Navigant Research Blog

Rethinking Intelligent Building ROI: Follow the Money to Transactions

— November 14, 2017

The intelligent buildings market has undergone a makeover in recent years that has yet to move the needle on widespread investment. The narrative has shifted in the last 2-3 years from a focus on energy efficiency to business insight. The logic behind the push makes sense when you consider the financial impacts of energy costs relative to employee costs in terms of building ownership (remember the omnipresent JLL 3:30:300 calculator). The problem is, metrics that impact payroll or employee costs are complex and interactive. There is no mutually exclusive measure of productivity—if a workspace has the perfect temperature and lighting, an employee may still fail to meet a deadline because of so many hard-to-measure issues: personal life, management, workplace culture. The healthy building approach has been a pathway many stakeholders are taking to frame workplace conditions and worker productivity, but the reality is the numbers are still soft.

Energy efficiency remains a straightforward way to measure the impact of technology deployment. You invest in controls and automation in your office building, you see a reduction in your energy bill by 10%—that is a defensible measure of ROI. However, energy remains a small overall share of operating costs for many building owners, particularly relative to other business costs, so what can make building energy performance bare real weight in business? It seems a one-two punch of public disclosure and financial due diligence may be the answer.

Public Disclosure and Real Estate Valuation

Many US cities have aimed at building energy use as a lever to tackle greenhouse gas emissions. Public disclosure programs range from voluntary to mandatory but are generally limited to reporting, without mandates for efficiency improvements because of the politicization of climate change in the US. It seems there must be a bottom-line pressure that aligns with the energy performance rating to drive investment in energy efficiency. And now it seems there is.

A recent article in Urban Land explains, “If energy efficiency can be correlated to mortgage default rates, it could have a significant impact on energy disclosure and possibly even mortgage interest rates. Underwriters on new projects may consider requiring energy disclosure before issuing a new loan, or charging a higher interest rate (all else being equal) for energy-intensive properties. Mortgage companies looking to reduce their default risk may also look to engage their current portfolio in strategies to improve their energy efficiency.” This article was based on findings from a 2017 Lawrence Berkeley National Lab study, which aimed to correlate commercial mortgage default rates and energy efficiency. The study concludes that “building-level source energy use intensity (EUI) and the electricity price gap are statistically and economically associated with commercial mortgage defaults. Using building energy simulations, we find that building asset characteristics and operational practices that affect source EUI have very important effects on the likelihood of default.”

So, there it is, a roadmap for quantifying the relationship between building energy performance and real estate asset value. The argument could even go a step further and assert that intelligent building solutions are worthwhile investments to provide a foundation for minimizing EUI and ensuring ongoing energy efficiency gains. The analytics at the center of leading intelligent building solutions will monitor, report, and even predict changes in energy consumption based on space use. This insight can become strategic guideposts for business decisions around real estate. As more data is collected, there will be greater opportunity to tackle the challenge of quantifying those softer, yet significant, employee costs over time. Today, energy efficiency remains paramount in showcasing ROI.

 

Capitalizing on Data for Intelligent Buildings Market Expansion

— August 9, 2017

The intelligent buildings market continues to evolve, and an increasing focus on the value of data opens the door to inventive offerings that speak to critical pain points for commercial customers within the market. Energy efficiency remains an important value proposition for intelligent building solutions, but cost savings associated with utility bills is an insufficient driver for market transformation in facilities management. The push toward the Internet of Things (IoT) as the framework for digital transformation of commercial buildings and the next iteration of the intelligent building capitalizes on the multitude of nonenergy benefits derived from facility data. The next frontier is moving from energy efficiency to energy optimization and from data-driven improvements to the occupant experience.

Smarter Interactions with Energy

Building-to-Grid Integration, a Navigant Research report, presents big picture energy opportunities for intelligent buildings. Data, and the insights derived from it through analytics, elevate business opportunities for managing energy in commercial and industrial (C&I) buildings. A growing number of intelligent building solutions utilize data to direct an orchestration of systems to optimize energy use—the focus is on advancement and a more sophisticated use of technologies than simply using data to create dashboards that report on system performance.

Building-to-grid (B2G) is an emerging construct that creates an opportunity to generate new value streams with energy services as a foundation. The B2G platform is the framework for transactions around the energy supply and demand associated with the facilities and distributed energy resources of C&I sites. The bundling of advisory services, data communications, controls, and analytics will likely be the foundation of B2G solutions that enable the aggregation and coordination of C&I facilities to meet specific economic and corporate objectives. These objectives include power reliability, sustainability, and revenue growth.

Fundamental Shift in Enhancing the Occupant Experience

The Intelligent Building Technologies for Value-Added Services report from Navigant Research explores how utilities can leverage IoT as a platform for new offerings to improve customer engagement and satisfaction. The benefit of the focus on data creation and analysis showcases the many nonenergy benefits that align with shifting customer expectations around technology. The number of commercial customers already investing in IoT solutions should result in changes to the consumption and demand patterns utilities use for resource planning. Furthermore, rapid growth in IoT for intelligent buildings market represents a significant revenue opportunity for new offerings. At the same time, it represents a threat to existing revenue streams for traditional electric services as these technology-enabled customers reshape how their building operations and energy consumption align.

IoT value-added services can be designed around financial incentives and expert advisory that builds off the existing core capabilities of C&I demand-side management programs. IoT intelligent building advisory offerings can leverage existing core domain expertise around energy efficiency and domain management, but would be amplified by partnerships with IoT players currently in the market.

