The paper gives an overview into the features and paradigms of a smart energy city in the framework set for the evolution of existing cities and their transformation to smart cities. The potentials of smart buildings has been scrutinized and put into perspective as the basic building block of cities. A draft model has been developed in Anylogic using system dynamics to demonstrate basic features of several smart houses, equipped with (1) demand side management capabilities, (2) micro renewables (solar and wind), (3) micro energy storage, (4) basic electricity-price based consumption controller. The smart building responds to price signals from the market. The system shown is being coupled with parallel initiatives of smart metering, micro-size renewables and energy management initiatives at the Faculty of Electrical Engineering and Computing, Power Systems Department.