As cities around the globe strive to become more innovative and efficient, the European Union’s Artificial Intelligence (AI) Act introduces a new layer of regulation that may shape the future of urban development. The convergence of AI and energy consumption in smart cities presents opportunities and challenges, particularly as the world seeks to reduce its environmental footprint while fostering innovation.
A landmark in global AI regulation
Adopted in 2024, the EU AI Act is the first comprehensive legal framework designed to regulate AI technologies across various sectors, including healthcare, transportation, and public services. This legislation introduces a risk-based approach, categorizing AI systems based on their potential impact on human rights, safety, and societal well-being. For smart cities, many AI applications, such as traffic management systems, surveillance technologies, and energy optimization platforms, fall under this regulation’s purview, especially when categorized as “high-risk” due to their direct impact on public safety.
The Act seeks to ensure that European AI technologies adhere to stringent ethical and safety standards while promoting innovation. However, balancing these two goals presents significant challenges, particularly as AI becomes increasingly integrated into the fabric of urban infrastructure.
Role in energy efficiency for smart cities
One of AI’s primary promises in smart cities is its potential to enhance energy efficiency significantly. AI-driven technologies can optimize everything from street lighting to public transportation, reducing energy waste and improving the sustainability of urban environments. For instance, in cities like Barcelona and Copenhagen, AI is already used to manage energy grids and reduce emissions.
AI can predict energy demand and adjust supply in real-time, enabling cities to reduce their reliance on fossil fuels and integrate renewable energy sources more efficiently. AI-enhanced smart grids can also respond dynamically to fluctuations in demand, distributing energy where it is needed most and reducing overall consumption.
For instance, AI-powered systems can turn off lights in unused buildings or reroute electricity during non-peak hours. These systems can also learn from consumption patterns to make predictive adjustments, thus helping reduce energy waste. This application of AI could play a critical role in helping the EU achieve its climate goals, particularly under the “Sustainable Transformation” scenario outlined in the Global Energy Perspective, where decarbonization technologies are scaled rapidly.
AI increasingly energy demands
As cities grow smarter, their energy consumption is becoming increasingly complex. AI systems are often energy-intensive, particularly as they require large-scale data processing and real-time analytics. The rise of data centers, driven by the proliferation of AI applications in smart cities, has added a new dimension to the energy equation. According to McKinsey’s Global Energy Perspective 2024 report, data centers alone could account for up to 9% of global electricity consumption by 2050.
This creates a paradox in the context of smart cities. While AI technologies can help reduce energy consumption across urban systems, they also increase demand for energy to power the very systems that enable these efficiencies. As AI becomes more embedded in city infrastructure—through autonomous vehicles, smart grids, and IoT networks—the energy footprint of these technologies must be carefully managed.
In the EU, where the transition to renewable energy is central to climate policy, ensuring that AI-driven smart cities are powered sustainably is critical. Renewable energy sources such as wind and solar must scale rapidly to meet the growing energy demands of AI infrastructure. However, as noted from the Global Energy Perspective, the current rate of renewable energy deployment is not fast enough to meet these demands in the short term.
Regulatory challenge
Despite AI’s potential benefits for energy efficiency, the regulatory framework introduced by the AI Act poses several challenges for smart city implementations. Under the Act, high-risk AI systems, including many AI applications in energy and infrastructure management, must undergo rigorous testing and oversight before deployment. This includes compliance with strict data governance rules, transparency requirements, and human oversight mandates.
The cost and complexity of complying with these regulations could slow the adoption of AI technologies in cities, particularly for small and medium-sized enterprises (SMEs), which are often at the forefront of innovation in this space. Some experts warn that the AI Act’s stringent requirements could create a chilling effect on investment, deterring the development of high-risk AI systems essential for smart city infrastructure.
Moreover, the risk-based classification system in the AI Act may place undue burdens on some technologies that, while high-risk in terms of regulation, may have a net positive impact on energy consumption and environmental sustainability. For example, AI systems used for traffic management or energy distribution could be subjected to costly compliance processes that delay deployment despite their potential to reduce emissions and improve energy efficiency.
Policy, innovation, and sustainability
Policymakers must strike a delicate balance between the complex relationship between AI regulation, energy consumption, and urban sustainability. The EU AI Act’s focus on ethics, transparency, and safety ensures that AI technologies respect fundamental rights and contribute to the public good. However, overly stringent regulations could stifle innovation, particularly in sectors like energy, where AI has the potential to drive significant progress toward climate goals.
One potential solution is fostering greater collaboration between policymakers, AI developers, and urban planners. Regulatory sandboxes, which allow AI systems to be tested in controlled environments, could provide a pathway for smart city technologies to meet the AI Act’s requirements without stifling innovation. These sandboxes could be especially useful for testing AI applications that aim to optimize energy consumption and integrate renewable energy sources.
To ensure that AI-driven smart cities have a sustainable energy supply, it’s important to invest in clean energy infrastructure alongside AI research and development. As AI advances, its impact on energy use and efforts to address climate change will become increasingly significant.
In the coming years, the EU must continue refining its regulatory approach, ensuring that AI technologies can drive progress toward sustainability without creating new energy burdens. By fostering innovation within a robust regulatory framework, Europe can lead the way in building smarter, greener cities for the future.
