Navigant Research Blog

IoT Bridging the Gap for Intelligent Small and Medium-Sized Buildings

— October 24, 2016

Intelligent BuildingLarge building owners have been investing in intelligent building technologies and leveraging these data-driven solutions to reduce costs, improve operational and energy efficiencies, and achieve broader corporate objectives like sustainability. Small and medium building (SMB) owners, on the other hand, often struggle to maintain profits and sustain slim margins with more traditional approaches. Most of these smaller buildings lack the technology to generate the kind of data that ties energy consumption to operational and bottom-line performance. As a result, there is a lost opportunity for these business owners. The Internet of Things (IoT) concept, however, is changing the conversation around building management and delivering impressive results. There are three ways that IoT is opening new doors for SMB energy efficiency and business improvement.

#1: Secure, Scalable, and Easy to Install

IoT is a concept that spans nearly every area of the economy. It is about the connectivity of devices, data, and personalization of technology. IoT is an influential concept when considering energy management and operational efficiency in smaller facilities because it is a pathway to cost-effective technology deployment. An IoT platform for building energy management systems (BEMSs) entails sensors, gateways, and wireless communications to deliver better data to the analytics engine that in turn presents better insights and actions to customers. The significant reductions in cost from this technology approach—as compared to traditional controls and automation—make the benefits of developing intelligent buildings attainable for smaller facilities.

IoT-enabled intelligent building systems are secure, scalable, and interoperable. They assist with open communications and standards within the building space, assisting with reduced costs and improved integration possibilities. Security is becoming a high-profile aspect of intelligent building investment decisions. Solutions providers are installing network-secure IoT platforms that scale to support the same opportunities for improved efficiency and reduced costs in small and medium-sized buildings that are available in large buildings. IoT can deliver essential data, down to the asset level, to support better directives via the BEMS.

The bottom line is that IoT solutions deliver data-driven insights to SMB decision makers without significant business disruption for installation—and at a cost that is justifiable.

#2: Unifying Tool for Multiple Challenges

Energy management remains an important use case for BEMSs because the performance improvements of building systems deliver a transparent ROI through utility bill reductions.

  • Data aggregation: The promise of the intelligent building—and IoT for that matter—is the ability to have a centralized view of building operations to direct changes and make investments that drive down costs and improve experience. One of the big challenges for new customers is that their business has operated with management silos. Spreadsheets, monthly bills, and rules of thumb have often dominated the approach to energy or facilities management because the work at hand is the business happening inside the walls, not facilities optimization. IoT offers customers a new unified platform to bring data together across their silos to make better informed decisions that create efficiencies and cost savings—and even enhance sales.
  • Data presentment: Once the data is centralized, another benefit of an IoT-enabled intelligent building is the visual communications of sometimes complicated data sets. Dashboards, mobile applications, and automated alerts can give customers a quick and concise view of the performance of their facility.

#3: Clear Benefits beyond Just Energy Efficiency

The pain points that drive customers to invest in IoT solutions can vary in each situation, but there are some common themes Navigant Research has identified. It is clear the vendors that are making traction with SMB customers are pitching benefits beyond just energy efficiency.

  • Retail: The centralized data of an IoT solution can be translated into information that is critical for shop owners. Occupancy and environmental data can provide insight into the customer experience: How long do shoppers stay, what route do they travel, and how long do they wait for help? These are clearly non-energy benefits, but fundamental to retail customers’ bottom lines. While the IoT solution may help optimize the environmental conditions for energy efficiency, the cost savings on energy bills are only amplified by longer or more streamlined customer experience.
  • Small and medium-sized offices: Energy efficiency is foundational to calculating intelligent building ROI. Fewer kilowatt-hours used mean fewer dollars on that monthly utility bill. There is an important soft ROI for IoT-enabled solutions for office spaces, albeit a squishy metric of productivity. There are many use cases for intelligent lighting controls, HVAC optimization, and indoor air quality that tell the story of worker productivity. It is the simple narrative that happy employees are more productive. IoT solutions provide the data-driven insight to create the necessary environments to maximize worker satisfaction.

