Utilities Could Miss The Growth in the Smart Building Sector

Intelligent infrastructure and grid connected Smart Buildings are poised to take off and utilities need to be in the game.
Published: Wed 02 Apr 2014

The smart building technology market has experienced a number of years of slow growth but it looks as if the tide is turning. This is according to IDC Energy in their report, Insights Global Smart Buildings Forecast 2013-2018, which is predicting the global market to triple to US$21.9 billion by 2018.

This is due to an increasing broad market awareness of the business values generated by deploying smart building solutions.

Smart building technologies have matured to enable facility optimization through the integration of information technology and building automation. The reduced barriers to entry for local generation and energy storage are also playing a key part.

The utility will need to prepare its business for the development of this sector so that opportunities are not lost and some are doing just that be launching or offering energy service solutions.

Slow adoption in the past

The reason for the slow adoption of these technologies has been largely due to changes needed for deployment and utilization and poor return on investment matrices. Case studies and demonstrations are being used to educate the end-user market around the business case and the benefits associated with developing smart buildings.

Prior to 2013, the global smart building market grew more slowly than expected due to externalities such as less expensive electricity in several markets and a slow economic recovery leading to deferred capital investments.

This is changing thanks to economic recovery. In addition to this, energy costs remain a large and variable component of building operations.

"As businesses recover following the 'great recession,' building owners continue to focus on managing their operational energy costs and risks. Often, gathering building data is not the issue, rather combining, interpreting, and prioritizing that data is becoming the key challenge. Smart building solutions are valuable technologies for deploying energy management strategies that generate operational efficiencies, cost containment, and sustainability benefits that appeal to key stakeholders across chain of command in building management," says Jill Feblowitz, Vice President, IDC Energy Insights.

A development which we believe is key to the development of smart buildings is the lower cost of entry for local generation (fuel cells, photovoltaics and the like) coupled with better and more affordable energy storage. This has changed the conversation from one of energy efficiency to energy security.

The witness to this trend is the lead taken by large energy consumers such as Walmart, Ikea, Google and Facebook to name but a few. [Google Sees Green and The Google Smart Home Play]

Different needs

Different countries face very different drivers towards the development of smart buildings. In the US, there is a need to reduce and control energy costs, German governments are driving environmental and energy efficiency goals (Germany) and Japan is working towards overcoming energy supply challenges.

Adoption rates are expected to vary by region, business segment and solution type. The most aggressive adoption is expected to occur in the US, Western Europe and Asia/Pacific over the next five years.

The vertical industry has a large impact on the rate of adoption of smart building technologies. Buildings managed in the government or healthcare verticals, for example, tend to be more mature in their appreciation of the benefits of smart buildings, and more advanced in their deployment. In addition, investments over the past several years have focused on Heating, Ventilation and Air-Conditioning systems. Customers are now beginning to expand their evaluation to lighting, plug load, equipment maintenance, and other issues.

Regardless of varying needs, the adoption of solutions is growing significantly.

 

Growth forecast is a small percentage of the total potential value

Despite the aggressive growth forecast for the smart buildings market, adoption still represents a small share of the total addressable market.

The continued development of case studies and best practices by early adopters will promote awareness and support longer-term expectations for market growth.

With many basic control and monitoring systems in place, a need is developing for intelligent software and external services to help analyse, interpret, and prioritize the data that is being collected.

Utilities should embrace smart buildings

Perhaps it is time for utilities to take note of this emerging sector especially since energy efficiency is a primary driver for these systems. Buildings typically drop their energy consumption by 20% or more after smart technology has been installed. Smart buildings are ideal candidates for automated demand response, load control and similar programs.

Furthermore, “smart buildings will play a central role in stabilizing the future grids thanks to the buildings`flexibility regarding energy consumption and energy storage”, says Andreas Gmuer, Marketing Manager, Siemens Building Technologies Division.

This flexibility of buildings could help balancing power generation and consumption, an increasing challenge for grid operators, especially considering the unpredictable nature of renewable energy sources.

This is a good time for utilities to rethink their load growth projections as penetration ratchets up.

An increasing number of building owners are proactively seeking to tap into new revenue streams by connecting to the smart grid. Demand Response is one such revenue stream, as well as the idea of generating power onsite to sell to utilities.

To take advantage of this, commercial customers will want to partner with their utilities. It is therefore only a matter of time before commercial customers will expect their local utility to have a program ready for them.