Navigant Research Blog

Building Automation Systems Get Smart

— May 8, 2012

According to our recent report on building automation systems, the market for building automation controls today totals over $75 billion per year.  There’s still room for growth, however, not just in developing regions but even in North America and Western Europe.  Automation systems and controls relating to HVAC and lighting are not always required by code, but they can play an important role in maintaining high levels of energy efficiency.  As LEED certifications soar (recently passing 2 billion square feet of commercial certified space worldwide) and organizations look to reduce their energy consumption and carbon emissions, such controls are one of the key enabling technologies that achieve high levels of energy performance in buildings.  Although some of this growth is due to the increasing stringency of building energy efficiency regulations, such as the EU Energy Performance of Buildings Directive, which will require all new construction in Europe to achieve nearly zero-energy levels by 2021, much of the investment in building automation controls will be voluntary, as companies aim to improve energy efficiency in their building portfolios.

At the same time, building automation systems are becoming more intelligent.  Increasingly, controls are not designed to be “set and left” but are connected to a building management system (BMS) that continuously monitors data streams from building controls and feeds them into energy displays that help facilities managers and other decision-makers gain visibility into how their buildings are performing.  This is enabled by the convergence of IT with building controls, a process that, despite arriving later to the building industry than to other industries like telecom, is now transforming the way energy is managed in buildings.  Controls were originally imagined as standalone devices that would to some extent take control of building energy out of occupants’ hands to “make sure the lights got turned off.”  The new wave of intelligent controls, ironically, aims to put control over controls back in the occupants’ hands, albeit under the guidance of sophisticated BMS and building energy management systems.

BAS Market Size by Region, World Markets, 2011-2021


These advances in building automation technology are occurring just as demand for higher levels of energy efficiency is rising.  As a result, Pike Research expects the market for building automation systems to grow to $146 billion in 2021 – a near doubling of the market today.  Much of this growth will come from rapid construction activity in China, where 2 billion square meters of new space are added every year, and where much of that new space will integrate sophisticated controls over time.  The fastest growth categories will be those that relate directly to energy efficiency, such as lighting controls.  As these devices are rolled out, they will usher in a new generation of intelligent buildings that are less expensive to operate and easier to manage than ever before.


Efficiency 2.0 Acquisition Gives C3 Full Energy Management Portfolio

— May 2, 2012

C3, the energy management software firm, announced on May 1 that it is acquiring Efficiency 2.0, a software company whose software-as-a-service (SaaS) product focuses on improving the efficiency of residential and small business customers.  This move rounds out C3’s portfolio of utility energy management services, which has until now focused on large commercial and industrial customers.

If you’re familiar with OPOWER, then you’ve seen the role that some energy management software firms are looking to play in helping utilities meet their demand-side management (DSM) goals for energy efficiency.  Efficiency 2.0 aims to aggregate residential and small commercial sites – some of the hardest-to-reach customers in energy efficiency programs – and document the results in a way that helps utilities comply with efficiency mandates and qualify for incentives from their state public utility commissions.

C3 has been very busy since it formally opened its doors to the public last August, as I covered on our blog, with both its utility and corporate customers.  The firm is already working with Pacific Gas & Electric, for whom it provides a white-labeled version of its software to help PG&E’s account managers identify and implement energy conservation measures with PG&E’s largest commercial and industrial customers.  The acquisition of Efficiency 2.0 rounds out C3’s offering for utilities by helping it address a full range of customer types, ranging from individual homeowners to facilities with peak loads in the hundreds of kilowatts.  Through the acquisition, C3 and Efficiency 2.0 now boast a combined customer base of fourteen utilities, in addition to many other corporate customers.

Many firms in the energy management world have been eyeing utilities as potential customers.  For example, Pulse Energy, the Vancouver-based software firm, has retooled its entire strategy to focus on utility customers rather than building owners.  The business model for energy management is considerably different for utilities, as utilities benefit less from energy cost reductions (as building owners do) and more from increased visibility into and control over customers’ energy consumption as well as from compliance with energy efficiency mandates.  Through this acquisition, C3 is one of the few (if not the only) vendors that can address a utility’s entire customer base using a single platform.

The news of yet another acquisition in the energy management space also takes the era of the energy management startup, which has been gestating over the last few years, one step closer to its natural conclusion, when virtually all startups will either be acquired or close their doors.  C3’s executives, many of whom were previously in executive roles at Siebel Systems, the software firm that Oracle acquired in 2005 for $5.8 billion, know that as well as anyone.  Demand for energy management solutions for utilities will continue to mature over the next few years, and, as it does, companies like C3 will be well-positioned to help utilities improve their customers’ energy efficiency.


