Navigant Research Blog

How the Internet of Things is Changing Healthcare

— February 25, 2015

Much talked about in the energy efficiency sector, the Internet of Things (IoT) refers to a world where everything from lamps to HVAC systems to entire grids will one day be connected. The concept has gained traction in recent years, but deployments remain modest. Only an estimated 1% of the world’s buildings use systems to control and network lighting, and only 7% of commercial building lighting is operated using smart controls.

However, controls products offer huge energy consumption savings opportunities. Enlighted Inc., one lighting controls vendor, claims that its wireless sensor system can cut commercial building energy consumption by 50% to 75%. In an environment where healthcare costs are predicted to increase by 6% annually for the next decade and uncertainty lingers concerning the Affordable Care Act, cost-savings opportunities like that are enthusiastically welcomed.

Update Needed

In the healthcare sector, IT investments increasingly emphasize connectivity and networked systems. Networking enables healthcare systems to lower costs while improving patient experiences and facilitating an advanced degree of care customization. Particularly in the United States, where the cost of patient discharge is about $18,000 (versus $6,000 in other developed nations), networked systems can dramatically cut administrative costs.

One of the greatest benefits is the ability to test and diagnose devices remotely. This can help to reduce device downtime and avoid unexpected breakdowns, thus avoiding shutdown costs and patient rescheduling. Connected devices, such as MRIs, CT scanners, and lab test equipment, can signal when critical operational components are being depleted.

Efficient scheduling is another benefit of IoT technology in healthcare facilities. By leveraging utilization statistics, hospital employees are able to optimize equipment use and avoid over-scheduling procedures.

Seeing the Patterns

The expanded capabilities of smart, connected products and the data they generate are becoming necessary in the increasingly competitive healthcare sector. In addition to cost-cutting benefits, the IoT is opening extensive opportunities for improved operational efficiency and patient satisfaction. This emerging Internet of Healthy Things is composed of apps and hardware that promote positive health outcomes and focus on preventive healthcare for individuals. For example, Fitbit’s wearable device captures health-related data, such as sleep patterns, activity levels, and other personal metrics, to provide a complete picture of behavior and baseline vital signs. Medical device companies offer home health-monitoring systems that allow physicians to remotely monitor their patients’ clinical status. For example, Propeller Health’s asthma and chronic obstructive pulmonary disease (COPD) tracker allows a doctor to remotely monitor patients’ symptoms. Other apps exist to monitor a range of other health issues, including diabetes.

Although the healthcare sector has been traditionally slow to embrace new technology, the IoT offers improvements for both facility management and individual patient care. As tele-health and other in-home care options continue to expand, IoT-enabled devices can enable progressive hospitals to remain competitive—and improve outcomes.

 

Going Ductless, AC Systems Gain Efficiency

— February 17, 2015

If the rest of the world used air conditioning like the United States, we’d be in trouble. Luckily, that is not the case. The presence of ductless split systems (which are ubiquitous almost everywhere else in the world) in U.S. homes is dwarfed by ducted central air conditioning units. Ducted units circulate air within a house to maintain an appropriate temperature, whereas ductless systems circulate refrigerant. Typical efficiencies of ducted central air conditioners run from 13 seasonal energy efficiency ratio (SEER), a measure of the energy consumed by an air conditioner based on its electricity consumption, to 21 SEER. Ductless split systems far more efficient; they’re available up to 33 SEER.

Many factors contribute to the slow adoption in the United States. U.S. houses are designed for and typically supplied with ducted systems. Running ducts through wood-framed American homes is far easier than in concrete, stone, or brick houses, which are more common abroad. But, general resistance to change among consumers, contractors, and distributors is the biggest factor that is holding back greater adoption. Ductless manufacturers have acknowledged this and are working to lower the barriers for switching that each stakeholder faces.

Changes to the Equipment

For contractors and distributors, ductless split system manufacturers reduce the burden of inventory management. Systems can come in a variety of configurations. One outdoor condensing unit can be connected to several indoor units (multi-zone) or just a single indoor unit (single-zone). Previously, these configurations required different units for multi-zone and single-zone configuration, and even units that have the same capacity aren’t interchangeable. But, earlier this year, Haier introduced its FlexFit ductless system, which can use the same indoor units in both single-zone and multi-zone configurations.

Similarly, several manufacturers of ductless split systems have eliminated cooling-only units and provide heat pump capability to all units.  Mechanically, the only difference between the two is a four-way valve. All heat pumps are capable of cooling, so providing a heat pump for a cooling application does not create any functional problems. Indeed, it appears that the logistics improvements associated with reducing the number of models offset the slightly higher cost of materials.

Is It Enough?

To win over reluctant consumers, LG Electronics has long focused on the aesthetics of the system. A traditional ducted system has a discreet register hidden on a wall, ceiling, or floor. Ductless systems entail indoor units in occupied spaces. To some, the units are unsightly. But, LG’s design-oriented Art Cool product line, featuring low profiles and designer color finishes, is an attempt at making indoor units pretty. Additionally, the company’s Art Cool Gallery hides the indoor unit in a picture frame that can be personalized with artwork or photography.

