Navigant Research Blog

The Real Value of Digital Transformation for Commercial Buildings

— August 5, 2016

Home Energy ManagementThe Internet of Things (IoT) and digital transformation are hot topics that appear to be reaching a buzz, but there are practical implications for customers within these developments. The idea is that digital transformation and IoT deliver better information for comprehensive insight and management strategies. IoT is a platform of devices, communications, and analytics that creates a comprehensive picture of the commercial building. IoT enables a digital transformation of a commercial building that results in a data map that can be translated into vital information to orchestrate new business models for bigger revenue streams and a smaller risk to the bottom line. The generation of data from equipment operations and occupant behaviors married with weather and grid conditions help customers save money, minimize power outages, and maximize the occupant experience.

Data for Optimization

The intelligent building is defined by integrated controls and automation that optimize how space is used, how equipment is operated, and how behavior modification is directed because of insights garnered through software analytics. A pinnacle in optimization, the intelligent building maximizes the effects of capital expenditures, operations and maintenance management, and occupant engagement. This is all made possible by data. Today’s reality is that many buildings are far from data rich and, therefore, incapable of optimization. There is a major shift underway thanks to technology innovation beneath the umbrella of IoT.

IoT is about the proliferation of devices, the connectivity of systems, and the access to data. In the commercial building environment, this is a major shift that will redefine how buildings are operated. IoT is the foundation, the data platform that enables the digital transformation for unprecedented business value in corporate and commercial real estate. It is all about better information for better management. A recent survey by Dell highlights the customer perspective: “Investing in cloud applications, cloud infrastructures, mobile and/or IoT solutions to transform their businesses. By adopting these technologies, most companies hope to drive up employee productivity (75%) and grow their businesses (67%).”

The commercial buildings industry is known as a slower mover, but there is gaining momentum around digital transformation. Major technology incumbents, software startups, and even electric utilities are moving to promote solution adoption. A few interesting examples include:

  • Bala Ram, the vice president of SAP Labs, explained the growing momentum of digital transformation: “Across multiple sectors, whether it’s manufacturing, energy and natural resources, healthcare … there is a big awareness right now that we must use this sensor data to create new business opportunities, and then solve the existing problems.” Ram’s statement highlights that the pace of adoption may vary, but customers across the economy now understand the power of data.
  • IBM recently explained the benefits of digital transformation, stating that it will “help us to create buildings that can sense, respond, self-improve and communicate, putting them in far greater harmony with humans and the planet.”
  • New York State Energy Research and Development Authority has announced $30 million available for Real Time Energy Management system implementation and services with Noveda Technologies for up to 5 years. “These funds will support the use of advanced technologies to help building owners fine-tune their building’s energy systems, identify capital projects to cut energy costs, and reduce operations and management costs by an expected 5% to 25%.”
 

It Takes a Lot of Energy to Catch ‘Em All

— July 29, 2016

Cloud ComputingPokémon GO has taken over the world. For those who have not yet played the game, it’s an augmented reality smartphone app where players walk around collecting Pokémon, battling in gyms, and generally having a good time. It’s also on the forefront of technological innovation, combining mapping data from Google with a narrative from the longstanding franchise. Niantic Labs, the developers of the game, have risen to the forefront of the technology world. Nintendo, one owner of the Pokémon franchise, became the most traded company by value of shares swapped on the Tokyo stock market this century. However, shortly after this rise, the stocks plummeted. Nintendo is not, after all, directly responsible for the development of the popular game and only owns a 32% stake in The Pokémon Company.

However, there is, as they say, a Butterfree in the ointment. The immense popularity of Pokémon GO has caused overrun servers and overheating data centers, making the free app crash every few hours. In addition, players are expressing frustration with the app’s  intense battery draining ability. A typical smartphone battery can drain in as few as 40 minutes of gameplay. The game is based entirely around GPS capabilities, which are notorious battery hogs. While GPS is running, a mobile device cannot enter a sleep state. In addition, communications channels with GPS satellites are very slow, and mapping software is processor-intensive, further compounding the energy intensity of such applications.

