By Dan Rafter
The national economy has improved. But it hasn’t improved enough to persuade the owners of office buildings or companies to return to the free-spending ways before the Great Recession hit.
This means that the manufacturers of energy management services and products face a daunting challenge when trying to convince office owners to invest in their systems: they have to convince these potential customers, many of whom are still recovering slowly from the recession, to spend big dollars upfront to enjoy steady energy savings each year.
The owners of office buildings and companies will enjoy the yearly energy savings. These, after all, can lower their bottom-line costs each year. But the upfront costs of energy management systems (EMS) can make even the most environmentally minded owners hesitate. After all, dollars still aren’t plentiful for many business or office-building owners.
That’s why return-on-investment (ROI) is the most important factor for any company to consider when pitching its EMS.
Just ask Danny Yu, chief executive officer of Los Altos, CA-based energy management company Daintree Networks. Yu says that an alarming number of office buildings today are in need EMS. For example, as many as 95% of commercial buildings in the US do not benefit from networked lighting, he says.
But despite this shortage, many owners of businesses and office buildings are still leery about making the big investments in energy management systems, Yu adds.
And that’s unfortunate; inefficient lighting is one of the biggest energy drains that office buildings face. Office buildings are known for being wasteful consumers of energy: their tenants often leave lights on in empty rooms, forget to shut off office lights after they leave for the day, and fail to switch off their computer monitors when they’re no longer sitting at their desks.
EMS—especially networked ones that allow, say, lighting systems to talk to HVAC systems—can dramatically reduce the amount of energy that the typical office building consumes. Add this to the fact that so many today lack these systems, and it’s clear that the energy management industry should be in definite growth mode today.
What’s the key to realizing this growth? Convince the sometimes-skittish facility managers, office building owners, and company executives to invest their dollars in their facilities instead of in new products or additional hires.
“A lot of these networked solutions are only presented when a building is in the construction and design phase,” says Yu. “Unfortunately, most of the commercial building stock in this country went up when energy was not a big focus. So, either the tenants in these buildings, or the owners or managers of them, must make the decision to upgrade these existing facilities with energy management systems. That is sometimes a decision some owners and tenants are hesitant to make.”
The secret, then, for energy management companies is to convince building and company owners that energy management systems will boost their buildings’ energy efficiency levels high enough to improve their financial bottom lines each year.
And to do this, manufacturers have to first show building owners real numbers proving that EMS can generate high enough yearly energy savings to quickly pay back the upfront investment that the owners must first make when buying and installing such systems.
“We are very focused on return on investment when we sell our products and services,” says Yu. “We want owners to understand that we are a long-term solution. We want to help the energy management market grow by providing a natural solution for our customers.”
A Big Impact
How big of an impact can EMS have on an office building? A recent case study from Daintree Networks provides a good example.
Daintree recently installed an intelligent lighting system made up of LED fixtures and the company’s ControlScope smart building control system in the Sacramento, CA, office of United Stationers.
The results are impressive: according to Daintree, the installation has reduced the office’s monthly lighting bills by 94%.
As part of the project, Daintree recommended replacing hundreds of fluorescent light fixtures with more efficient LED fixtures at the United Stationers office. Not only did this reduce the amount of energy the office building spent on lighting, it also boosted the light quality, making employees more comfortable.
The ControlScope system manages these new lights. The wireless system includes automated on/off switching, daylight sensing, motion sensors, and wall switches that allow users to temporarily override the automated system. This last point is important: employees working late in the night can still turn on lights at the wall switch even if the automated system has set the lights in a particular room to shut off at the end of the work day.
“If you do it right, you can combine sound business practices with doing the right thing for the environment,” says Ted Pinnow, maintenance manager with United Stationers. “That’s what we’ve done here.”
Barry McConachie, CEO of Austin, TX-based energy management company Incenergy, says that the potential office market for energy efficiency is a huge one. And, he has the numbers to back this up. He says that commercial buildings consume more than 60% of all the energy used by buildings in the US. At the same time, more than 95% of commercial buildings today are smaller ones, which includes those less than 100,000 square feet of space.
This last stat is important because, McConachie says, about 85% of all smaller commercial buildings have no energy management solutions in place at all.
“They are not managing their energy in any way,” he explains. “They are wasting it. More than 30% of the energy produced by these buildings is being wasted. It is being wasted from all sorts of things, from how the energy is used, to when it is used.”
