Navigant Research Blog

Despite Bleak Chinese Construction Outlook, Still Hope for Green Buildings

— July 27, 2015

According to second quarter gross domestic product (GDP) data released by China, the miraculous decades-long growth of the Chinese economy is continuing. In reality, though, China’s GDP figures range in the territory of unreliable to laughable. As publicly traded companies announce their second quarter earnings, a picture of a more stagnant Chinese economy is emerging, and for construction, that picture is bleak.

How Low Can You Go?

United Technologies share price tumbled on July 21 (before receiving a little bit more bad news) as net sales and net income fell and performance failed to meet analyst expectations. The company’s Otis elevator and escalator products were projected to experience a 5% increase in orders in China for the year. Instead, the company recorded a 10% decline. The fall in elevator orders is a direct result of the fall in Chinese construction.

Unfortunately, construction in China does not appear to have a bright future. China’s government-led construction drive gobbled up massive amounts of commodities. In 2014, the country accounted for 40% of the world’s copper consumption, despite having just 20% of the world’s population. In just 3 years, China used more cement than the United States did in the entire 20th century. But, commodity prices have dropped, highlighting China’s cooling construction market. The Bloomberg Commodity index has fallen to its lowest level since 2009.

Darkest before the Dawn

Despite these construction headwinds, there is hope in high-performance buildings. The Chinese government is pushing green buildings, in part as a response to the country’s urban air pollution problem. Even though the construction boom has faded, advanced controls and building energy management systems are still poised for growth. As the focus shifts from completing construction to ensuring efficient operation, there is an opportunity for wider adoption and more sophisticated systems.

Other players in the building space are viewing China as a growth opportunity. Johnson Controls noted increased revenue on market expansion in China. Indeed, the company is investing in the Chinese market in anticipation of significant growth opportunities. Honeywell’s Automation and Controls Solutions (ACS) experienced double-digit growth in China in the second quarter of 2015. As China’s construction market continues to mature, the break-neck growth that has been characteristic has slowed substantially. The focus is shifting from more buildings to better buildings, creating opportunities for solutions that improve operational efficiency.

 

The Real Estate Services Shopping Spree

— June 12, 2015

You would be forgiven for thinking that CBRE stands for Can’t Buy Rapidly Enough. The company (which actually stands for Coldwell Banker Richard Ellis as a result of an interesting history of spinoffs, mergers, and acquisitions) is the world’s largest commercial real estate service and has been on a recent acquisition binge. In March, CBRE announced a definitive agreement to acquire the Global Workplace Solutions business that Johnson Controls, Inc. announced it would divest last year. Two weeks later, CBRE announced the purchase of Environmental Systems, Inc. (ESI), an energy management and systems integration provider.

Global Workplace Solutions offers services that help companies operate facilities more efficiently, optimizing real estate performance and employee productivity, particularly in the industrial, life sciences, and technology sectors. These services include everything from site selection and design, planning, and construction management to standardizing maintenance procedures and performing inventory management.

ESI, on the other hand, designs, installs, manages, and supports integrated building automation systems and building energy management systems. In 2012, ESI was selected by IBM to manage the energy use of the 50 largest federal government buildings, linking the automation systems of the buildings together on a cloud-based platform to provide enterprise-level management.

The Complete Package

Both acquisitions highlight how providing a complete portfolio of services for corporate clients is becoming increasingly important for CBRE and the commercial real estate service industry as a whole. With growing demand for green-certified commercial office space, as well as increasing awareness of the benefits of energy efficiency in reducing operating expenses, commercial real estate service providers are moving to expand their capabilities with clients. Indeed, DTZ and CoreNet Global announced a partnership that incorporates CoreNet Global’s benchmarking service into DTZ’s commercial real estate services portfolio.

Real estate services companies have historically played a less central role in energy efficiency decision-making, energy management, and energy benchmarking than other infrastructure-focused players such as energy service companies (ESCOs) and HVAC contractors. But, that seems to be changing, as corporate clients are beginning to view energy information to be as important as the other information typically provided by real estate service companies. Though CBRE’s shopping spree may be over for now, we will likely see more acquisitions by real estate services companies to fill out their service portfolios.

