Navigant Research Blog

The IoT and Intelligent Buildings: An Optimization Roadmap

— June 7, 2016

Intelligent BuildingThere is a lot of discussion around the importance of buildings in tackling big challenges, ranging from climate change to energy resilience. Intelligent building solutions are the tools that maximize the flexibility and responsiveness of facility operations to manage energy consumption, allowing for reduced greenhouse gas emissions and response to grid pressures. The intelligent buildings market has been maturing through investments made predominately by the largest customers managing large portfolios and facilities. Technology, and specifically Internet of Things (IoT) and data-driven services, are the evolutionary developments of the intelligent buildings market that now enable optimization of the market as a whole. The opportunity is huge, and as a result, technology giants are making big investments. New partnerships and acquisitions set the stage for deeper market penetration with enterprise customers as well as the midmarket.

Enhancing the Enterprise

Navigant Research has tracked the development of the intelligent buildings market and specifically the evolution of software solutions. Building energy management systems  have been the focus of our research, as they are the offerings that first disrupted the building automation and facilities management industry. This market continues to evolve, and the focus on investment increasingly spans both energy and operational efficiency. The growing demand for showcasing operational efficiency has been the foundation for big moves on the business front, including partnerships and acquisitions.

Siemens and Capgemini recently announced the Navigator platform, a “joint engagement to provide analytics-based services for connected buildings.” The move underscores the magnitude of opportunity to engage enterprise customers in the intelligent buildings market. As the press release framed it, “Together with Capgemini, Siemens is now further developing this Navigator platform to help corporate real estate owners drive business results and meet energy efficiency goals, while maximizing the lifecycle potential of their customers’ real estate assets.” Other major technology players have announced similar partnerships, including Hitachi’s launch of its Insight Group, which is expected to deepen partnerships with tech partners such as SAP and Microsoft. The investment and commitment of both the building technology and information technology and services giants validates the bullish outlook on the intelligent buildings market for enterprise customers.

Setting the Stage for Midmarket Penetration

The midmarket is another important segment of the facilities industry because of the sheer number of these facilities and a legacy of inefficiency in operations that presents big opportunity for optimization. Navigant Research’s new Building Energy Management Systems for the Midmarket report presents the outlook for investment to 2025. The acceleration of the IoT market and continued growth in customer awareness sets the stage for rapid investment in BEMS for the midmarket, which we estimate to reach $1.6 billion by 2025 (at a 24% growth rate from 2016). Our optimistic outlook on the market is built on clear market signals, including similar partnership and acquisition trends that we are tracking in the enterprise segment.

For example, Current by GE announced the acquisition of Daintree Networks to enhance its IoT and energy management capabilities. As a company press release states, “This acquisition will enable Current to expand its building automation platform and its energy-as-a-service offering to small- and medium-size facilities through the deployment of Daintree’s open, standards-based wireless control systems.” There are others taking advantage of the new opportunities in the midmarket through IoT; for example, Intel has made numerous partnerships with companies from Lucid to Building Robotics.

IoT may seem to be a buzzword, but it is increasingly evident the technology trend is changing the game for building energy and operational efficiency. Expect significant partnership and acquisition announcements through the rest of 2016 as the market continues on a fast pitch to broad customer adoption.


Retrofits Are Key to an Energy Efficient Building Stock

— April 12, 2016

modern square and skyscrapersEven if all new buildings from today on were built to be net zero energy, it would take several decades for the change to have an appreciable effect on overall building energy consumption. Indeed, 50% of commercial buildings in the United States were built before 1980. Moreover, older buildings adhere to outdated standards—if they adhere to any standards at all—and often have higher energy intensities than new construction. Retrofitting these older buildings is the only path toward substantially reducing the energy footprint of the existing building stock.

