Navigant Research Blog

Seeking Reliable Power, Hospitals Go Local

— April 21, 2015

A few weeks ago, Hitachi in India announced that it is working on a pilot at the All India Institute of Medical Sciences (AIIMS) hospital in New Delhi that focuses on energy efficiency. The project has three major goals: to upgrade the facilities of AIIMS, install a highly efficiency data center, and incorporate the data from the energy management system (EMS) to optimize the facility’s overall performance. This is the latest example of energy management coming to the fore in healthcare facilities. The drivers and barriers for advanced energy management in healthcare are detailed in Navigant Research’s recent report, Energy Management for Healthcare Markets.

The energy management for healthcare market expected is to grow from $949 million in 2015 to over $2 billion in 2024, driven by government regulation on one hand and corporate strategy on the other, both working to keep costs low for hospitals. According to the U.S. Energy Information Administration, energy conservation measures have been employed by hospitals at high rates, yet our research shows that the integration of these system with digital EMSs is less universal.

Surviving Disaster

Improving the energy posture of hospitals can also help them become more resilient. After events like Hurricane Katrina (when the failure of hospital power systems was citywide and catastrophic, as revealed in Sheri Fink’s devastating account, Five Days at Memorial) and Hurricane Sandy, hospitals are incorporating plans to function without utility-based power in the face of a disaster. At the simplest level, a highly energy efficient hospital running with efficient HVAC and lighting systems would need less power than an inefficient one. But the hospital’s ability to leverage onsite backup power can make the difference, literally, between life and death in a disaster.

One Wisconsin healthcare system has taken the concept of resilience to its logical extreme. Gunderson Health System has endeavored to generate its own power from a myriad of sources. This includes burning biomass from waste wood, employing dairy waste digesters, using methane captured from local landfills, and gathering power from wind turbines on farms in the area. Gunderson claims to be the first energy-independent healthcare system in the world. More significantly, the system presents itself as an example of a locally powered healthcare facility, proving that it’s integrated into the local community.

Going Micro

Unlike Gunderson, most hospitals use diesel generators for power backup. These generators are seldom-used but ready to deliver backup power when needed. And if you’ve ever been near the hospital when they’re running, you know how unpleasant they are to be around. While the price of crude oil has dropped in global markets, electricity prices have not universally fallen. The use of fossil fuel-based generators as backups poses an interesting question: If the price of gas stays low, as forecasted, will hospital facilities shift their use of petroleum generators to essentially become microgrids, to save costs?

Although most facilities are not prepared to do so at present, it’s highly likely that all new healthcare facilities will introduce more flexible backup power, to avoid more Katrinas in the future.

 

Balance of Power in Building Automation Shifts to Lighting

— March 27, 2015

Earlier in my career, when I worked for a mechanical, electrical, and plumbing (MEP) design engineering firm, my boss used to tell me, “Mechanical drives the bus.” The mechanical design of a building is composed primarily of the heating, ventilation, and air conditioning (HVAC) system, which has historically been the most complicated of the MEP systems. Moreover, HVAC equipment accounts for about 30% of commercial building electricity consumption in the United States. What my boss wanted to get across was that HVAC needs to be designed first—and all of the other systems can fit in afterwards.

Indeed, until relatively recently, the idea of building controls really meant HVAC controls. Before widespread adoption of microprocessor controls, HVAC controls consisted of a series of tubes (pneumatics, not the Internet), lighting controls consisted of a switch, and the idea of integrating more than one building system was preposterous. Building automation emerged from HVAC controls. Now, however, the integration of multiple systems into a single building management platform is becoming more common. Navigant Research’s recent report, Commercial Building Automation Systems, maps these trends in the integration and interoperability of systems.

More Equal Than Others

Even in highly integrated buildings, the HVAC system retains priority—but that may be changing. As part of the Continental Automated Building Association’s Intelligent Buildings and Big Data research project, Navigant Research quantified the number of data transactions generated by the automation systems of intelligent buildings. In the future, lighting might generate far more data than HVAC. The rapid adoption of LED lighting coupled with faster and cheaper computing options creates the possibility of individual light fixtures having their own sensors and controls. While HVAC systems may still be more complex, the data volume created by the dense sensor networks of these advanced lighting controls is immense. Soon, it may make more sense for HVAC operations to be managed through an additional module on a lighting controller, using data gathered by lighting sensors.

New Pecking Order

The market seems to be reacting to the new pecking order. Acuity Brands recently announced its plans to acquire Distech Controls, a building controls and energy management company. Despite having a complete portfolio that includes lighting, access control, and closed-circuit TV (CCTV), Distech Controls emphasizes HVAC. The company’s integrated room controls solution, for instance, creates an environment where the HVAC controller also controls lighting and automated blinds. Acuity Brands, on the other hand, is a lighting company. It is a designer, manufacturer, and distributor of a variety of indoor and outdoor lighting fixtures and lighting controls.

