Navigant Research Blog

With Invensys Deal, Schneider Surfs the Industrial Automation Wave

— August 5, 2013

After a high-profile initial announcement in mid-July (and following a few weeks of speculation about counter-offers and a bidding war that never materialized), Schneider Electric, the French power systems and automation giant, agreed to buy Invensys, the United Kingdom-based engineering company, for £3.4 billion ($5.2 billion).  On August 2, Invensys accepted the offer, making it Schneider Electric’s largest acquisition since its 2006 purchase of American Power Conversion for $6.1 billion.

The agreement will add Invensys’ software and control systems to Schneider Electric’s arsenal, bolstering one of its highest-profit businesses and placing it on more equal footing with other industrial automation giants such as Siemens and Mitsubishi.  Schneider Electric has been expanding its focus from sales of industrial automation products to broader solutions that consist of hardware, software, and recurring services.  Invensys, which provides engineering services to integrate processes for large industrial sites, will complement Schneider Electric’s product offerings. Schneider says the acquisition will also create €140 million in cost reductions and generate an additional €400 million in revenues by 2018.

Smart Automation

This move also marks a notable end to the British tenure of Invensys, one of the largest tech and engineering companies in the United Kingdom, though that may be more a symbolic fact than reality. As Sir Nigel Rudd, chairman of Invensys, pointed out in the Financial Times, “Basically this is an American company – 95% of sales are outside the U.K. … this is not a U.K. company.”

The driving force behind the acquisition, however, is the expectation that demand for smarter industrial automation and energy management systems will grow in the long term, particularly in Asia Pacific. As Navigant Research concluded in our report, Industrial Energy Management Systems, the global market for industrial energy management systems will reach $11.3 billion in 2013 and grow to $22.5 billion by 2020 at a combined annual growth rate (CAGR) of 10.3%.  The market in the Asia Pacific region will grow even faster, at a CAGR of 13.4%.  Adding Invensys’ deep expertise in industrial automation should enable Schneider Electric to take advantage of this growing market.


Building Design Software Adds Energy Modeling

— April 16, 2013

Decisions made early in the building design process can have dramatic impacts on the building’s energy performance.  Is the building oriented to take full advantage of solar rays to maximize daylight while reducing unwanted solar heat gain? Will those more expensive double-glazed windows pay off?  As Joseph Romm famously said of building design, by the time “1% of the project’s up-front costs are spent, up to 70% of its life-cycle costs may already be committed.” In other words, a building’s design team, which only plays a role in the early phases of a building’s lifecycle, has significant control over the building’s long-term performance.

In the nearly 12 years that the U.S. Green Building Council’s LEED green building certification has been administered, energy efficient design has been highly dependent on specialized designers that are able to integrate design software, such as Autodesk’s Building Information Modeling (BIM) suite, with energy modeling tools, such as the U.S. Department of Energy’s eQUEST tool.  To date, the process has been largely one-directional: a design team submits its completed design to a team of energy engineers, who redraw the blueprints in eQUEST and model energy performance.  By the time the design is submitted to the engineering team, however, most of the key decisions have been made, and little can be done to tweak the design to improve energy efficiency.  I recall from my days as a LEED and energy efficiency design consultant the frustration of being engaged in the design process too late to drive true energy efficient design.

So Long Redrawing

Now, however, building design and building performance is becoming a two-way street with Autodesk’s Revit 2014 software release.  This latest version now encompasses building performance analysis (BPA) features, which help design teams iterate between building design scenarios and their implications on energy performance.  Such capability not only allows design teams to make better-informed decisions about energy efficiency in the early stages of the design process, but it also reduces considerable labor costs on the back end because it allows design teams to export the digital blueprints to energy modeling environments such as eQUEST without redrawing, which can be a time-consuming process.

Jonathan Rowe, Sustainable Buildings Program Manager at Autodesk, sees this as a major step forward for the building industry as a whole. “One major pain point design teams face is getting rapid feedback on the energy performance of their planning decisions early in the process,” he told me when I spoke with him recently. “Energy Analysis for Autodesk Revit 2014 is a cloud-based solution that aims to provide this kind of actionable feedback in minutes rather than hours, making sustainability assessment a routine part of any project delivery.”

Given that Autodesk’s energy efficiency software is used to design many of today’s high-performance buildings, this level of interoperability will help facilitate the design of more efficient buildings and integrate energy efficiency into building design – from the outset.


