Below is an excerpt from our free report on intelligent efficiency. Join us in San Francisco on July 29th for our Avant EE conference, which will focus on how intelligence is reshaping the way utilities, consumers and businesses deploy energy efficiency.
The pool of energy efficiency resources in the built environment is vast. Together, buildings and industry account for more than 70 percent of America’s energy consumption each year. This represents an enormous opportunity for businesses looking to tap into energy efficiency reserves. However, most facilities are not yet sophisticated enough to reap the full potential of the efficiency resource.
Johnson Controls, one of the leading companies in the building controls and energy optimization space, releases a yearly survey of the global building efficiency market. Every year, the market barriers remain the same. They include:
- Lack of awareness of opportunities for energy savings.
- Lack of technical expertise to design and complete projects.
- Lack of certainty that promised savings will be achieved.
- Inability of projects to meet the organization’s financial payback criteria.
- Lack of available capital for investment in projects.
These problems are all exacerbated by the old efficiency paradigm defined by information scarcity.
“The most amazing part of our business is that the vast majority of companies we work with in the C&I space don’t even know how much they spend on energy,” says Gregg Dixon, senior vice president of marketing and sales at EnerNOC, a leading demand response and energy services company. “That gives you a sense of how far we have to go to make better energy management decisions.”
This basic lack of awareness about energy use within many organizations feeds into every barrier identified above. Without accurate information, it’s difficult to understand the initial opportunity, even tougher to design a project, and nearly impossible to verify whether you’re actually saving energy. Those uncertainties make it hard for companies to justify spending money on efficiency upgrades. They also make projects less attractive for investors.
These barriers also stem from the natural tension in how facilities are run. Choices about energy-efficiency projects are often made by many players in a company or institution, with each of those players taking a different approach.
The facilities manager who cares solely about reliability and keeping occupants comfortable may be resistant to new, relatively unknown technologies. The chief financial officer primarily concerned about managing her company’s quarterly finances may be nervous about the upfront cost of upgrades. And the sustainability officer focused on environmental performance may propose ambitious solutions that are outside the comfort zone of both the CFO and the facilities manager. These contradictory positions within a company can add up to uncertainty, delays or poor decision-making.
“The biggest constraint is the way companies operate,” says Stefan Heck, a sustainability and resource productivity expert at McKinsey & Company. “But the awareness has been building, particularly as companies use information technology to get a handle on their performance.”
Sometimes all it takes is a little information awareness to get companies thinking seriously about energy efficiency. Consider the experience of EnerNOC. A decade ago, EnerNOC started out in the traditional demand response market helping C&I customers reduce demand at peak times. As its data analytics capabilities grew with better hardware and improved cloud-based software, the company branched out into energy procurement and energy efficiency services. With facilities worth more than 24,000 megawatts of capacity in its portfolio, EnerNOC now simply sees itself as an energy management company.
“The types of data we’re collecting are becoming broader and deeper. So we are simply in the business of automating and collecting real-time energy data to make better energy decisions that result in financial benefit. That is what we do,” says EnerNOC’s Gregg Dixon.
The company engages both the operation and finance sides of the client firm when selling its services. It’s particularly important to talk to the operations side in the industrial sector where energy bills are often handled by the personnel managing plants. In the commercial and institutional space, decisions around energy costs are often pushed from facilities managers up to the chief financial officer. Bringing both parties to the table is extremely important, says Dixon. But the finance side is often where decisions are made.
However, there is usually a severe lack of attention to detail when it comes to energy use, even among financial experts. Sweeping the dust off utility bills and tracking basic data is the first order of business. To start, EnerNOC will look at billing information, set some basic targets, and then begin implementing and tracking basic operational changes.
“Once customers begin to track energy, they want to do more. And the way they do more is to get more sophisticated,” says Dixon. “They very often ask, ‘What’s next?’”
The next level of value is created through tracking commodity usage data at a more granular level. That includes reading meters and control equipment in five-minute increments. EnerNOC then starts normalizing that usage data and comparing it to other facilities. That usually encourages a customer to start thinking about efficiency in a portfolio-wide context.
The final level of granularity enables companies to track specific pieces of equipment -- chillers, boilers and pumps, for example -- and normalize performance against external factors to understand anomalies. All the data is analyzed in order to predict and respond to changes in the energy market, occupancy, or weather.
When companies are exposed to all of this data, their choices often go beyond simple efficiency retrofits. With the opportunity to sell demand reductions into the capacity markets, the regional energy markets, or the regulation markets, energy efficiency becomes a real resource with a tangible market value.
“You can get really crazy with this stuff. You start at a very basic level by analyzing bills and then you get really sophisticated in order to bring in incredibly deep savings,” says Dixon. “The higher-quality data available helps drive decision-making.”
All of the energy efficiency companies we spoke with said the same thing. Once customers get a little bit of information about their energy use, they’re often hungry for more. The ability to track that information on a very granular level, normalize the data, and compare it to other facilities in a portfolio plays a strong role in breaking down the barriers to projects.
“Ultimately, it comes down to optimizing on tangible information or data so there is clarity around what measurements need to be made and to attach a value to those measurements,” says Rich Kroes, director of product strategy at Oracle’s applications division. “That’s what will drive projects and demonstrate success.”
Information is not the end-all solution to breaking down the barriers to energy efficiency. But it is a major catalyst for project development, which helps make companies more comfortable and engaged in the process.