Where, then, can office building owners make improvements? McConachie says that, in the typical office building, more than 50% of the energy is used for heating and air conditioning. An additional 20% of energy goes toward lighting. This means that heating, air conditioning, and lighting account for about three-quarters of all the energy spent in office buildings.
Styles of Office Use Vary
It makes sense, then, that building owners would see the biggest return of energy savings by investing in energy management services and products that target these key areas.
Yu from Daintree Networks says that office owners can dramatically reduce their monthly energy bills by targeting these problem areas.
It’s not enough, though, to simply install more energy-efficient lighting, say, to cut a building’s energy bill. As Yu says, every office building is different. The employees in each office work differently. This means that energy management consultants must take a careful look at every office building before they make any recommendations.
For instance, an accounting firm might need brighter lights because their employees spend so much time in front of computer monitors. An advertising agency might be moving to an open office setup, or one in which a larger number of their employees work from home. Such companies might be able to reduce their energy use by eliminating some of their computer stations. It might make sense for such companies to no longer set aside reserved computers for each worker. It might be more financially feasible—and less of an energy drain—for these offices to install a smaller number of computers shared by their workforce.
“With office buildings, the space has to be occupant-friendly,” says Yu. “That is the driver. You want the employees working there to be comfortable and productive. But that is not the only factor for building owners to consider. Say lighting accounts for up to 40% of the energy bill for an office building. If we can reduce that, and if we can reduce it by anywhere from 40 to 90%, we can make a big difference in that building’s energy bill.”
But before energy consultants can enact such a change, they first need to study how building occupants are already using their lighting. Maybe the employees in an office building are already shutting down lights when conference rooms are empty. Maybe they’re already working under sensor-powered lights that dim or turn off when the area underneath them is empty.
But maybe employees are leaving lights on at full volume even when just one or two workers are staffing a room late in the day. Maybe they are working on five different monitors at once even though they can easily complete their work with just two monitors up and running.
In other words, no building consumes energy—whether through lighting, heating, or cooling—in the same way.
McConachie says that most waste in office buildings occurs because occupants don’t take common-sense measures to lower their energy bills. They might leave too many lights on even when people have left the building for the day. They don’t lighten their temperature controls so that their buildings naturally drift cooler in the winter and hotter in the summer.
And facility managers and owners need to know that how their buildings consume energy isn’t the only factor that influences their energy bills. It also matters when buildings consume the most energy. Utilities charge end users higher rates when demand is at its highest. Those office buildings that consume the most power during these high-demand periods, then, will watch their energy bills soar, McConachie says.
Intelligent energy systems, though, can combat this, McConachie says. Full-building automation systems can help office buildings dramatically lower the amount of energy they consume each month. Such systems might include thermostat, lighting, temperature, and humidity controls. They usually include analytics that help facility managers measure how much energy their buildings are consuming at any given time.
“Educating the owners and facility managers that products like this exist and can really save them money is the key,” says McConachie. “If we can show them that they can save money, and how they can save money, we can more easily convince them to make the investments in these products.”
Is It Really Waste?
David Eijadi, a principal with Minnetonka, MN-based energy analysis and consulting firm The Weidt Group, says that it’s not always fair to say that the tenants of a building are consuming energy in a wasteful manner.
“Using the word ‘waste’ implies that someone has done something wrong,” he says. “It’s a pejorative assumption. But the truth is, buildings are complex operating systems. People’s use of them is also complex. No one moves into a building thinking that they are going to be wasting energy once they get into it.”
What does happen? Before moving into an office building, tenants think they know how they’ll use their new space. But the reality after a move-in is often different. And the unexpected ways in which tenants have to adjust to their space often boosts the amount of energy they consume on a weekly or monthly basis.
Chris Baker, also a principal with The Weidt Group, points to a recent client. The client leased space in a speculative office building, a space not built specifically to suit the needs of the company. When the company first moved into the building, its officials didn’t think that it would need data closets.
But the company did. So it converted existing janitor’s closets into space for its data center equipment without dedicated cooling units. This resulted in higher energy bills. The Weidt Group consultants recommended a dedicated cooling system for the data closets that could cut the company’s energy bills by 20%. Once the company installed these cooling systems, their energy bills did, indeed, fall.
“That wasn’t the company being wasteful,” says Baker. “The company’s executives made the best decisions they could make before moving into the building. Once they moved into the building, they were able to upgrade to a new cooling system that they didn’t know they needed before moving in. The way they ended up using the building was different from what they expected.”
Consuming Too Much Energy?
How, then, can building owners determine if their office spaces are consuming more energy than they should?