 

Green House Gas Emissions and HVAC

— June 9, 2015

The scientific consensus around climate change is that greenhouse gases (GHGs) emitted by human activities are creating a very serious problem. As a result, most major global regions have adopted targets for reduction of GHG emissions, notably carbon dioxide (CO2). The largest source of CO2 emissions comes from the burning of fossil fuels for generating electricity, powering vehicles, and providing heat. Heating, ventilation, and air conditioning (HVAC) equipment plays a large role in CO2 emissions, as it accounts for roughly 40% of total building energy consumption.

Thus, increasing the efficiency of HVAC equipment is a clear way to address GHG emissions. But, it’s not the only way HVAC equipment can help. Indeed, in a recent report, the World Resources Institute points out that non-energy and non-CO2 emissions account for 22% of all U.S. GHG emissions and are expected to rise. The report goes on to recommend the reduction of hydroflourocarbons (HFCs), which are used as refrigerants in HVAC equipment. However, when it comes to HVAC, what HFCs should be replaced by is not entirely clear.

Engineering Requirements

Within an HVAC system, refrigerant needs to be evaporated, condensed, and be compressed in such a way that the system can provide cool air. As a result, the band of temperature and pressure in which refrigerant changes phase between liquid and gas is narrow. Within a building, even the best HVAC systems may leak at some point in their lifetime. So, refrigerant needs to be non-toxic and non-flammable to keep building occupants safe. These requirements were met by chlorofluorocarbons (CFCs) and hydrochlorofluorocarbons (HCFCs). However, the proliferation of these refrigerants introduced a new problem: ozone depletion. While HFCs have solved the problem of ozone depletion, they are a GHG that traps heat in the atmosphere, contributing to climate change. The next generation of refrigerant needs to solve all of these problems.

So far, finding one refrigerant that is functional, safe, and doesn’t have severe impacts on the environment has been difficult. Potential candidates that have a lower the global warming potential than HFCs include R-32, which is mildly flammable, and CO2, which doesn’t fully change phase. Both have been commercialized. R-32 has been available in Japan since 2012. CO2 is being used as a standalone refrigerant in Europe and has recently been deployed in the United States. While challenges still remain, the development of these refrigerants presents the promise of reduced GHG emissions.

 

More EVs Might Mean Changes to Parking Garages

— May 27, 2015

The adoption of electric vehicles (EVs) seems to be unstoppable. In Electric Vehicle Market Forecasts, Navigant Research estimates that plug-in EVs will make up 2.4% of total worldwide light duty vehicle sales by 2023. EVs will thus have a profound impact on the electrical grid, but how will they affect buildings?

Currently, the most visible impact has been the proliferation of electric vehicle charging stations. Driven largely by LEED requirements and state-level incentives, many commercial buildings have dedicated parking spaces for EVs. Indeed, in some markets, EVs have enough of a presence that commercial buildings are installing charging stations in response to demand from the market. But, increased adoption of EVs may necessitate new paradigms for the design of parking garages.

The Solution to Pollution Is Dilution

Parking garages need ventilation. In addition to the carbon dioxide that contributes to climate change, internal combustion engines also emit a lot of other pollutants that are terrible to breathe. Parking garages need to exhaust these pollutants and replace them with fresh air in order to be compatible with human life. Building codes dictate the amount of air that needs to be exhausted based on the worst-case scenario: if every car in the garage was running at the same time.

This approach made sense when sensors and controls were expensive and difficult to use. However, with the sophistication of modern systems, demand-controlled ventilation (DCV) is becoming an attractive alternative to reduce energy consumption. DCV uses sensors to monitor air conditions and match the delivery of ventilated air with the actual need of the space. DCV saves substantial energy because the airflow that a fan provides has a cubic relationship with the power needed. As a result, halving the airflow of a fan reduces the power consumption to one-eighth of the full airflow. Some systems can reduce peak kilowatt-hour demand by up to 95%.

Unlike internal combustion engine vehicles, EVs do not create emissions that need to be exhausted (that happens at the power plant). So, in a future with all EVs, garage ventilation requirements can be drastically reduced. But, in the meantime, the presence of EVs in parking garages translates to greater savings through DCV operation.

 

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