07/31/2014

The State of Smart Technology in Commercial Buildings

Survey reveals energy management practices and smart technology applications

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The following article discusses smart technology and summarizes the results of a survey of energy practices over 586 commercial building owners and facilities professionals. A 24-page whitepaper with the full report of the survey conducted by BUILDINGS is available at www.BUILDINGS.com/smartinfrastructure.

 

FACTORS IN ENERGY PROCUREMENT

For commercial building owners, energy issues revolve around costs – the cost of energy, the cost of smart technology, and the cost of energy-efficient materials.

The cost of energy is volatile and perhaps more perplexing to forecast than it has ever been. Diverse factors like geopolitics, demand, the costs of fossil fuels (coal, natural gas) for generating plants, and safety concerns about nuclear generating plants influence electricity prices. In the near future, there may be greater impacts from increasing use of renewable sources, changing weather patterns affecting demand and hydropower generation, and new regulations for generating plants and transmission lines.

Despite the uncertainties of forecasting, the consensus is that electricity prices are rising at an accelerating pace, as they did during much of the previous decade. Average retail prices to commercial customers climbed 10% from 1999 to 2003, and 24% from 2004 to 2009. Most survey respondents believe that increases will continue in the near future, with 82% anticipating increases over the next five years.

Perhaps anticipating increases in energy prices, 47% of respondents plan to decrease their per capita or square foot energy consumption in the coming years. However, 25% foresee increases in consumption. In particular, 35% of healthcare facility professionals anticipate greater consumption over the next five years.

 

READINESS TO PAY FOR RENEWABLES

While the price of electricity from renewable sources is higher than that from traditional sources, some building owners are willing to pay a premium for renewable sources for at least a portion of their demand.

Among all survey respondents, 44% report that they are willing to pay a premium for renewable energy. Some 26% of respondents would pay 5% more for renewables and 18% would pay 15% or more. Nonetheless, only 16% of respondents currently purchase renewable energy credits (RECs), and only 25% use power purchase agreements (PPAs), which typically involve solar or wind power. Healthcare and hotels/motels were most likely to use PPAs (35%), significantly higher than the average for all respondents.

Among all respondents, a little more than half (55%) are unwilling to pay any premium for renewable energy and/or lower greenhouse gas emissions. However, the primary business of the respondent could cause a significant deviation from the 55% average. For example, among financial/insurance firms, 70% would not pay for renewable sources.

There were also significant differences among organizations depending on whether their respective buildings were owner-occupied or leased. Organizations that lease their buildings to others were more likely to decline any cost premium for renewable energy (74%), whereas firms that are tenants and lease their space were less likely to decline a premium (39%).

 

CURRENT ENERGY MANAGEMENT PRACTICES

As illustrated previously, 82% of the commercial building professionals expect that rates for electricity will accelerate in the near future, and 47% say they plan to reduce their per capita or square foot consumption. But what are those 47% doing now to reduce costs and consumption?

Building owners cannot manage their energy if they have not measured it. The first and fundamental step is auditing energy consumption, and most respondents (70%) have completed an energy benchmarking survey of their buildings, often using Portfolio Manager, ENERGY STAR’s free, online benchmarking tool.

Whether building owners have taken clear steps as a result of benchmarking is a different matter. Only 29% of respondents have a written energy management plan in place – far fewer than those who have completed an audit. Facility professionals in federal buildings (46%) and the hospitality industry (47%) are the groups most likely to have a written energy management plan in place. Organizations managing the largest amounts of space were also more likely to have a written plan in place. More than half (55%) of organizations with 10 million square feet or more have a strategic energy plan, but only 21% of those with 100,000–250,000 square feet have one.

”There are no clear rules for how to implement an audit’s findings,” says energy and sustainability consultant Jennifer Woofter. “Who should be involved, how much you should spend, how long you should wait before you make your money back – only you can answer these questions, because the right answers vary so widely.”

Many actions that might be outcomes of an audit have a price tag attached to them. Initial cost is by far the greatest obstacle to implementing smart technology. Among all survey respondents, 46% cite initial cost – some three times more than those who mention the second-rated obstacle, which is lack of staff to evaluate new technology (13%).

“For our corporate clients in owner-occupied facilities, if we bring them ideas and recommendations that need capital expenditures, these clients can generally find the capital if there is a good business case and a reasonable payback,” says Dan Probst, chairman, energy and sustainability services, Jones Lang LaSalle. “For investor-owned buildings, it has been quite the opposite. Even for projects with an attractive payback, financing the upfront capital has been an issue.”

 

THE OWNER’S NEW ROLE IN THE ENERGY MARKETPLACE

Smart infrastructures and the smart grid will enable building owners to play a new role in an emerging energy marketplace. In the new paradigm, owners will be able to participate in the wholesale energy market, where only very large businesses had access in the past.

