Some bad news for the demand response and smart grid industries: most commercial building owners and operators don’t know you exist.
Connecting to the smart grid and demand response isn’t even on the radar for most commercial building owners and managers, according to a Tuesday morning discussion at the Smart Energy International conference in San Francisco. According to preliminary survey results from consultancy CoR Advisors, only 32 percent of building owners are involved in any kind of demand response today -- and only 19 percent have any kind of automated connection to smart grid systems.
That might be excusable, given the early stages of the nation’s smart grid build-out. But as CoR president and CEO Darlene Pope revealed, a full 68 percent of building owners don't even plan to connect their buildings to automated smart grid systems in the next three to five years. The survey, set to be released later this week, polled thousands of building owners and managers controlling hundreds of millions of square feet of real estate.
Of course, there are a lot of reasons why commercial buildings remain a tough market for demand response. One is that so much of its power use is tied up with its tenants. Up to 50 percent of a typical office building’s power load remains out of the building owners’ control, Pope noted -- we’re talking about computers and other IT equipment, office lights and thermostats, and all the other systems that need to be under the control of office tenants.
To be sure, some commercial building owners have banded together out of necessity to control their peak power use. Robert Fox, co-founder and principal of Cook + Fox Architects -- the designers of the LEED Platinum Bank of America Tower in New York -- says that the Real Estate Board of New York has banded together to shave up to 15 percent from their combined building stock’s power use “within seconds,” he said.
That’s via turning off building chillers, elevator banks and other centrally controlled power loads, he explained. Of course, that’s a power that building owners aren’t going to use lightly -- in the case of New York, it has been developed primarily as a last-ditch measure to avoid blackouts.
Moving from this kind of heavy-handed, emergency load-shedding to a more light-touch demand response capability -- one aimed at delivering cost reductions and new revenue streams, rather than preventing blackouts -- will be a much tougher sell. In part, that’s because commercial buildings have so much pure energy waste to squeeze out of their operations, demand response may be an afterthought.
Indeed, most of the high-tech startups looking at applying software, sensors and controls to buildings -- Scientific Conservation and Serious Energy are two big names -- are seeking first just to make building systems run properly to shave 10 percent to 20 percent off power bills. Moving from overall energy savings towards actually shifting energy use to take advantage of demand response programs or variable energy prices isn’t yet a priority, though some startups such as BuildingIQ are specifically targeting that capability.
Most building owners are far more focused on spending on energy efficiency than on preparing for connection to smart grid systems, since the real estate downturn has them “laser-focused” on cutting operational costs, Pope said. To the extent building owners are reaching into energy markets, they’re doing so as players in deregulated markets, she added.
Still, “What’s the use of having a smart grid if you connect it to dumb buildings?” Pope asked. Failing to prepare for the revenue potential of interfacing with smart grid-enabled demand response or variable pricing systems of the future seems like a bad choice, she noted.
There are certainly challenges to changing energy use patterns on the fly, particularly when those actions might alter tenant comfort or limit access to building services. Tenant covenants and lease agreements often lock building owners into wasteful energy use just to avoid the chance of conflict, she observed.
But at the same time, many building owners aren’t taking full advantage of the opportunities that do lie in most lease agreements to pass through the costs of energy efficiency upgrades on to tenants. That’s according to Carlos Santamaria, vice president of engineering services at Glenborough LLC. The building management firm has saved about $10 million via energy efficiency projects since 2004, largely through retrofits -- and every retrofit has seen most of its costs passed on to tenants, he said.
“Here’s the best-kept secret in the business: every commercial office lease has provisions where you can recoup energy savings upgrades in one manner or another,” he said. While that may not be the most popular move amongst tenants, numerous surveys have shown that energy-efficient buildings also tend to garner higher rents per square foot -- not to mention greater resale values.