Join Casey Talon, principal research analyst at Navigant Research, Sunita Shenoy, director of Products at Intel, Doug Harp, COO at CANDI Controls, and Vladi Shunturov, founder and president of Lucid, on October 27 for a roundtable discussion. We’ll dive further into these ideas on how IoT can bridge the gap for intelligent buildings in SMBs. Register now.

 

Is the Smart City Market Entering an Acquisition Phase?

— September 19, 2016

Intelligent BuildingIn my last blog, I wrote about how the smart city market is at an important point in its evolution. In that blog, I focused on the changing priorities for smart city projects. Another side to this evolution is the changing market dynamics as suppliers refine their approach to the market and look to extend their capabilities. The most recent Navigant Research Leaderboard Report on smart city suppliers shows the continuing evolution in strategy and offerings among key players in the market.

One important indicator of the maturity of any technology market is the level and focus of merger and acquisition (M&A) activity. It is a sign of the relative immaturity and uncertainty associated with smart cities as a market that there has been little activity in recent years. But there are indications this is changing.

Internet of Things Focus

The acquisition of sensor network company Sensity by telecoms giant Verizon is the latest example—and one of the most significant. Sensity provides sensors and network controls for street lighting systems and has been targeting the emerging market for city platforms. For Verizon, the move marks a step up in its Internet of Things (IoT) and smart cities strategy and gives it the ability to offer a range of city solutions beyond intelligent street lighting, such as traffic management, smart parking, security, and air quality monitoring. It also increases Verizon’s attractiveness as a partner in the complex ecosystem of smart city and IoT suppliers. The alignment with the company’s broader IoT strategy is important to this acquisition, as well. Indeed, the growing focus on IoT capabilities across the technology industry is one of the main reasons why the smart city acquisition picture is changing. Cisco’s $1.4 billion acquisition of IoT platform provider Jasper Technologies in early 2016 can be seen as part of the same pattern. While enhancing their ability to play a bigger role in the IoT space, Verizon and Cisco are also developing strong smart city platforms. Moves from other big players for sensor technology and IoT platform providers are likely to be on the cards.

Analytics Companies

It is not only IoT technologies that are being acquired; analytics companies are also on the shopping list. Urban Engines, a specialist in the use of advanced analytics for the Internet of Moving Things, has announced that it is to become part of Google Maps. Founded by former Google employees, this may be more of a homecoming than an acquisition. However, it suggests that some of the more niche analytics providers in the smart city space will eventually find their home as part of a broader platform offering from bigger players.

Application-Specific Solutions

The third area of the market that we can expect to see more M&A activity is in application-specific solutions. This is an area with a greater history of activity. IBM, for example, has been adding to its roster of government solutions for a number of years in areas like intelligence and social care. But there has been less activity in new application areas. One exception is Silver Springs Networks’ move to strengthen its hand with the acquisition of street lighting software specialist Streetlight.Vision. If acquisition activity is stepping up across the market, the next phase could see more activity in other emerging solution areas such as smart parking and smart waste, for example.

These important developments will add spice to the conversation at Smart Cities Week in Washington, DC next week. I will be attending with other colleagues from Navigant Research and look forward to discussing these and other issues. Let me know if you would like to meet up at the event.

 

Demand Response Prepares for the 2016 Summer Season

— June 24, 2016

??????????????????June has been a much less newsworthy month than May was for the demand-side management industry. But it does represent the traditional start of the summer demand response (DR) season, so we’ll see what Mother Nature has in store for the weather. Will it be a busy DR season or a light one, as the last few years have been?

Drivers of DR Growth

Meanwhile, macro-level factors continue to act as both drivers and barriers for the global growth of DR. California, for example, continues to offer new opportunities for DR participation. The most recent case is the California Public Utilities Commission approving a decision that allows Southern California Edison to spend an additional $8.7 million on DR programs this summer to mitigate potential natural gas shortages stemming from the Aliso Canyon natural gas leak.