The owners’ participation will be scalable; that is, owners participate at different levels depending on their knowledge, choices, and the smart infrastructure in their buildings. Some participate in event-based demand-response programs; others participate continuously in price-responsive demand-response programs. Based on their onsite generation capabilities (fuel cells, solar power, wind power), entrepreneurial energy managers can choose to trade energy in the marketplace.

These managers can also make money-saving decisions about which fuel source to tap at any given time for their buildings’ heating and electricity demands. Their decisions to switch to onsite sources are communicated to the utilities, who will routinely exchange information with consumers on the power grid’s available power supply, outages, etc. Building owners can elect to band together and create their own microgrid, conducting their transactions as a group in the energy marketplace. An open, standardized language for demand response makes it easier for owners to work with different providers. Data on weather forecasts and submetered loads allows astute owners to sharpen the performance and efficiency of their buildings.

This concept of the energy marketplace, in which building owners buy and sell energy, requires new interfaces to support the exchange of information between buildings and the utilities.

 

PILOT PROGRAM ENVISIONS SMART GRID APPLICATIONS

Although a number of smart pilot programs have been undertaken by cities across the country, few focus primarily on commercial buildings rather than homes. Envision Charlotte is an exception.

This sustainability program encompasses energy, water, air, and waste. The energy component, Smart Energy Now led by Duke Energy, includes some 70 buildings with 21.5 million square feet in the central I-277 Interstate loop area. Building owners and tenants have signed voluntary agreements to participate in the program. For each customer account, Duke Energy has installed a digital smart meter next to the billing meter and a router to communicate the meter’s consumption data over an independent wireless network.

Each building in the program will have an interactive digital display in the lobby that shows occupants the collective energy usage of all buildings, including real-time usage, load factors, and historical trends. The display will also supply energy and sustainability tips. Customers who want to see their own confidential usage data can log onto a secure portal.

The goal of the Smart Energy Now program is a 20% reduction in usage over five years. According to Vincent Davis, director of Smart Energy Now, behavioral change is estimated to account for 5% of the goal. The remaining 15% is based on anticipated investments in energy projects by businesses that will have better data to rationalize such investments.

Davis believes that Smart Energy Now’s technical platform is necessary but not sufficient for the program’s success. “I speak a lot less about the platform and more about the customer engagement strategy. The technology enables the program, but the reality is, the technology can’t carry the day if people don’t change their behavior.”

 

WHAT SHOULD A BUILDING OWNER DO NOW?

Smart technology is changing the way that electricity will be purchased and consumed by commercial buildings. It will not be your great-great-grandfather’s power grid where the utility supplies electricity to the consumer, whose only role in the process is to pay a monthly bill.

But the digital smart grid is not here yet. So what should facilities professionals do now?

1) Understand your energy profile and develop a plan.First understand your energy usage as best you can and then look for ways to take action. Benchmark your building’s energy usage. Investigate ways in which you can invest in smart sensors and near real-time data to capture more insights into the energy performance of individual building systems.

Then act on your energy usage profile. Write a strategic energy plan and take action. Many owners take the energy benchmarking step but fail to move forward on the next steps.

2) Search for incentives.Funding for energy initiatives is an issue for many owners, yet rebates and incentives from federal, state, local, and utility programs often go unnoticed and untapped.

Two reasons are an aversion to IRS paperwork and a misalignment of goals within organizations, according to Bill Bissmeyer, president of energy consultant B&B Energy.

“People shy away from complicated returns and the IRS,” he says. “And the people who are doing the taxes are not the same people who are paying the checks, and probably not the people who are really, really aware of energy and facility costs.”

3) Be an entrepreneur in the energy marketplace.The new energy landscape offers entrepreneurial opportunities to building owners, not just to those who supply energy tools and services.

Owners will be able to participate in the buying and selling of energy, and those who embrace their new role in the marketplace will gain a competitive edge for their facilities. Another opportunity might involve tenants: Would your tenants see value if you provided them with money-saving counsel on energy matters?

Many tenants may not expect help on energy matters or willingly share their energy profile with their building’s owner. But energy disclosure and visibility are likely to become more of the norm, helping to create an atmosphere in which tenants value the owner’s energy expertise.

4) Don’t lose sight of the behavioral element.Waiting for technology to supply a silver bullet for energy usage is fool’s gold. Occupant behavior has an impact on energy consumption at every step of the way.

Even if the facilities department has a good grasp of the building’s energy profile, does it also know how daily occupant behavior affects the profile? And do the occupants know? There’s real gold in continually working on energy behaviors and ensuring that facilities personnel and occupants share the same information and goals.

 

 

 
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