End Near for Compact Fluorescents

— April 16, 2013

For years, the compact fluorescent light bulb (CFL) has stood as an icon of the modern sustainability movement.  Simply replacing an incandescent bulb with a CFL can reduce energy consumption by 75%.  That impressive saving has led college sustainability groups across the United States to hold light bulb swaps in an effort to get more CFLs into use.  It has even led countries around the world to ban or begin phasing out incandescent bulbs, driving the adoption of CFLs.   The tell-tale swirl of this favored bulb has worked its way deep into our popular culture, standing as a symbol of efficiency.

Though widely admired, the CFL has never been perfect.  The bulbs can be slow to start, they do not dim well, and they operate poorly in low temperatures.  For the environmentalist, a more significant problem is the tradeoff these bulbs pose between toxicity and global climate change.  CFLs contain between 1 mg and 5 mg of mercury, which can be released when the bulbs are broken or disposed.  Many have argued that the mercury in CFLs is more than offset by a reduction in mercury emissions from coal-fired power plants.  Few would deny, however, that it would be preferable to avoid this compromise altogether.

Mercury Rising

Enter the light emitting diode (LED).  Years of falling prices for LED lighting are finally making LED lamps a reasonable alternative to both incandescents and CFLs.  LEDs are more efficient, avoid the problems of dimmability and low temperatures, and, of course, contain no mercury.  While the combined effects of price and performance will drive consumers toward this type of lighting, there are also new signs that the issue of mercury will begin driving consumers away from CFLs.  In January, the governments of 147 countries approved the Minimata Convention on Mercury, which limits mercury from multiple sources including CFLs.  The current limits will still allow for the manufacture of CFLs, though the writing may be on the wall for stricter limits in the future.

A new report from Navigant Research, Energy Efficient Lighting for Commercial Buildings, forecasts that revenue from CFL sales will experience a steady -9%  compound annual growth rate (CAGR) between 2013 and 2021.  During the same time period, revenue from LED lamp sales will increase at a 23% CAGR.  While CFLs will surely remain a widely used light source for years to come, their tenure as an icon for sustainability will quickly come to an end.


New Chinese Subsidies Target Improved Building Efficiency

— June 10, 2012

The Chinese government recently announced a series of subsidies and incentive schemes aimed at energy efficiency and renewable energy proliferation around the country and on June 1, it started offering subsidies for televisions and fixed-speed air conditioners.  The total volume of available subsidies will be about RMB 26 billion ($4 billion), though the program aims to use the subsidies to drive total consumption of RMB 450 billion ($70 billion).  The program represents part of a national plan to stimulate domestic consumption in 2012 by investing RMB 170 billion ($27 billion). Of that sum, more than 50% will be aimed at energy efficiency and renewable energy products under a series of subsidies (that haven’t been announced yet) and other incentive programs.

China represents the world’s largest construction industry, and about 2 billion square meters of new space are added to China’s building stock ever year, as described in Pike Research’s report entitled “Global Building Stock Database.” A surge in energy consumption has accompanied this growth and China surpassed the United States as the largest emitter of greenhouse gases a few years ago.  However, a recent report from the International Energy Agency adds that China’s carbon emissions intensity per unit of GDP fell by 15% between 2005 and 2011.

In an effort to curb its carbon emissions growth, China’s 12th Five Year Plan, released in 2011, laid out the Chinese government’s ambitions to reduce energy consumption per unit of GDP by 16% from 2010 to 2015.  This most recent wave of subsidies is aimed at helping China meet these goals by targeting specific energy-intensive appliances – televisions and air conditioners – that are responsible for a significant portion of the growth in China’s per-capita energy consumption.

As I wrote in Pike Research’s recent white paper, “Smart Buildings: Ten Trends to Watch in 2012 and Beyond,” the Asia Pacific region’s size relative to the rest of the world is not always reflected in revenues for energy efficiency technology.  Despite the region’s dynamic construction activity, it represents just 25% of the global market for building automation systems (BAS) and controls, 20% of the global market for building energy management systems (BEMS), and 17% of the global market for intelligent lighting controls.  However, as the Chinese government bolsters sales of energy efficiency equipment in the next few years through subsidies and other regulations, China’s market share for smart building technology is expected to grow, placing the building industry at the center of China’s strategy to reduce the energy intensity of its economy.


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