These new Navigant Research reports underscore the expansive opportunities associated with intelligent building data. Early solution provider adopters will need to develop strategic partnerships and revisit branding and positioning, but the upside to these challenges will far outweigh the costs.

 

Smarts for Sports

— April 7, 2017

The annual upsets and thrills of March Madness may be coming to an end, but excitement can still draw attention to major arenas across the country. Intelligent building solutions are heightening the experience for audiences, keeping visitors safe, and delivering cost savings for arena owners by improving maintenance for operators.

In Wisconsin, the president of the Milwaukee Bucks, Peter Feigin, explained the vision for the team’s new arena. It will “create a state of the art environment that is the most fan friendly place anybody can go for sports entertainment in the world. The importance of technology is crucial to that environment. How a state of the art building system can seamlessly integrate to ensure fans are safe, comfortable, and everything they need is at their fingertips … the overarching vision for this development is not just an arena, but a catalyst for positive change throughout our region.” The development of the 714,000-square-foot arena is the center of the planned Wisconsin Entertainment and Sports Center in downtown Milwaukee. It is a central piece of an overall 30-acre development aimed at revitalizing the city’s downtown. Johnson Controls is the technology partner bringing the smarts to the new home of the Bucks.

There is an important opportunity in the deployment of smart building technologies in arenas. These high profile, multimillion (or even multibillion) dollar facilities are the epicenter of community pride for many cities. The smarts in these facilities can be an effective catalyst for the intelligent buildings industry as a whole. Technologies are here today to completely rewire how facilities are operated to be safe, comfortable, and convenient. The challenge is market awareness and education. How well building owners and managers understand the financial, business, and social benefits of intelligent building technologies can be a huge hurdle for technology adoption.

Convenient

High profile arenas can be a great live action classroom to boost demand for intelligent building technologies. The results can be striking, as WIRED magazine put it with a profile of the new Sacramento King’s Golden 1 Center: “the highest-tech stadium in sports is pretty much a giant Tesla.”

Convenience and information drive the visitor experience at the King’s Golden 1 Center—download an app to receive texts on last minute ticket upgrades, pointers on the best parking, directions to your seat, and even stats on the game. The backbone of customer convenience comes from a rich network of intelligent building technology, sensors, data communications infrastructure, and analytics.

Safe and Comfortable Too

Besides enhancements to the customer experience, owners and operators of smart arenas see other important benefits. The technology infrastructure that pushes information to customers through phone apps can also quickly and efficiently direct staff to ensure the facilities are safe and comfortable. Take a look at the Vivint Smart Home Arena in Utah. Due to fan expectations for seamless connectivity during March Madness, the arena deployed a Distributed Antenna System. Two integrations provide parallel benefits. Not only does every visitor on Snapchat get their picture sent to friends, but the system also supports emergency preparedness as a direct network for first responder communications.

The smart arena is the new face of sports and an important avenue for promoting the intelligent buildings industry to fans and ultimately building owners and managers across industries.

 

Intelligent Digital Systems Enabling New Strategic and Operational Paradigms

— March 20, 2017

Data in and of itself has little value. Dashboards and other business intelligence software are excellent at compiling and displaying collected data from a multitude of sources in a useable and understandable format. At times, however, these analytical tools do not go deep enough with intelligent calculations on that data to transform a business, increase efficiency, promote deep understanding and learning, and add the most value. In these instances, it can be a case of you don’t know what you don’t know—leaving important insights on the table.

A good yet simple example of this was outlined in an IBM white paper on facilities management. A commercial building designed to accommodate 1,800 people showed an occupancy rate (assigned space) of 66%. However, further study of the data using access card information showed that average daily occupancy was only 28%, leading to a better understanding of the actual space being used and paving the way for eliminating unnecessary costs associated with rather large and consistent underutilization of the facility.

Beware of Silos

In energy efficient buildings, care must be taken when assuming that smart components are always operating efficiently and in the best interests of whole building optimization. In a recent interview, an intelligent building component OEM stated that he has seen instances where the intelligent cooling and heating equipment each reported that they were operating at peak efficiency—but they were efficiently cooling and heating the building simultaneously. In this instance, the overlord building energy management system (BEMS) identified and resolved the issue. Intelligence systems operating in a silo can be as ineffective as data that has yet to be transformed into useful information.

Analyze the Analytics

Today, the general use case for data analytics is well understood and accepted. This acceptance arose in a similar fashion to a market dynamic that happened in the LED lighting industry. Ten years ago, questions arose when LEDs were specified for a construction or retrofit project. Today, questions arise if LEDs are not specified for a project. The same largely holds true now for BEMSs and other intelligent systems that generate analytics regarding building performance. With the variety of analytics engines available in the market—at all price points and complexity levels—it is assumed that some form of analytics will be included in any efficiency effort, no matter how deep or superficial the project is.

Open communication standards have enabled access to this disparate universe of intelligent and connected digital systems and the data they generate. The cross-pollination of information from these diverse data-driven systems opens a multitude of possibilities that reverberate across the entire organization with all key stakeholders, enabling new paradigms of strategy formulation and operational success.

 

Blog Articles

Most Recent

By Date

Tags

Clean Transportation, Digital Utility Strategies, Electric Vehicles, Energy Technologies, Policy & Regulation, Renewable Energy, Smart Energy Practice, Smart Energy Program, Transportation Efficiencies, Utility Transformations

By Author


{"userID":"","pageName":"Intelligent Building Management Systems","path":"\/tag\/intelligent-building-management-systems","date":"12\/11\/2017"}