Digital twins for sustainable urban energy systems: a systematic review of market mechanisms, flexibility, and coordination at the district scale

The pathway toward decarbonization of urban energy systems requires new digital infrastructures capable of operating and coordinating distributed renewable energy sources and enabling energy markets. Digital Twins are promising technologies in the management, modeling, simulation, and decision support of complex energy systems. This research is a systematic literature review conducted following the PRISMA 2020 guidelines. An initial database search identified 378 records, supplemented by additional studies identified through citation screening, resulting in 51 studies included in the final qualitative synthesis. Unlike previous reviews focusing primarily on technological architectures and operational optimisation, this review examines Digital Twins as enabling infrastructure for decentralized urban energy markets. The findings indicate that in urban energy systems, Digital Twins are used for real-time data acquisition, analysis, and optimization of local price discovery, peer-to-peer energy trading, tariff formation, and flexibility aggregation. The results suggest that Digital Twin applications can support improvements in system performance, including cost optimization, peak-load management, and enhanced utilization of locally generated renewable energy. However, most reported benefits are derived from simulation-based and case-specific studies, with limited evidence from long-term real-world implementations. At the same time, Digital Twin platforms improve the coordination among prosumers, operators, and market platforms. Nevertheless, the deployment of Digital Twins in energy markets faces significant challenges that may impede large-scale implementation, including the lack of sectoral standards, the complexity of scaling real-time co-simulation, cybersecurity risks, regulatory constraints related to automated trading, and the limited availability of long-term operational experience. Based on the current body of scientific literature, Digital Twins have the potential to become a key component of future decentralized energy markets, enabling the development of low-carbon, resilient urban energy systems. The findings of this systematic literature review provide insights for researchers, urban planners, and energy system operators involved in the development of smart and sustainable urban energy systems.