Smart Grid-Smart Building Link Calls for a New Utility Business Model

The new level of interconnectivity between smart buildings and the smart grids will prompt utilities to alter their business processes.
Published: Tue 08 Apr 2014

Utilities have a lot on their plates: distributed generation, electric vehicles, fuel switching to natural gas, customer engagement, intermittent renewables, and the list goes on. A new trend, the fast development of smart buildings, is another one the utility will need to consider and prepare for if they are not wanting to miss out on a massive business opportunity.

The smart building is not a new concept and neither is the idea of connecting to the smart grid for load control and demand response. But, the real estate industry is beginning to realize the size and value of the revenue streams offered by smart grid connection.

Demand response and generating power onsite to sell back to utilities are big revenue streams. Commercial customers are going to want to partner with their utilities to realize this business potential and utilities will need to be ready with a robust business plan in place.

Smart buildings and smart grids-A new level of interconnectivity

New research from Jones Lang LaSalle explains that new technologies including electronic control systems, data sensors and machine-to-machine communications — are enabling new interconnectivity between smart buildings and smart grids. Affordable wireless sensors, embedded micro- and nano-controlled systems and radio frequency identification (RFID) technology, combined with renewable energy, are helping buildings use less fossil-fuel power and become smart-grid ready.

The technology is allowing utilities to offer automated Demand Response programs and commercial buildings offer a significant opportunity to decrease peak loads.

According to the Electric Power Research Institute (EPRI), the smart grid-smart building link will create a new landscape in which "commercial buildings are increasingly able to provide a range of grid-supportive functions." EPRI predicts "an increasing portion of commercial and industrial customers will be able and willing to contribute services to the grid."

A growing number of buildings are smart, with computer-controlled systems for heating, cooling and lighting. While the number of utilities that have invested in smart grid technologies is on the increase, very few utilities have the capacity for two-way interaction with smart buildings.


Some buildings are already self-powered. For instance, Walgreens has a net-zero store which uses solar, wind and geothermal energy along with high-efficiency appliances and lights. The company draws municipal power when it is required.

Eventually larger smart buildings with excess energy will be able to provide services to regional transmission organizations such as PJM interconnection.

The US commercial and industrial real estate industry consumes between US$179 billion and US$202 billion in energy annually. By harnessing smart systems for grid interaction, energy consumed by cities will be significantly reduced. This could have a major effect on worldwide consumption habits.

The smart building, just like the smart home requires joined up and disruptive thinking. We believe that margins lie in services and parts, not necessarily monitoring and connectivity. The Smart Home and Building will only work if there is a real and perceived benefit which consumers will buy into and pay a bit more for. We discuss this in detail in our article Smart Homes-Fundamentally Flawed?

Further Reading

Jones Lang LaSalle-The Changing Face of Smart Buildings [pdf]