Outside of the United States, there are a number of examples of markets becoming more open and attractive for DR resources. From Canada to Europe to Asia, market structures are being reformed to allow DR to compete against generators for revenue. In Ontario, the Independent Electricity System Operator plans to launch a capacity market where DR will be able to compete with generation and other resources. Two of Europe’s largest electricity markets—France and the United Kingdom—plan to open capacity markets by 2017 that would allow DR participation. South Korea now allows DR to compete equally with generators in the electricity market.

And Barriers …

However, specific barriers to DR development still exist due to environmental and reliability concerns. The amount of DR capacity available for this summer was reduced due to the expiration of the U.S. Environmental Protection Agency’s (EPA’s) rules for emergency generators (EGs) for DR purposes. Last year, the U.S. Court of Appeals overturned an EPA rule that allowed 100 hours of EG use for emergency DR programs. It granted the EPA a 1-year stay, which expired on May 1, 2016. The EPA has no plans to make changes to the rule, meaning that the court’s ruling will remain intact, affecting upward of 20% of DR resources in some markets.

The recent PJM capacity auction cleared less DR capacity than the previous year, mostly due to lower prices. But in the longer term, PJM is phasing out its summer DR categories in favor of annual participation requirements. Industrial customers may have fairly flat load profiles throughout the year, but many commercial customers rely on air conditioning (AC) measures to respond to DR events. On a portfolio level, it will come down to a risk/reward calculation. Residential DR that gets bid into the PJM market by utilities running their own DR programs are almost exclusively focused on summer-focused loads like AC and pool pumps. These programs offer virtually no winter DR capability and would not be eligible under the new rules unless they could combine a bid with a winter-type of resource.

All of these dynamics and more are covered in the Navigant Research report, Market Data: Demand Response. I look forward to seeing anyone who will be attending the National Town Meeting on DR in Washington, D.C. in July.

 

Take Control of Your Future, Part VIII: The Emerging Energy Cloud and Final Thoughts

— June 16, 2016

Power Cloud ComputingMackinnon Lawrence also contributed to this post.

In the initial blog in this series, I discussed seven megatrends that are fundamentally changing how we produce and use power. Here, I discuss my last megatrend, the emerging Energy Cloud and its role in changing our industry.

What Is Happening?

Since coming back from Chicago, where I attended the EEI Annual Convention, I am even more convinced that the electric power industry is transforming. In the closing session of the convention, several utility CEOs spoke about the current state of this transformation and shared success stories. Although utilities will continue to focus on safe, reliable, and affordable power, they will also have to embrace clean, distributed, and intelligent energy. It was interesting to hear CEOs’ perspectives on customer engagement (“we now actually listen to our customers”), innovation (“we are all in”), and distributed energy resources, or DER (“we want to play”).

While that’s great, we are faced with an enormous dilemma. It is hard to comprehend the complexity of what we are dealing with here. The Energy Cloud will be the product of accelerating innovation, the bulk of which lies beyond our immediate purview. Although we cannot predict or anticipate all the disruptions that will be triggered by emerging technologies, there is an inevitability to this transformation that cannot be ignored. These changes will penetrate all corners of the industry: customers, regulation and policy, technology, business models, and grid operations.

Meanwhile, there is limited or negative demand growth throughout the United States. And because of more efficient ways to use power and more prosumers taking the plunge to generate their own, less and less electrons will flow through the central power system (indefinitely). At the same time, in order to provide safe, reliable power, as well as support a tsunami of DER, exploding Internet of Things (IoT) capabilities at the edge of the grid, and rapid digitalization, significant grid investments are needed. The number one question is: Who will pay for this evolution? The search for new value and pricing models (and there will be many) has begun.

We are at the beginning of the transformation, and I don’t think we have seen anything yet. I predict we will enter a 20-year period of uncertainty, trial-and-error, and both successes and many failures. Along the way, we will figure out ways to transform our power generation, delivery, and consumption system into an orchestrated, flexible, open, and efficient Energy Cloud platform.

