A sustainable energy system based on renewables, energy-efficiency, decentralisation of energy generation and synergies between different sectors requires new energy planning methods and policies. Energy transition and climate change mitigation achievement can no longer be seen only through top-down activities from a national government. Local and regional governments have a crucial role in delivering public policies relevant to such endeavour. Therefore, the implementation of multilevel governance (MLG) has become a priority for fostering local and regional development more inclusively. Paper analyses the existing energy planning governance in Austria throughout the MLG structure by focusing on the alignment between the local energy and climate initiatives and the national and EU goals. Also, the paper examined the effectiveness of the current MLG structures and outlined the fields where improvements are needed. The successfulness of the MLG approach is shown on Judenburg city case study. Desk research is enhanced by a series of interviews with energy policy experts and implementation of case study measures in TIMES model. The MLG analysis showed the solid alignment of different governance levels. In contrast, the comparison of the energy and climate initiatives on the local level outlined recommendations for the design of more effective energy planning approach. Four areas of action are identified for further improvement: territorial fragmentation, data availability, spatial energy planning and new integrated MLG. The remaining non-conventional biomass potential of the Murtal region is enough to increase the share of district heating for the residential buildings of the Judenburg city from 16.3 to 30.8% while the building refurbishment increases district heating share to 32%. Application of MLG analysis demonstrated the alignment of energy targets in Austrian policy on different governance levels. The general willingness of Austrian municipalities to take part in local energy actions was shown through the local initiatives’ analysis. It is argued that strengthening the listed areas of work is necessary to raise the effectiveness of the local initiatives. The case study for the city of Judenburg developed in the TIMES model confirmed that coordinated actions from different levels of governance lead to effective implementation of measures.