As intelligent energy management technology has evolved, it has expanded considerably beyond the initial systems and platforms designed to help enterprises manage energy in their facilities.  We’ve seen some energy management players – from enterprises to utility customers – reorient their offerings to serve as a demand-side management tools.  Others have decided to specialize in certain high-value applications such as demand response.

One of the newer frontiers in intelligent energy management is the integration of energy management and facility management technology.  At first, it might appear that these two services have little to do with one another.  The former is concerned primarily with monitoring and reducing energy consumption and consumption, while the latter is focused on a range of issues affecting interior spaces (such as space planning, mail management, catering, janitorial services, and security).  However, several of the IT systems used to monitor and govern many of these facility management services also create data relevant to energy management.  Thus, they create opportunities to build additional applications onto the same IT backbone.

Yin, Meet Yang

One of the best examples of this integration is Jones Lang LaSalle’s IntelliCommand offering, which is a white-labeled version of Pacific Controls’ energy and operations management software.  The tools provide Jones Lang LaSalle’s commercial real estate customers with a suite of applications, such as energy visualization, energy management, and demand response, that help reduce energy costs while maintaining (or improving) building operations and the quality of the interior environment.  In addition, the system ties directly into Jones Lang LaSalle’s existing workflow management system, which its customers are already familiar with, an advantage over similar offerings that have independent user interfaces and functionality.  Meanwhile, IBM’s acquisition of facility management software firm TRIRIGA in 2011 and Ameresco’s acquisition of FAME Facility Software Solutions in 2012 also demonstrate the rapid integration of facility management with business operations and energy efficiency offerings.

The Jones Lang LaSalle model, which integrates energy management into a broader facility management offering, would appear to be the inverse of the IBM/Ameresco model, which adds facility and asset management capability to energy management systems that offer a multitude of energy-related applications.  Rather than arguing that one or the other is the “right” model, I will say that both models will likely coexist within the building industry for years to come.  This yin-yang effect – with facility management nested into energy management and vice versa – will ensure that customers have options that suit their priorities, budget, and existing building IT infrastructure.

Decisions made early in the building design process can have dramatic impacts on the building’s energy performance.  Is the building oriented to take full advantage of solar rays to maximize daylight while reducing unwanted solar heat gain? Will those more expensive double-glazed windows pay off?  As Joseph Romm famously said of building design, by the time “1% of the project’s up-front costs are spent, up to 70% of its life-cycle costs may already be committed.” In other words, a building’s design team, which only plays a role in the early phases of a building’s lifecycle, has significant control over the building’s long-term performance.

In the nearly 12 years that the U.S. Green Building Council’s LEED green building certification has been administered, energy efficient design has been highly dependent on specialized designers that are able to integrate design software, such as Autodesk’s Building Information Modeling (BIM) suite, with energy modeling tools, such as the U.S. Department of Energy’s eQUEST tool.  To date, the process has been largely one-directional: a design team submits its completed design to a team of energy engineers, who redraw the blueprints in eQUEST and model energy performance.  By the time the design is submitted to the engineering team, however, most of the key decisions have been made, and little can be done to tweak the design to improve energy efficiency.  I recall from my days as a LEED and energy efficiency design consultant the frustration of being engaged in the design process too late to drive true energy efficient design.

So Long Redrawing

Now, however, building design and building performance is becoming a two-way street with Autodesk’s Revit 2014 software release.  This latest version now encompasses building performance analysis (BPA) features, which help design teams iterate between building design scenarios and their implications on energy performance.  Such capability not only allows design teams to make better-informed decisions about energy efficiency in the early stages of the design process, but it also reduces considerable labor costs on the back end because it allows design teams to export the digital blueprints to energy modeling environments such as eQUEST without redrawing, which can be a time-consuming process.

Jonathan Rowe, Sustainable Buildings Program Manager at Autodesk, sees this as a major step forward for the building industry as a whole. “One major pain point design teams face is getting rapid feedback on the energy performance of their planning decisions early in the process,” he told me when I spoke with him recently. “Energy Analysis for Autodesk Revit 2014 is a cloud-based solution that aims to provide this kind of actionable feedback in minutes rather than hours, making sustainability assessment a routine part of any project delivery.”

Given that Autodesk’s energy efficiency software is used to design many of today’s high-performance buildings, this level of interoperability will help facilitate the design of more efficient buildings and integrate energy efficiency into building design – from the outset.

The Japanese market for building energy efficiency technologies has been strong for decades, thanks in large part to the 1979 Act Concerning the Rational Use of Energy, the foundation of Japan’s stringent building energy codes.  In the 2 years since the Fukushima earthquake and the ensuing energy crisis – which has caused a 17% increase in the price of energy for non-residential customers of TEPCO, the monopoly utility that serves the greater Tokyo region – demand for energy efficiency technologies in Japan has grown significantly.