NRG Energy Responds to Outcry Over EV Charging Agreement

— May 1, 2012

Power provider NRG Energy’s proposed settlement with the California Public Utilities Commission (CPUC), which would include the company’s ownership of EV charging equipment across the state, was lauded by some EV manufacturers and met with displeasure from EV industry participants and competitors.  The company responded by adjusting its settlement offer, and along with the CPUC on April 27 filed an amended settlement offer with the Federal Energy Regulatory Commission (FERC), which has 90 days to review the deal.

I submitted questions to NRG about the changes to the revised agreement and the impact on Californians, and below is an edited transcript of the email exchange with Arun Banskota, president of NRG Energy’s EV Services division.

Pike Research: How do you think that this agreement will accelerate the demand for PEV ownership in California?

Arun Banskota: This is a significant investment of capital that addresses the “Chicken and Egg” problem facing the industry as a whole: how do you build a network when there aren’t enough cars on the road? NRG’s investment and innovation in DC fast-chargers will break open the EV market by addressing the number one challenge facing the industry–range anxiety.  This settlement puts the state on the path to creating a “backbone” of fast-charging stations and work place and residential charging as well as charging at institutions such as schools, hospitals and community colleges that are crucial to meeting California’s goal of having 1.5 million EVs on the road by 2025.  More EVs on the road means more opportunities for companies throughout the sector as we create a technology- and vendor-neutral infrastructure to encourage EV adoption and demand growth.

PR: What are the benefits from the settlement to California ratepayers who don’t own an electric vehicle?

AB: NRG’s EV infrastructure will deliver multiple benefits to California families and businesses, including those that don’t currently use EVs.  NRG’s project will:

  • Create jobs and new investment in California;
  • Open up increased market opportunities for existing and new businesses in the EV sector, from technology to manufacturing to EV charging hosts;
  • Improve air quality in the of the state’s largest most densely populated metropolitan areas;
  • Make EVs more accessible to consumers of all socioeconomic backgrounds;
  • Give consumers another choice for transportation amidst rising oil prices;
  • Reduce greenhouse gas pollution;
  • Provide greater exposure to the benefits of EVs through the car sharing program we will support.

PR: Can you explain how the modifications to the agreement address the concerns filed by Ecotality?

AB: NRG worked closely with the CPUC to ensure that this settlement will drive growth and preserve competition in the EV market so that Californians can meet their clean energy goals.  California is targeting 1.5 million EVs on the road by 2025.  To get there, the state needs the kind of investment that we are making – and then some.  The 200 public freedom stations and the make ready sites will be spread across 55,000 square miles of the most densely populated metropolitan areas in California.  While it is significant, it doesn’t saturate the market.  Additionally, a good percentage of our infrastructure will be built in low and moderate income areas, something that was unlikely to happen outside the scope of this type of settlement.

Most importantly, there is no exclusivity for the locations where the Make-Readies or the Freedom Stations will be installed–our competitors can build right next to our installations.  Additionally, the make ready infrastructure is being built for and will be delivered to the citizens, businesses and property owners of California.  This investment will enable other companies to make subsequent investments in a more mature market as we are taking the up-front risk to create longer-term value for the entire sector by paying to build an infrastructure that our competition will have access to after 18 months.  By building the make readies, we are lowering the barrier to entry for the entire market.  The infrastructure cost (approximately $10,000-$15,000) is the most significant portion of the overall cost to install chargers.

PR: Other EV charging services companies have objected to the 18-month period where NRG gets exclusive access to installing charging equipment at the make ready locations.  Why was this clause inserted and how can it expand rather than impede competition in EV charging services?

AB: I would emphasize that the CPUC wanted someone with “skin in the game” to ensure this infrastructure was successful by incenting NRG to site this infrastructure at properties with a higher probability of attracting EV drivers.  The 18-month period allows us to have a short amount of time to try to take advantage of our $40 million investments, but is short enough to ensure that competitors can take advantage of it as well when this period is over.

PR: Is NRG required to give away any vehicle charging services or equipment as part of the agreement? I understand that the make-ready wiring and upgrades will become property of the location or residential EV owner, but will power be given to EV owners at no cost, or will any of the charging equipment be owned by the location owners?

AB: The make ready sites, a $40 million investment by NRG, will be turned over to the facility owner after the expiration of the 18 month exclusivity period and NRG will not own this infrastructure.  By design, neither the actual chargers nor the electricity will be part of the infrastructure we supply to enable the property owners or our competitors to take advantage of the infrastructure in a way that best fits their respective business models.

PR: How does the equipment provided by this agreement compare with the free charging equipment given to PEV owners via the EV Project and ChargePoint America?

AB: The EV equipment we use will be acquired through a technology- and vendor-neutral RFP process.  Probably one of the most important comparisons is the difference that our equipment is privately funded to ensure a sustainable business model that is only dependent on success of EV adoption.

Is this a good deal for EV owners, the industry, and California as a whole? Should FERC okay this with the 18-month exclusivity contract intact? Please share your comments below.


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