Navigant Research Blog

Meeting Global Challenges with Energy Efficiency

— January 9, 2017

Energy CloudAccording to the International Energy Agency (IEA), efficiency is the only energy resource that all nations possess in abundance. Similar to other resources, energy efficiency must be mined. Not from the ground per se, but by examining the available opportunities and by implementing a holistic plan that looks at methods and actions appropriate for the locale, climate, population, demographics, and a host of other interrelated inputs.

According to the IEA’s World Energy Outlook 2013, every $1 invested in efficiency saves $2 in new power plants and electricity distribution costs. Globally, buildings are responsible for nearly 40% of energy use (including 60% of electricity use), 12% of water use, 40% of waste generated by volume, and 40% of material resources. This vast amount of resource consumption provides a significant opportunity that amounts to more than mere cost reductions for building owners, managers, and tenants. Energy efficiency competes on price with the cheapest of energy generation technologies.

Example End Use Consumption of Standard Building Components in Different Climate Zones

(Source: American Council for an Energy-Efficient Economy)

This value has consistently held up over time, making it a stable and relatively predictable alternative to new generation sources of any kind. Overall, investments in energy efficiency enable more effective capital utilization to help meet difficult global challenges such as accelerating urbanization, climate change, national energy security, energy access, and worker productivity, to name just a few.

Opportunities in Buildings Efficiency

Navigant Research’s 2015 Global Building Stock Database report noted that residential and commercial global building stock was expected to reach 160 billion square meters in 2016. There are many opportunities to expand and extend the value of this resource, and the world is making progress. Gross domestic product and population growth has been largely decoupled from the demand for energy, the energy intensity of nations has decreased, and energy efficiency policies covered 30% of energy consumption (up from 11% in 2000). All this has happened despite the fact that oil prices fell as much as 60% in 2014.

Overall, progress continues to be made on efficiency gains in developed and developing nations, and regional and country specific momentum may be strong enough to withstand the temporary political climates that could serve as a hindrance.


HVAC Vendors Providing More Than Just Heating and Cooling

— January 5, 2017

Heating, ventilation, and air conditioning (HVAC) controls represent a critical part of building energy management, as they are often the single biggest users of building energy. A recent article posted on Energy Manager Today states that “[Companies] within [the HVAC Industry] are unanimously eager to learn and grow in continual pursuit of advanced levels of efficient operation.” While the ultimate measure of success for global energy managers is the amount of energy saved, supporting industry sectors such as lighting and HVAC provide the actual tools to help them realize their targets.

In the HVAC industry in particular, leading vendors such as Trane and Carrier are redefining what it means to provide a supporting role to global energy managers. Similar to other industries where digitization has enabled a more detailed understanding of energy consumption, these leading vendors are finally realizing the value locked within their extensive building relationships and the knowledge they have gained working in buildings for many decades. Both Trane and Carrier have quietly developed highly capable building energy management systems that rival other leading offerings in the market.

Digitization Driving Progress

Data and software capabilities are the key drivers here. The expanded software capabilities built into newer controllers give these HVAC vendors the ability to transform their knowledge of cooling and heating into new, holistic optimization strategies for the operation of their equipment in conjunction with other critical building systems. The good news is that even though some of these offerings were years in the making, the advancements are still in the earliest stages of development. As additional data and experience are gained with these systems and new working relationships, the results are expected to be even more dramatic.

As described in Navigant Research’s recent Leaderboard Report: Commercial HVAC Systems, Trane and Carrier have evolved digital offerings that help to understand, integrate, and coordinate disparate building systems, allowing for improved efficiency and lower lifecycle costs. Similar to leading website and Internet commerce companies that tout page views as a measure of their value, Trane and Carrier have realized and begun to exploit the value locked in their existing customer bases and vast knowledge of building operations to help move the HVAC industry into the digital age.


Defining Companies in the Digital Age

— December 15, 2016

Intelligent BuildingAs I mentioned in a previous blog, a company that does not have some form of automation or intelligence in its commercial building efficiency product or service will have little chance to compete in the changing market landscape. That’s a pretty strong statement, and maybe one that not everyone agrees with. It seems to be the direction that macro market trends are moving, however, and there are plenty of examples to back it up.

One of the most compelling observations about the changing face of automation and intelligence was made in a keynote address by Jeffrey Immelt, Chairman and CEO of General Electric (GE), at the Intelligent Platforms User Summit back in 2014. The comment he used to frame his speech was, “If you went to bed last night as an industrial company, you’re going to wake up this morning as a software and analytics company.”

Long Road to Change

This is easier said than done, and GE knows it. The company has been working on this strategy for over 5 years and through $1 billion in investment, and it is still not yet fully transformed. But this shift is the company’s goal. GE’s software business is growing 20% per year with a goal of $15 billion in revenue by 2020, a benchmark which would make the company a top 10 software player.

Not every participant in the field will end up as a software company; each must follow their own strengths and strategy. But it is imperative to build some form of internal capabilities to meet the demands of a new digital world. Each company has intellectual property (IP) that can only be completely understood and translated by internal resources that have boots on the ground. The job won’t get done with a software supplier or a software integrator alone. And who would trust this critical strategy solely to outsiders anyway?

The main point of my previous blog was that developing these types of intelligence and automation capabilities will not happen overnight, even by acquisition. Companies that did not have the foresight to start assessing the digital transformation years ago will be in serious catch-up mode in the years to come.


The Growth of Automation and Market Competition

— November 14, 2016

Ethernet CablesHumans have amazing analytical capabilities; it has taken decades and some of the most powerful computers ever produced to finally challenge and beat top-level chess players due to the complexities of the game. Now, however, we are seeing autonomous cars driving themselves on our roads, and more and more automation is creeping into basic the technologies that we use every day.

The same is true for commercial buildings and other related energy equipment and technologies.  Automation is taking over tasks and settings that were either normally left alone or adjusted based on a human’s intervention or intuition. The difference between a human and a machine with built-in intelligence lies in focus and attention span. Computers don’t lose focus, nor do they get bored, tired, or stressed; humans do. That’s why it makes sense to let computers check and recheck a setting or make an adjustment to a piece of equipment a couple of hundred times per second, 24 hours a day. Humans simply cannot do this kind of work.

So why is automation so complex, and why is it taking so long to implement into something that a computer can do? First off, a human has to understand any automated tasks and translate them into a language a computer can understand. But that’s not all; new sensors need to be designed and built, software has to be written, and computers require more power to run these automated processes.

An Evolutionary Step

Automation is an evolutionary step to a market dynamic that started years ago with the advent of big data. While many touted the benefits of how much data they were collecting, as it turns out, data can be meaningless, useless, and even costly. A facilities manager can’t do much with a terabyte of building system data collected every day. A computer, however, is a different story.

After years of collecting data, many industries are now starting to understand how it can be used to make significant differences in the efficiency and optimization of equipment operations. They are also starting to take a more holistic view of how disparate pieces of equipment actually work together as an ecosystem of technology to serve a common purpose.

There is still a long way to go. Companies that have started the process of assessing their capabilities in this area will have a significant market advantage over those that have not, and the ones that have an automated offering are already industry leaders. In the near future, it may be the case that a company that does not have some form of automation or intelligence in its commercial building efficiency product or service will have little chance to compete.


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