The Emerging Energy Cloud

In my blog, “The Impacts of the Evolving Energy Cloud,” I discussed how we are moving away from a centralized hub-and-spoke grid architecture based on large centralized generation assets toward a more decentralized grid with an increased role for renewables, DER, grid-edge IoT, and digitalization. The Energy Cloud is an emerging platform of two-way power flows and intelligent grid architecture. While this shift poses significant risks to incumbent power utilities, it also offers major opportunities in a market that is becoming more open, competitive, and innovative. Fueled by steady increases in DER, this shift will affect customer relationships, shape policy and regulation, change business models, propel continuous technology innovation, and overhaul grid operations in every single region of the world.

The Energy Cloud

Energy Cloud

(Source: Navigant)

North American utilities are at various stages of integrating distributed generation, demand response, energy efficiency, electric vehicles, and electric storage. Navigant expects this integration trend to accelerate. According to our analysis, DER is projected to grow almost 3 times faster than new central station generation in the next 5 years. That makes DER one of the most disruptive factors affecting the grid today and in the future. From a recent Public Utilities Fortnightly-Navigant survey among 400 utility stakeholders, 90% of survey respondents believe that the growth of DER will force a major shift in utility business models. We believe it is critical that utilities have an integrated DER (iDER) strategy and approach.

Path Forward: The Energy Cloud Playbook

The paths that utilities will follow to transition toward the Energy Cloud will be different. More importantly, the pace by which they move through iDER maturity levels will differ greatly. But understanding the North Star and taking the right steps at the right time are vital to making the transition successful.

At an advanced iDER maturity level, utilities have addressed issues arising from high DER penetration such as intermittency, reverse flows, and power quality issues. Utilities are using both information and operations technology (i.e., IT/OT) and have aligned their business processes, operations, and organizations appropriately. DER management systems (DERMSs) and advanced distribution management systems (ADMSs) are managing DER output at the feeder and substation levels. At this advanced iDER maturity level, the utility has augmented its role as a supplier of electricity and has become a platform provider and network orchestrator that enables prosumers to market their DER assets on an open market. This role is critical to fully maximizing the benefits of DER—and it will be key to providing future value to customers and shareholders.

What’s Next?

While the Energy Cloud is in its infancy today, its evolution will be both pervasive and highly disruptive to stable electric industry revenue streams for the next 30 years or more. Navigant projects that the Energy Cloud’s evolution could result in nearly $1 trillion worth of global investment shifting downstream to the retail segment of the value chain. What’s more, it could add an additional $1 trillion to 1.5 trillion in new value from investments in digital infrastructure and associated services by 2030.

As a follow-up to Navigant’s white paper, The Energy Cloud, we will publish our Energy Cloud 2.0 white paper in the next couple of months. This new white paper will move beyond the “what” to identify the “how.” At the same time, it will provide an Energy Cloud Playbook for the different utility, regulatory, investor, manufacturer, and government stakeholders positioning to build, manage, and protect their future in this emerging ecosystem.

Final Advice: Take Control of Your Future

This post is the eighth and final in a series in which I discussed power industry megatrends and the impacts (“so what”) in more detail. Navigant is at the forefront of what is happening in our industry. We continue to collaborate with our clients to help them navigate the rapidly changing energy landscape.

I have received positive feedback and insightful reactions on this blog series from many. Some readers wanted to understand more about the energy technology trends we see. So Navigant is preparing a new series in which we will cover the specific technology trends that we see disrupting our energy industry. Others have requested a megatrends series focused on oil & gas, which we are working on as well.

The megatrends discussed in this series cannot be underestimated. They are accelerating transformation in the energy industry, enabling the entry of new players, putting pressure on incumbent players, and altering traditional strategies and business models. Organizations will need to adapt, and there will be winners and losers as this transformation takes shape. My advice to senior leadership of energy companies is to take an integrated, holistic view of the opportunities and challenges that are flowing from these megatrends. Only then will you be able understand the full impacts and path forward. And that is the only way you can really take control of your future.

I hope you enjoyed this blog series. Stay tuned for future series.

Learn more about our clients, projects, solution offerings, and team at Navigant Energy Practice Overview.

 

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