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I believe the increased power is due to the fact that the T5 is AWD while the T4 is FWD. This article has a pretty helpful comparison: 2019 Volvo XC40 T4 Momentum: Thrifty and Efficient
Still no explanation as to where the added HP comes from. My guess would be tuning and (maybe) more turbo boost, but I still have yet to hear a definitive answer. A little more HP might be desirable with AWD, but AWD doesn't produce the extra HP.
 

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Late MY23 XC40 Ultimate, B4 AWD, Bright Dusk
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Also been looking into this. The pre-facelift versions are identical in every possible way except horsepower and torque which gives me the impression that it's only software tuning in place or/and a different turbo is used. As for the facelift versions, the B3, B4, T4 twin engine and T5 twin engine have a 7 gear DCT. Everything else has a 8 speed automatic transmission.
 
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