one might expect, indicating the need for additional incentives to prompt local action. Therefore, the aim of this paper is to present an overview of external incentives that might prompt cities to act and to highlight good practices that could be used in future initiatives. This paper first discusses how to evaluate the climate and energy performance of a city and how local authorities can contribute to its improvements. Moreover, it analyses the disincentives that local governments are confronted with, categorizing them as simple market failures, institutional failures and multi-agent failures. The paper then presents a survey of initiatives at national and EU levels to promote local action towards a low-carbon future; grouping them into tambourines, carrots and sticks. We focus on Austria, Germany, the Netherlands and Sweden because they are pioneering countries regarding energy policies for cities.

Traditional analysis of distribution network tariff design assumes a lack of alternatives to grid connection for the fulfilment of consumers' electricity needs. This is radically changing with breakthroughs in two technologies: (1) Photovoltaics (PV) enable domestic and commercial consumers to self-produce energy; (2) Batteries allow consumers and self-producers to gain control over their grid energy and capacity parameters. Contributing to the state of the art, the grid cost recovery problem for the Distribution System Operator (DSO) is modelled as a non-cooperative game between consumers. In this game, the availability and costs of the two named technologies strategically interact with tariff structures. Four states of the world for user's access to technologies are distinguished and three tariff structures are evaluated. The assessed distribution network tariff structures are: energy volumetric charges with net-metering, energy volumetric charges for both injection and withdrawal, and capacity-based charges. Results show that in a state of the world with new technology choices for grid users both efficiency and equity issues can arise when distribution network charges are ill-designed.

The role of DSOs is evolving due to the increasing penetration of intermittent and distributed energy resources in the distribution system. On the one hand, TSOs are accessing flexibility resources connected to the distribution grid. On the other hand, DSOs are actively managing distribution grid congestion, moving away from the conventional fit and forget approach. As a result, the need for DSO-TSO cooperation has become increasingly important. In this study, we first discuss market and grid operation issues related to different system states and the corresponding congestion management approaches, in the context of the European electricity market design and regulation. Second, we discuss viable solutions that are inspired by inter-TSO cooperation solutions as well as solutions that are being adopted by DSOs. Our findings show that the issues are rather similar both at transmission and distribution level; however, the need for cooperation and the solutions will depend on where structural congestion will occur and which borders will be managed. We also note that cooperation between DSOs as well as between DSOs and microgrids could become more important with the development of local energy markets in the long term.