Navigant Research Blog

Reimagining Energy Efficiency as a Pillar in the Climate Action Strategy

— December 5, 2017

A recent Wall Street Journal blog post by Sam Ori from the University of Chicago, “Why Government Energy-Efficiency Programs Sound Great–But Often Don’t Work” starkly criticizes energy efficiency programs and ideas on how to revisit residential program design. The author’s conclusion is sound, but there is more to be said on how energy efficiency can become a sturdier pillar in the strategy to combat climate change. Ori points out, “there is an opportunity for policymakers to rethink the ways they choose, design, implement, and evaluate energy-efficiency programs.” Based on ongoing Navigant Research analysis, policymakers play a role, but the challenge requires a balanced two-pronged approach.

Utilities Are Only Part of the Equation

The reality is that a transformation of the energy industry is underway. A more dynamic, digital infrastructure of renewable, distributed, and non-traditional resources is being applied in the commercial buildings context. Navigant Research characterizes this new energy ecosystem as the Energy Cloud. In the buildings sector, rapid adoption of behind-the-meter energy management technologies, alongside onsite power generation and storage and ongoing investments in information technologies on the utility side of the meter, are redefining the relationship between electricity supply and demand.

This means federal and state policy and electric utilities will no longer be the gatekeepers of energy supply or the rule makers for how to orchestrate shifts in energy demand. Energy efficiency improvements are crucial for building optimization, which is made possible by intelligent technologies—notably the uptake of Internet of Things infrastructure and analytics. Navigant Research’s recent Building-to-Grid Integration report outlines how the intelligent building represents a conceptual paradigm shift for businesses through the integration of facilities management and IT. The intelligent building unifies strategy, investment, and decision-making. The door is open to market influencers, utilities, and many others that can introduce creative ways to utilize existing technology infrastructure, deploy new solutions, and analyze increasing data streams to optimize facility operations that meet broad business demands with energy efficiency savings as a byproduct.

Do Not Undervalue Energy Efficiency for Commercial and Industrial Customers

The Wall Street Journal blog outlined some significant challenges to realizing greater carbon emissions savings from energy efficiency in the residential sector, but missed one important part of the climate change big picture: tackling commercial and industrial (C&I) building energy use. C&I facilities are important because they not only consume more energy, but are also more energy-intensive per SF of floor space compared to residential customers.

Furthermore, C&I customers can be effective partners in tackling energy efficiency improvements because the scale of their effectiveness (and business perspectives) can help accelerate change. First, the energy savings potential of a single large building, single customer with multiple buildings, or a campus simply delivers a greater volume reduction in energy use and therefore carbon savings. In order to meet the magnitude of savings to combat climate change in a significant way (as outlined in the Wall Street Journal blog), business customers need to participate. Second, business customers understand the risks that climate change presents to their bottom lines and the mounting environmental, social, and economic challenges tied to unfettered energy consumption. This sector deserves credit for showing leadership through sustainability initiatives. Read more about how C&I customers invest in sustainability and combat climate change in Navigant Research’s report Intelligent Building Technologies for Sustainability.

As Ori summed up, “Energy efficiency offers significant potential as part of a portfolio of climate policies. But that potential will only be realized if we crack the code to get programs structured to deliver results. If we don’t, dealing with climate change will be much more expensive than we realize.” Want to hear more about Navigant Research’s perspective on the importance of energy efficiency? Register for our upcoming webinar, Monetizing Energy Efficiency, with Tom Machinchick.

 

Customers Hold Keys to Growth of Turnkey Energy as a Service Solution Providers

— August 15, 2017

A recent Navigant Research blog highlights how corporate commercial and industrial (C&I) energy and sustainability managers are choosing to apply new technology and business model innovations to meet their energy management and sustainability needs. These new customer choices are giving rise to the growth of energy as a service (EaaS) solutions. Navigant Research’s recently released report on the evolution of EaaS defines specific solutions that make up a comprehensive EaaS solution offering:

  • Energy portfolio advisory solutions: Comprehensive, enterprisewide strategic guidance to help customers navigate their unique procurement, energy management, financing, business model, and technology opportunities across all energy management and sustainability needs
  • Onsite energy supply: Distributed generation solutions like solar PV, combined heat and power, diesel and natural gas gensets, microturbines, and fuel cells that improve energy supply
  • Offsite energy supply: Including electricity procurement options from offsite sources in retail choice deregulated electricity and gas markets and from emerging large-scale, offsite renewable energy procurement business models
  • Energy efficiency and building optimization solutions: Comprehensive energy efficiency assessment, business case analysis, financing, implementation, monitoring and verification, and building commissioning services to reduce energy spend and use
  • Load management and optimization solutions: Comprehensive, end-to-end energy management solutions to optimize energy supply, demand, and load at the site and enterprisewide, including demand response (DR), distributed energy storage, microgrid controls, electric vehicle charging equipment, and building energy management and building automation systems and software controls