In particular, demand for building energy management systems (BEMSs) has grown as much as 30% to 40% year-on-year over the last few years, according to discussions I’ve had with market participants and key industry players in Japan.  Although the concept of BEMSs is mature in Japan, given that it is a requirement of the Act Concerning the Rational Use of Energy, the concurrent timing of the energy crisis and the market availability of software-as-a-service (SaaS)-based BEMS software has led to a surge in its adoption.   (It should be noted that the concept of BEMSs in Japan overlaps significantly with the concept of BEMSs in Europe and North America, though BEMSs in Japan often include additional technologies such as building-to-grid connections, smart meter technology, and others that are often considered part of the smart grid in other regions.)

Driving DR

At the recent World Smart Energy Week at the Big Sight in Tokyo, I was focused on learning more about the adoption of technologies such as building energy management systems (BEMSs), direct digital controls (DDCs), demand response (DR), and other intelligent building products in Japan within the 3^rd Eco House & Eco Building Expo.

I attended several sessions of the event’s Smart Grid Technical Conference, where representatives from organizations such as Itron, NEDO, and Toyota discussed smart building technology in the context of the increased intelligence of the utility grid.  In particular, the increased growth of PV and wind in Japan will continue to drive the country’s emerging DR market, which will expand further through the adoption of smart building technology.  As Taichiro Kawahara of Hitachi put it, “Demand-side energy management in Japan must be promoted through demand-side management and demand response.”

The conference not only explored the application of these technologies in Japan, but also compared and contrasted similar successes and challenges with smart grid integration experienced in Europe and North America.  This perspective is critical for ensuring that the adoption of smart grid technology in Japan unfolds as smoothly as possible and for providing Japanese technology developers with important insights into the market landscape in other regions into which many Japanese companies are looking to expand.  This sort of international forum is critical for spreading market-leading technology – and ensuring that the industry doesn’t make the same mistakes twice.

The last few years have been up and down for Property Assessed Clean Energy (PACE) financing, which allows building owners to finance energy efficiency and renewable energy projects through an assessment on their property taxes.  Immediately following its inception in 2008, many states allowed PACE financing and dozens of jurisdictions launched programs.  In 2010, however, the announcement that the Federal Housing Finance Agency (which administers Fannie Mae and Freddie Mac) that it would not back any mortgage where PACE financing with a priority lien was placed on the underlying property halted most residential PACE programs and dragged many commercial programs down with it.  Although the FHFA is seeking public comment on its new rules, the residential PACE market has not rebounded, and the commercial sector remains a trickle.

This may change in 2013, primarily thanks to new market entrants that are helping municipal governments offer PACE programs.  The market continues to be limited by the considerable up-front effort required on the part of municipalities.  In a time when city budgets are shrinking, the professional resources required to get a PACE financing program off the ground can be hard to come by.

Move Along Please

In the last few years, however, a number of companies dedicated to PACE financing have emerged that aim to facilitate PACE financing by removing the administrative red tape (as we discussed in Pike Research’s recent webinar, Financing Energy Efficiency, which can be replayed here).  For example, Ygrene Energy Fund recently launched Clean Energy Sacramento, a $100 million PACE financing program in Sacramento, and is in the process of launching similar programs in Georgia and Florida.  Figtree Energy Financing, which is leading a similar project in San Diego, is eligible to administer similar programs in dozens of other jurisdictions throughout California.  And Renewable Funding administers commercial and residential PACE programs around the United States (as well as a similar program in Melbourne, Australia), including the high-profile GreenFinanceSF PACE program.  Although each of these firms has developed its own business model, they typically make money through a combination of per-building fees and through interest on the bonds issued by the PACE financier.

In addition to the reduced administrative burden on municipalities, “fully-funded” models such as Ygrene’s offer a number of other potential benefits.  One is the accelerated pace of Ygrene’s model, which allows the municipality to release funds on a rolling basis, rather than waiting to pool enough projects before issuing a public bond.

“Many PACE models require property owners to arrange their own funding – a complicated and time-consuming process,” said Stacey Lawson, CEO of Ygrene Energy Fund, when I spoke with her recently.  In addition, building owners face less risk in terms of interest rates under the fully-funded model, as the interest rates are known at the time that a PACE project is signed; in contrast, a building owner may not know the actual interest rate until months after agreeing to participate in a bond issuance, posing long-term risk.

Although the potential for PACE financing is easily in the billions of dollars per year, only about $100 million worth of projects was financed in 2012.  The backlog of projects at many PACE financing outfits suggests that PACE financing could easily hit $250 million in 2013, which would be a major increase over 2012.  Once the concept has been further tested and proven, expect to see a growing number of municipalities launching similar programs and relying on specialty PACE financiers to design and administer their programs.