Overall, as integration between building automation systems increases, so too does the opportunity for the crossover between HVAC companies and lighting companies. Indeed, Daintree Networks, a leader in wireless mesh networking for integrated lighting controls, expanded into HVAC controls in 2013. But the trend has been for established HVAC players to acquire lighting solutions or for lighting players to organically expand into HVAC. Acuity Brands’ acquisition of Distech Controls may signal a shift in the balance of powers.

 

Going Small, Americans Seek More Efficient Housing

— March 25, 2015

If you have spent any time on social media lately, you’ve likely encountered at least one post or online album that features so-called tiny homes. Literally tiny, averaging less than a couple hundred square feet, tiny homes have inspired numerous periodical references, coffee table books, and at least one documentary. Given that Americans on average tend to inhabit more square footage than people from almost any other nation, it’s remarkable to see this change in attitude as a growing number of people not only accept, but also intentionally pursue smaller living spaces.

Though it’s a far cry from the idyllic rural landscapes that many tiny houses are photographed in, large cities like New York, where high demand for space has inflated rental and housing markets and regulators are pursuing more sustainable forms of urban development, are benefiting from this minimalist attitude. Recently, a collaborative micro-apartment project called My Micro NY received the city’s adAPT NYC award to design, build, and operate a 55-unit space in Manhattan, with each apartment to be less than 400 square feet.

Hold Please

From an energy-efficiency perspective, small-unit multi-tenant living spaces have many benefits. Individual small units require much less energy to heat and cool, and efficient multi-tenant spaces can benefit from shared climate control. If the resident struggles with personal energy management (e.g., they constantly push the hold button on their thermostat and forget to turn it off), much less energy is wasted in a shared climate. Most importantly, as with multi-tenant spaces in general, heating and cooling can be shared, so the per-capita energy requirements are much lower. And if the space is designed to be energy efficient—or even better, zero energy—then these effects are multiplied.

Of course, there are downsides, including the potential negative effects on one’s health that can be caused by spending too much time in a small, studio-like space. Experts generally agree that while this type of housing can be suitable for young professionals in their 20s, it can have detrimental health effects on individuals in their 30s and 40s who have different lifestyle preferences and forms of stress. Families and couples should be aware of possible issues surrounding privacy and the ability to concentrate in small, shared spaces.

Small Is Beautiful

Still, energy-efficient housing solutions are becoming widely available for people of all ages, incomes, and lifestyle preferences. The explosion of the energy-efficient pre-fab market, which is characterized by smaller overall spaces, is an indication that Americans are compromising space for efficiency—and not necessarily with cost as a major driver (aside from the fact that smaller square footage = less overhead cost).

Although tiny homes on wheels and pod apartments will likely remain niche markets, the growing buzz and number of options offer design and lifestyle benefits that are catching the interest of many Americans. As a culture, Americans are still far from being characterized as energy-conscious, but this growth in the small housing market signals a step in the right direction.

 

Investors Search for Returns from Energy Efficiency

— March 9, 2015

The U.S. Federal Reserve is poised to raise interest rates this year, ending an unprecedented period of prolonged low rates. Though the suppression of interest rates has cushioned the effects of a severely damaged economy, it has also forced investors to search for higher yields. With bond yields so low, money has been flowing into different and sometimes new assets. While energy-efficiency improvements can generate a strong return on investment, the investment has generally only been made by building owners (or, in some markets, energy service companies). The unique investment environment created by monetary policy seems to be facilitating a broader financing of energy-efficiency improvements. However, it is unclear if a successful model can be established in time to survive a return to historically normal interest rates.

Financing Energy Efficiency

New models of financing energy-efficiency improvements demonstrate the flow of money into the space. The general model is for investors to finance equipment upgrades, commissioning, and the installation of advanced controls. Then, the savings in operating costs for the building owner are used to compensate the investors. Building owners reap the cost savings without capital investment, while investors get the returns. An interesting new twist on this model is Alodyne, which focuses exclusively on boilers. In the residential market, the expanding opportunity to lease solar panels represents investors trying to capitalize on renewable energy generation in much the same way.

Social Responsibility

Financially, energy-efficiency investments have demonstrated strong returns that, for the most part, are uncorrelated with overall market gyrations. Outside of money, energy-efficiency investment has many benefits. Lower electricity demand can strengthen the electrical grid and reduce carbon emissions. Unfortunately, doing well by doing good may leave investors doing not so well. The Credit Suisse Global Investment Returns Yearbook 2015 examined the performance of sin stocks, based on companies involved in tobacco, alcoholic beverages, gaming, and defense/aerospace industries, and found them to have outperformed socially responsible portfolios over the past 15 years. Indeed, investments in vice, namely alcohol and tobacco, have outperformed all other industries since 1900. If normalized monetary policy does create an environment less conducive for energy-efficiency investors, improving building performance may return to being an area only of interest to building owners.

 

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