Navigant Research expects ductless systems to expand in North America in the future. But, even at aggressive growth rates, it will take years for ductless systems to reach parity with ducted ones. Cost remains a factor. Depending on the complexity of the system and whether ductwork already exists, installation of a ductless system can be much more expensive than the installation of a ducted system. Even if the United States never sees the same penetration rate as the rest of the world, though, ductless split systems will drive energy efficiency improvements in residential air conditioning.

 

Thermostat Studies Show Benefits of Being Smart

— February 16, 2015

This month Nest announced several studies that have been conducted on its learning thermostat.  One was conducted by MyEnergy, a Nest subsidiary that analyzes residential energy information. The others were conducted by the Energy Trust of Oregon and by Vectren Corporation, an Indiana-based holding company. The results boost Nest’s claims that the thermostat can pay for itself in only a year or 2.

Across the studies, evaluators found average annual reductions in electricity use between 13.9% and 15% for cooling and 10% and 12% for heating loads.  For natural gas, the Vectren study confirmed an average annual reduction of 12.5%.  In terms of cost savings, Nest states that adopters showed an average of 9.6% savings on their gas bill and 17.5% on their electric bill.

Last year, competitors EnergyHub and EcoFactor released third-party studies that indicated reductions in electricity use of 6% to 17% after thermostats controlled by their back-end platform were installed in users’ homes.

The Limits of Studies

Smart thermostats have become increasingly numerous in recent years. According to Navigant Research’s report, Smart Thermostats, North American household penetration of these devices is expected to exceed 20% by 2023. Until recently the market was concentrated in warm weather states, but adoption across colder climates is becoming more common, and utilities are becoming interested in smart thermostats for year-round energy efficiency and demand response (DR) programs.

Regardless, the high prices—$150 to $300 for the device alone—are still a barrier. Hence, smart thermostat vendors have trumpeted third-party studies that indicate positive return on investment (ROI) through energy bill savings. Analyses of products from EcoFactor, EnergyHub, and now Nest indicates annual energy savings in the 8% to 15% range.

But such studies can be interpreted in several ways. The most obvious conclusion is that the chances of incurring similar savings are good given the variety in the studies’ methodology and sample populations. On the other hand, factors like the locations of households, weather varying, and simultaneous energy efficient behaviors all affect study results.

Your Results May Vary

For states where heating and cooling are a small part of the utility bill, the savings from a smart thermostat will look different than those in an area where the costs are high. In such cases the results could be misleading.

The MyEnergy study included households from all over the country in its sample, and Nest claims that it is fairly representative of their adoption base—but is that representative of U.S. consumers as a group? The average reported savings might not fall in the middle of the spectrum of all consumers, so someone using this information as a basis for purchase of the $250 device could be anywhere from greatly or slightly disappointed to slightly or very pleased depending on how similar they are to the majority observed that indicated decent savings.

And if the consumer doesn’t really care enough to break down this information in the first place, much less nitpick findings from a variety of disparate studies? These types of adopters might be drawn to purchase the device simply for its user delight qualities. Nest has created an iconic device that by most accounts works really well and that has a lot of informational features designed to trigger more energy efficient behavior. That would be a great outcome.

 

Sunny Outlook for Multifamily Housing Energy Advances

— February 10, 2015

In January, the Obama administration announced a new partnership with the state of California to promote energy efficiency and renewable energy in the multifamily housing market. As part of this new agenda, President Obama established a target of 100 MW of renewable energy across federally subsidized housing by 2020. The program aims to deliver both climate change and economic benefits, estimating that improving energy efficiency in the country’s subsidized multifamily homes by 20% would deliver a $7 billion annual savings and a reduction of 350 million tons of carbon in 10 years.

Accelerating PACE

Property Assessed Clean Energy (PACE) financing will have a big role to play in achieving the goals of the White House and the state of California. PACE programs enable customers to finance up to 100% of an energy efficiency or renewable project and repay the debt as a property tax assessment over a period of up to 20 years. These programs are locally defined by city or state legislation.

The off-balance sheet financing model hit a major roadblock in 2010 when the Federal Housing Finance Agency (FHFA) put residential PACE programs on hold over a battle initiated by Freddie Mac and Fannie Mae over the first lien status of the energy efficiency debts of a PACE-funded project. The FHFA argued the PACE debts put a heightened risk of default on home mortgages and that Freddie Mac and Fannie Mae should not back mortgages on properties with PACE debt.

Four years later, FHFA has not formally changed its stance, but PACE programs are once again funding residential projects. The government of California was so certain the program did not add default risk that the state legislature passed SB 96 in 2013. SB 96 established the PACE Loss Reserve Program and ultimately rejuvenated programs throughout the state. California is not alone in the local drive for PACE financing. In fact, according to PACENow, the non-profit advocate for PACE financing, there are over 25,000 PACE projects underway across the United States, and 18% are supporting improvements in the multifamily housing segment.

 

(Source: PACENow)

Going West

The opportunity for energy management in the multifamily market is opening the door to growing business in the private sector, as well. For example, Bright Power, a company specializing in comprehensive energy management solutions for multifamily housing, including energy audits and benchmarking, energy efficiency upgrades, and solar, announced a $5 million round of financing that will help support the company’s entry into the California market. The overall buildings market is ripe for the adoption of renewable energy and investment in energy efficiency, and innovative financing models are helping customers overcome the upfront capital challenge. An upcoming Navigant Research report will examine the evolving market for energy efficiency financing as a part of Navigant Research’s Building Innovations syndicated research service.

 

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