Navigant Research Blog

Johnson Controls’ Air Distribution Technologies Buy: More Than Meets the Eye

— May 12, 2014

Johnson Controls made news in April with the announcement that it will acquire Air Distribution Technologies from Canada Pension Plan Investment Board (CPPIB) for $1.6 billion.  Air Distribution Technologies makes ventilation systems under several brands, including Hart & Cooley, Ruskin, and Titus.  The move appears to be a straightforward horizontal integration that will enable Johnson Controls to capture a larger share of total construction spending.  The acquisition will allow building owners to turn to the same company for HVAC equipment, HVAC controls, security and fire safety systems, energy management, and now air distribution.  Indeed, Johnson Controls is already selling air distribution equipment through its FlexSys line of underfloor air distribution (UFAD) systems.  According to CEO Alex Molinaroli, “This investment expands Johnson Controls’ position in the buildings space with additional products that are complementary to our existing heating, ventilation, and air conditioning offerings.”

The Future of Controls Integration

However, this move could be more than a simple expansion of a product portfolio.  At this year’s Building Energy Summit, Grundfos provided a glimpse into the future of controls integration with its MAGNA3 pump line.  What is striking about these pumps is how little work they leave for a controls company (such as, say, Johnson Controls).  They include a built-in heat energy meter, an integrated temperature and differential pressure sensor, and optimized building management communication.  Additionally, wireless communication permits the pump to connect with another MAGNA3 pump, allowing multiple pumps to be controlled jointly through a single connection to a building automation system (BAS).  The wireless communication also connects to the Grundfos GO mobile app.  Much of what used to be accomplished by field integration is now shipped in the same box as the pump.

This level of controls integration may reach airside equipment, too.  Imagine a system where temperature sensors are integrated into return grilles.  UFAD systems already allow for individual diffuser control, but if a traditional air distribution system were to include diffuser-level damper control, it would enable every individual occupant to create its own ideal environment and would do so without much of the equipment needed to provide control today.  Could this model of integrated controls be the next big step in airside equipment?  The integration of Air Distribution Technologies into Johnson Controls might provide an answer.


Battle of the Buildings Addresses Split Energy Incentives

— February 18, 2014

Among the hottest topics in city-scale energy is the use of building energy benchmarking and disclosure data.  As explained in this blog by my colleague, Eric Bloom, benchmarking is the process of comparing a building’s energy use to others in its sector or class.  Disclosure refers to the reporting of energy data when a building is sold or refinanced.  Many of these practices fall under smart cities programs.  The cities, states, and, in the case of Australia, the country employing these metrics aim to make visible the energy being used by commercial buildings in order to provide carrots and sticks to encourage building owners and operators to reduce energy demand.  The adoption of these programs is now global (see for the breadth of these programs).  This movement could enable a process of market transformation where energy efficiency and sustainability become the norm, not the exception.  The Institute of Market Transformation has been a leader in promoting and tracking these programs, identifying the additional benefits to cities, including jobs and greenhouse gas reductions.


In the United States, many of the city-based benchmarking programs efforts are leveraging the ENERGY STAR Portfolio Manager program, administered by the U.S. Environmental Protection Agency.  Using ENERGY STAR has helped cities with the heavy lifting of capturing and standardizing building energy data.  Using ENERGY STAR has also helped open the conversation around improved building energy performance.  The ENERGY STAR site spotlights individual buildings that are making significant steps toward improved efficiency.  We may not see the realized savings of benchmarking programs for a few years, given the challenges of measuring and attributing energy savings.  But a series of case studies reported by the Institute for Market Transformation shows that an average of 7% energy savings have been demonstrated in cities across the country.

ENERGY STAR is also running its fourth annual Battle of the Buildings competition, pitting buildings against each other to achieve the greatest percentage-based reduction in energy use intensity over the course of the year.  This year’s competition (drawing on 2013 data) includes commercial tenants.  This is a novel change, addressing the classic split incentive issue.  The split incentive refers to the nature of the tenant-owner relationship; in most cases, the building owner pays for the capital upgrades to a building, while the tenant reaps the benefit in smaller electric bills.  A different, but similarly challenging, situation arises when tenants’ leases are not tied to energy use in any way, potentially negating the building’s energy efficiency improvements through naive behavior changes, like leaving the lights on over the weekend, or installing a server near a thermostat.  One approach is a green lease, under which the tenant and owner are aligned on energy savings goals, with financial incentives built in.  Of course, the tenant can pursue energy savings individually and try to win the ENERGY STAR tenant competition.  The results of the competition will be released in April.  Stay tuned for an assessment of the results.


On Energy and Buildings, Conventional Wisdom is Fleeting

— May 16, 2013

As the concentration of carbon in the atmosphere reaches a level not seen in human history, it’s worth considering how much the conventional wisdom surrounding energy has changed in the last 5 years.  In 2008, domestic fossil fuel production (other than coal) was considered to be in permanent decline, with local debates on where to site natural gas import terminals.  Coal-based electricity generation was assumed to be as irreplaceable as it was undesirable.  Increasing energy costs and volatility were unavoidable, while renewable generation cost parity appeared within reach as the bar moved lower.  A nuclear power renaissance was effectively promoted as the only carbonless solution with the potential capacity to displace coal.  The dawn of transportation electrification seemed upon us, while the smart grid took a laser focus on peak load reduction.

Much has changed since then.  Conventional wisdom has caught up with the gas industry experts (including some of my Navigant colleagues), who foresaw how the shale gas boom would reshape the North American energy landscape.  With domestic oil and gas production up sharply, costs are expected to stabilize and volatility decrease.  Planned natural gas import terminals, while still locally controversial, are morphing into export terminalsNatural gas generation is rapidly displacing coal, leading to significant carbon emissions reductions, though the enabling fracking technologies trigger new concerns.  Even as the cost parity goalposts keep moving, the cost of renewables continues to decline.  The Fukushima accident stalled a North American nuclear renaissance while driving Germany and Japan, at least notionally, to nuclear exits.  Home refueling of natural gas vehicles could replace electric vehicle charging stations in consumer imaginations.  Meanwhile, long-haul trucks, fleet vehicles, and even locomotives are adopting natural gas.  And the smart grid is becoming more important as a means of power resiliency in the face of hurricanes and superstorms than as a vehicle for peak load reduction.

Cheap Gas, Smart Buildings

This all came to mind recently when I moderated a panel discussion titled “The Future Direction of Energy in North America and the Impact on the Intelligent Buildings Sector” at CABA’s Intelligent Buildings Forum in Toronto.  CABA is the Continental Automated Buildings Association, a 25-year old organization dedicated to the advancement of intelligent home and intelligent building technologies (I am privileged to serve on CABA’s board).  The panel participants represented the perspectives of commercial property owner/managers (Cadillac Fairview), utilities (Ontario Power Authority), suppliers (Siemens), and technology researchers (CanmetENERGY).

So what do the major shifts of the last half-decade mean for intelligent buildings?  The panelists agreed that demand for improved energy efficiency remains strong, even if all the incentives for deploying the technology to deliver such efficiency are not always aligned.  Local codes and mandates may be drivers, but even lower-cost energy is not free energy.  Building-to-grid technologies and distributed generation may become even more important if natural gas enables local generation, which is becoming an intriguing option for the storm-ravaged Northeast United States.  Most importantly, all agreed that “cheap, abundant” natural gas is unlikely to spur new interest in dumb buildings.


Energy Management Meets Facility Management

— May 16, 2013

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 toolsOthers 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.


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