Turnkey Solutions to Drive Growth

C&I customers that begin to take advantage of these new solutions will increasingly look to turnkey solutions providers that can provide not only strategic advice across their property portfolios, but execution expertise as well. The key driver to enabling the growth of turnkey EaaS solutions vendors will be the ability to deliver comprehensive financing solutions to help customers avoid spending capital on energy projects. However, there are two additional drivers that vendors who are considering creating and delivering turnkey EaaS solutions will need to consider:

  • Historically, C&I customers have needed multiple regional partners to manage even a portion of their energy management needs. Turnkey EaaS vendors seeking to address C&I customers’ portfolio-wide needs for EaaS will require widely trained and deeply experienced advisory capabilities to address their customers’ complex energy procurement, financing, and technology deployment needs. For example, in the United States, a turnkey provider will need to have the depth of regional expertise under one roof necessary to address customer strategic needs in diverse energy markets and climate zones like Texas, California, New York, the Southeast, or the Midwest.
  • Experienced C&I energy and sustainability managers have endured years of disappointment from energy use and cost reduction claims that never materialized. Moreover, many of these managers have still not yet even tried to reduce energy spend. What C&I customers truly want is guaranteed lower energy costs, whether from solar PV, energy storage, energy efficiency, or DR. Vendors that blend execution expertise across all EaaS solutions with financing tools to guarantee cost savings through a single point of sale will be best positioned.

To date, with customer-sited distributed energy resources, too much emphasis has been placed on trying to figure out where to sell technology outside of a focus on solving customer problems. For turnkey EaaS vendors, market growth will not necessarily be led on a technology-first basis. For at-scale revenue generation, these vendors should start with the customer experience and work backwards to the technology. Navigant Research anticipates that vendors that place a keen eye on how to bring turnkey, customer-focused EaaS solutions into the market through a trusted, single point of contact with a financed savings guarantee will be at a competitive advantage.

 

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.

 

C&I Customers Are the New Rage in Today’s Evolving Microgrid Landscape

— May 8, 2017

The world of microgrids offers a spectrum of vendor opportunity. Each market niche has its own set of opportunities and barriers and vendor leaders and laggards, as well as preferred business models.

While governments and policy wonks tend to focus on the surge of interest in both the utility and community resilience microgrid sectors, the commercial and industrial (C&I) microgrid segment is now coming to life.

Just how big is the total C&I microgrid market? As discussed in the recently published C&I Microgrids report, Navigant Research expects the global capacity of these microgrids to reach 448.3 MW in 2017. This figure is expected to grow dramatically to 5,389.1 MW annually by 2026 at a compound annual growth rate of 31.8%.

Slow in Uptake, Quick to Catch Up

Thinking in terms of the typical evolution of a market, it makes inherent sense for the C&I sector to be slower in its uptake of microgrids than other microgrid market segments. With a razor sharp focus on the bottom line and an aversion to risk, the private sector initially lags behind other market segments that are privy to explicit government support. Yet, when the stars align on proven technologies and viable financing business models, businesses move swiftly.

Here are three reasons Navigant Research forecasts that C&I is emerging as the fastest growing of all microgrid markets over the next decade:

  • Steep drops in the cost of distributed solar PV and energy storage. While this trend benefits all microgrid developments, it is particularly pertinent to the C&I segment. C&I customers place a premium on reliability but also do not want to pay a premium for energy services. The lower the cost of key microgrid enabling technologies, the more attractive the microgrid value proposition becomes.
  • Major advances in software controls translate into the ability of microgrids to maximize the value of legacy assets (such as backup diesel generators) and new technologies (like solar and batteries). One of the primary sticking points in the past was confidence in the ability of smart inverters and software overlays to manage diverse distributed energy resources to substitute for the tried and true pure fossil fuel solutions of the past. Multiple commercial projects validate that this is now possible.
  • Business model innovation that addresses the fierce internal competition for fiscal resources within a corporate structure. Vendors offering no money down power purchase agreements, sometimes coupled with software as a service controls platforms, limit upfront capital expense. A microgrid looks a lot better from a corporate balance sheet perspective, as it is viewed as an ongoing operations and maintenance (O&M) expense.

Evolving Opportunity

As Navigant Research noted in its Market Data: Microgrid O&M Revenue Opportunities report, the microgrid O&M revenue opportunity is much larger than originally thought. As the fleet of all global microgrids grows, vendors are waking up to the opportunity. Likewise, both vendors and potential microgrids hosted in the C&I space are beginning to recognize the inefficiency of old school backup diesels, uninterruptible power supply systems, and redundant utility feeds. This is especially so for data centers, which have long focused on uptime linked to mission-critical loads, but abhor new technologies and anything that might be perceived as a risk.

Perhaps the best way to understand how C&I microgrids will lead future growth are these statistics: in 2017, C&I microgrids—both grid-tied and remote—are expected to capture just under 20% of the total implementation spend. By 2026, that market spending share is anticipated to surge beyond 35%.

 

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