Efficiency through Retrofits

In the world of retrofits, installing energy efficient heating, ventilation, and air conditioning (HVAC) systems; LED lighting; and building controls can help building managers lower the levels of energy consumption of building systems. For example, the 85-year-old Liberty Tower in Dayton, Ohio is using each of these strategies to improve energy efficiency. All interior and exterior lights in the 114,000-square-foot facility are being replaced with LEDs, the building’s existing steam boiler is being replaced with two vertical fire tube boilers, and the building controls are being replaced and upgraded to provide advanced programming measures.

Switching to LED lighting provides a substantial savings opportunity in existing buildings. In the case of Liberty Tower, the new lighting system is expected to use 60% less energy than the system it’s replacing. However, more savings are possible in LED retrofits through the addition of controls. Because LEDs provide better dimmability than fluorescent lights, they are better suited to controls. Even though the reduced energy consumption of LEDs reduces the amount of energy available to be saved, controls can allow an additional way of fine-tuning the amount of energy being used, thus providing more savings.

Lights can be dimmed when natural light is present or when a space is unoccupied to provide more savings. However, the level of light output during normal operation can also be adjusted based on feedback of occupants so that energy is not wasted providing more lighting than is needed. Additionally, LED lamps fail differently than incandescent or fluorescent lamps—they gradually grow dimmer at the end of their lifespan. As a result, using lighting controls to initially provide less than the entire output of the LED and steadily increasing output as the lamp fails could decrease the frequency at which lamps need to be replaced. This provides operational savings in addition to energy savings.

Upfront Costs

Though savings from retrofits can be substantial, so too can the costs. For the Liberty Tower retrofit project, the total cost is estimated to be $870,000 and provide annual utility cost savings of $99,000, generating a payback period of 8 years. The payback period, for better or for worse, is considered by many in the industry as an easy shorthand for determining whether or not a given energy efficiency retrofit project or technology will be viable for a particular installation. Most building owners require a payback of 3 years or less, though this depends on the ownership and use of the building.

Liberty Savings Bank owns the Liberty Tower and occupies about 10% of the total floorspace, with the remainder leased to tenants. Because the company is family-owned and occupies part of the building, it can accept a larger payback. However, only about 60% of commercial floorspace in the United States is occupied by its owner. Consequently, larger ticket upgrades, such as deep building envelope or HVAC system upgrades, remain difficult to sell within the retrofit market.

Moreover, because retrofits are prioritized by their payback period and generally have a long lifespan, opportunities with unattractive longer payback periods are the ones that remain. Without either a change in technology or an outside force, the energy savings potential of these opportunities may go unrealized. In the case of Liberty Tower, the project is expected to generate more than $70,000 in utility rebates, making the economic case more practical. With commercial buildings accounting for more than a third of total U.S. energy consumption, regulations and incentives will be the key to reducing the energy footprint of the existing building stock.

Join Benjamin Freas at the Navigant Research’s Retrofits for Commercial Buildings: Moving the Needle on Energy Efficiency in Existing Buildings webinar on Tuesday, April 19, 2016 at 2:00 pm EDT to learn more about energy efficiency in buildings.


Will COP21 Help Keep a Spotlight on Buildings?

— December 11, 2015

Buildings have been given a place in the spotlight, or at least they were for a day on December 3 at the world’s convention on climate change, COP21, in Paris. The emissions estimates make a statement: one-third of the global carbon footprint stems from energy use in buildings. If left unfettered, these emissions could triple by 2050. It is evident this reality has sunk in, for buildings are a necessary target for emissions reductions and the actions required for these reductions can make good business sense.

Registering Commitment

Inspired by the efforts of COP21, the U.K. Green Building Council (GBC) is leading the buildings industry in targeting emissions reductions. In a recent article highlighting the goals, CEO Julie Hirigoyen explained, “The eyes of the world are on Paris, but it is not just down to the politicians to make it a success. There is a clear business case for the construction and real estate sector to cut carbon emissions from buildings. The climate pledge commitments from our members demonstrate the widespread industry support for urgent action, and point to a market that is transforming itself.” The U.S. Green Building Council (USGBC) made similar commitments to support the aims of COP21, as well. In all, 25 GBCs worldwide joined the effort with goals for climate change mitigation.

