The pace of advancement and innovation in the area of building energy management systems in the last few years has been startling. Even 5 years ago, energy management consisted of a dizzying Excel spreadsheet and a frustrated energy manager who had spent months trying to gather data on the past. Today, as building energy management systems (BEMSs) move increasingly to the cloud, they can integrate more readily into existing workflow procedures for tracking energy and sync up with a building’s automation system to track building-related energy data in real time.
As a result, the market for BEMSs has been surging. In Navigant Research’s recent report, Building Energy Management Systems, we forecast that the market will grow from a base of $1.8 billion in 2012 to $5.6 billion in 2020 at a compound annual growth rate (CAGR) of 15.3%. The market will be concentrated in North America and Europe, though the Asia Pacific market is growing at the fastest pace.
BEMS Revenue, World Markets: 2012-2020
(Source: Navigant Research)
The technology landscape is still evolving, but the roles that various players will take in the long term are starting to solidify. The building industry incumbents, such as Johnson Controls, Schneider Electric, and Siemens, have been busy acquiring companies that provide broad data integration capabilities, as well as specialized players that offer capabilities such as demand response. At the same time, BEMS startups (though many of them could hardly be called startups at this point, given the number of Fortune 500 companies that have signed up for their systems) are releasing regular updates to their offerings, with each new iteration providing more comprehensive functionality, easier-to-use front ends, and scalability.
Ready or Not
The trend toward co-opetition, which I’ve discussed in the past, has continued to develop in the BEMS market in the last year. Schneider Electric and the venture capital arm of Siemens joined forces in a $9 million investment round for BuildingIQ in January. Then, in June, Johnson Controls invested in Optimum Energy through a venture capital advisory relationship with Navitas Capital, with the round totaling $12.2 million (and compounded by additional funding from Edison Energy in August). These investments are setting the stage for a new dynamic in which incumbents aim to foster innovation by investing in startups while allowing them to maintain their autonomy, rather than acquiring them and fitting them into the incumbents’ existing offers and strategies.
But is the building industry ready for BEMSs? The offering, as a whole, is very new to many customers, as is the concept of energy management. Given the rapid pace of technology advancements over the last few years, many BEMS vendors are shifting their focus from new technology development to marketing and packaging their products in ways that best suit the needs and purchasing patterns of customers. Whether that means offering outsourced energy management services that can be paid for through operating expenses or going through utility customer channels, the near-term challenge in the BEMS market resides in driving revenue rather than new innovation.
Tags: Building Systems, Energy Management, Mergers & Acquisitions, Smart Buildings Program
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