The intense data and energy use of the game has caused Werner Vogels, CTO of Amazon, to offer Niantic assistance in operating its servers. This intense usage of GPS capabilities, smartphone data, and server capacity promises to bring Pokémon GO to the top spot in smartphone application energy usage. According to SimilarWeb, in its first 4 days of use, the number of Pokemon GO users nearly surpassed Twitter users in the United States.

 Daily Active Users: Pokémon GO vs. Twitter

PokemonBlog

 (Source: SimilarWeb)

In terms of average time users spend using the app, Pokémon GO has surpassed social media sites WhatsApp, Instagram, Snapchat, and Facebook Messenger. The average player uses the app for 43 minutes a day. What’s more, Niantic plans to launch the app in over 200 countries as soon as servers are bolstered. With the current bulk of Pokémon trainers in the United States, a global phenomenon could have a large carbon footprint.

Pikachu-Powered Data Centers?

There’s little information available on the data centers that Niantic is using for the app, but the company is presumably using Google cloud data centers or something similar. Niantic was a part of Google until April 2015, when the two split. Google has always been known for its environmental stewardship in big data. The company’s data centers are reported to use 50% less energy than most in the industry, and it uses renewable energy to power over 35% of its operations. So while no data is available on Niantic’s end, it can be assumed that the company is using industry best practices in its data centers.

Niantic has not released any sort of impact statement on the app’s actual energy use, though it is almost certainly astronomical. Niantic is already hard at work developing improvements to the game, such as limiting the amount of personal data the app could access. The energy use could be measured to assess the app for potential energy improvements. A new tool called EnergyBox, developed by Ekhiotz Jon Vergara from Swedish Linkoping University, measures the energy consumption of mobile devices due to data communication. This tool finds that the way apps are designed helps to curb the energy used to send and receive large amounts of data. Niantic should take note of its app’s energy consumption before rolling it out globally, lest we be trapped in a Diglett-infested desert due to GO-related global warming.

 

The IoT Makes Inroads around the Globe

— July 25, 2016

AnalyticsThe Internet of Things (IoT) trend continues to make inroads among companies around the globe, according to new data from telecom giant Vodafone. Its latest survey on the topic finds more than a quarter (28%) of responding companies are already using IoT in their operations, and three-quarters (76%) say the IoT will be critical for the future success of any organization in their sector.

While this trend continues to be transformative for many businesses, one of the remaining barriers to IoT adoption is security, or the lack thereof. Nearly one in five (18%) survey respondents say the concern about security breaches is a potential barrier to wider IoT adoption within their companies. From an energy industry perspective, robust security is still key, of course, given the critical nature of the infrastructure and data. The survey indicates some positive moves in this regard, with nearly six in ten (59%) energy and utility companies working on IoT security guidelines and roughly half (52%) working with a specialist security provider. I choose to see this glass as half full, but the emphasis on the security piece could use some improvement.

Wireless Networks in Europe

Elsewhere, there is further evidence of the expanding IoT trend. In the Netherlands, telecom provider KPN has recently announced the completion of its nationwide wireless IoT network. The company also notes it has signed contracts to connect 1.5 million devices so far, and that potential customers include governments seeking to link sensors on critical infrastructure, companies that specialize in lighting and traffic control, and consumers with fobs on bicycles for monitoring location. In addition to KPN, French startup Sigfox is building a similar IoT network and is currently deploying its service in 20 countries.

One other clear sign of the growing IoT trend was the recent huge deal by Japan’s SoftBank, which is acquiring British chip designer ARM Holdings for $32 billion. The deal is the largest acquisition by a Japanese firm in Europe. The big bet by SoftBank is that ARM can become a leader in the design of chips that power IoT devices, similar to how ARM’s designs are key to the success of smartphones and tablets.

A Rising Tide

For utilities and other energy-related firms, it is hard to ignore this rising global IoT tide. The emerging technology is altering business processes, and stakeholders need to pay attention and make strategic plans. This is something my colleague Casey Talon and I point out in our Navigant Research report titled IoT Enabled Managed Services. By seizing on the opportunities of an array of IoT devices and combining the data with analytics and bundling services, utilities can improve their own operations and increase customer satisfaction. It’s a trend worthy of investment.

 

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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