In advance of the conference, USGBC and Ceres launched the Building and Real Estate Climate Declaration. These companies (125 and counting) have made a call for national climate policies and support of the Clean Power Plan. The voluntary registration of green buildings is an important step in bringing transparency and accountability to corporate climate commitments for commercial buildings.

The Business Impact

Tackling greenhouse gas (GHG) emissions is good for sustainability reporting, and it also delivers economic and business value. Navigant Research suggests intelligent building solutions are effective tools for supporting these corporate commitments to emissions reductions. Beyond reducing a building’s carbon impact, the benefits of investing in intelligent building solutions include reduced energy and operational costs.

Intelligent lighting and heating, ventilating, and air conditioning controls, for example, can coordinate system performance to reduce energy consumption while improving the occupant experience. A building energy management system can direct automated system improvements through automation and controls or manual improvements, and the benefits are wide reaching. The operational improvements can not only deliver energy savings for GHG emissions reductions, but can also generate the business intelligence that brings benefits to the bottom line.

In the end, even if national policy continues to wane in the political winds of the Capitol, there is hope for targeting buildings in the fight against climate change. The demands of business leaders—like those signing onto programs at the COP21 Buildings Day—are being heard at the local level. More momentum in city policy can lead the way. As explained in the newest C40 report, “Globally, the greatest opportunity for mayors to reduce GHG emissions is in urban building energy use.”


The Future of Buildings: Connected and Comfortable

— November 6, 2015

During October 26-29, I attended VERGE in San Jose, a conference on “accelerating sustainability solutions in an interconnected world.” This annual GreenBiz event covers the gamut of technology and sustainability—from agriculture and water to my own area of interest: next-generation buildings. At VERGE, the keynotes and panel discussions made it clear that technology is changing our experience in buildings and that the future is not just smart or sustainable, but also connected and comfortable.

Sensors, IoT, and Automation for Comfort

As explained in the Future of Building Management panel, “landlords will be caught flat footed if they don’t follow suit with the consumerization of technology.” This discussion between technology providers and commercial and corporate real estate representatives AtSite, Building Robotics, WeWork, and Under Armour made it clear that the future of the work space is undergoing fundamental change. The growth of co-working space and the commonality of personal technology is changing the definition of best-in-class office space. According to WeWork, the future looks to be dominated by independent workers, with up to 40% of the workforce being defined as entrepreneurs or independent contractors. Furthermore, office workers want to be in control. According to Building Robotics, companies deploying apps for HVAC optimization on individual employee cell phones are seeing 75% engagement.

So, the new workspace is fundamentally about technology and comfort. There is a shift in the marketplace where the business case for intelligent building solutions is expanding from green, to energy efficient, to networked, fine-tuned, and comfortable.

There are also alterations in the way data is gathered. As Enlighted explained, the business case for sensing is changing. The idea of the intelligent building as a platform brings a whole new set of opportunities. According to Enlighted, the applications can now pay for the hardware. The company explained with an example from healthcare: networked lighting with embedded sensing could now be a tool for asset tracking, and this kind of capability dramatically changes the return on sensor investment when the high cost, the movement of assets within a hospital, and the value of loss prevention are considered.

IoT and Defining the Intelligent Building 

At Navigant Research, we are tracking the evolution of the intelligent buildings market. It is clear that the Internet of Things (IoT) is gaining traction in the facilities industry as cost-effective devices make advanced sensing widespread. These applications pay for hardware upgrades and enable unprecedented occupant engagement, delivering energy savings alongside comfort.

Watch for further details on the future of intelligent buildings and the evolution of advanced sensors in Navigant Research’s upcoming report in its Building Innovations service.


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