Again, that’s a complicated question. As Eijadi says, there is no easy answer. Building owners and company executives first must look at how they are using their buildings. Certain uses—say, data centers—will simply consume more energy no matter how many LED bulbs and light sensors their owners install.
Only after taking a long look at their individual buildings’ age, location, style, and tenants—and how these tenants operate—can owners determine whether they need to invest in alternative technology, change operating procedures, or combine both steps as a way to reduce their properties’ energy consumption.
“When most people ask the question of how they can reduce their energy use, they’re looking for a pat answer,” says Eijadi. “They want someone to tell them to install LED lights. Well, it’s never that simple.”
There are two ways in which building owners can gain at least a feel for whether their properties are consuming too much energy. First, they can compare how much energy their office buildings are consuming compared with similar buildings from the same era.
They can also study how much energy their buildings use compared to others that are being operated in the same way.
Baker explains it like this: The first set of numbers is like the estimated miles-per-gallon of a car. This figure allows buyers to compare two different cars without taking into account who is driving the vehicles. The second comparison looks at how mileage varies when you—a unique individual—are driving different cars in the same way.
“The two numbers are most valuable together,” says Baker. “Are the assets—the hard stuff in the building, the building envelope, how good the glass in the windows is—causing you to use too much energy? Or is it the operational things such as how long people are in the building and whether they are comfortable at 68 degrees or 72 degrees [Fahrenheit] that is making the bigger difference?
“By looking at both comparisons, buildings owners can start deciding if capital improvements are going to provide more opportunity for energy savings or whether training and staff engagement—making sure staffers turn out the lights or that people are happy with two or three computer monitors instead of 15—are what is needed to improve a building’s energy efficiency.”
Convincing Managers, Owners to Invest
It’s not always easy for companies, such as The Weidt Group, to convince office owners to invest in energy management programs. This is the case even when the manufacturers of energy management equipment and services are armed with data showing the significant savings that building owners can receive after investing in monitors, analytics, and sensors.
Buildings owners demand a rapid ROI when it comes to energy savings. But even when companies can offer such a quick return, they might still struggle to convince budget-conscious owners to come up with the often-sizable upfront payments that some energy management products require.
Eijadi says that it takes education and “good charts and graphs” to educate owners on why energy management products are often a good investment despite the upfront costs.
“A lot of people are trying to green up their buildings today,” he says. “They are interested in making incremental energy improvements. That said, it is always a challenge to convince them to spend the money. They are always evaluating the time value of money. They are always debating whether they should improve their buildings or invest their money elsewhere. We can show that the return on investment is generally a quick one. Some owners are ready and willing when they see that; others are not.”
Baker adds that he’d like to see office owners or company owners view energy efficiency as they would stocks or bonds. As he says, many energy efficiency packages today provide a payback period of just six or seven years. For Baker that compares favorably to the returns business owners would receive when investing in stocks.
At the same time, the risk of investing in energy efficiency measures is low. As long as businesses remain in the same building, they’ll realize yearly energy savings. The risk, then, compares favorably to the low-risk investment of bonds.
This means that investing in energy efficiency programs can give building and business owners the higher returns of stocks, combined with the lower risk of bonds. So, investing in energy efficiency programs can give building and business owners the higher returns of stocks combined with the lower risk of bonds.
Matt Green, director of technical training for energy management provider Schneider Electric, says office building owners and facility managers today are more comfortable investing in EMS, even if they are still concerned with the initial price tags of these systems.
Of course, there is still room for improvement.
Schneider Electric has offered its own such system, SmartStruxure, since 2010. The system includes in-building sensors, analytics, and sophisticated algorhythms to help buildings maximize their energy efficiency.
“Are more people looking for these kind of systems? One hundred percent, yes,” says Green. “Office building owners understand the power of these systems, the real cost savings they can enjoy.”
Pankaj Lal, managing director of energy and sustainability with Schneider Electric, says that metering solutions are another important way for building owners to improve the properties’ energy efficiency. Once owners realize, through their advanced meters, how much energy they are consuming and when they are consuming it, they can make the changes necessary to boost their efficiency and lower their bills.
“Our meters allow owners to not just measure energy usage at the utility entrance level, but all the way down to the tenant level, to how individual tenants are using energy,” says Lal. “That’s important. The more granular the data, the more actionable it is. The more information you have, the better you can allocate costs, [and] the better owners can bill their tenants based on their actual energy usage.”
Lal agrees that office building owners and facility managers are more willing to invest in EMS today. But the really good news is that this trend is just getting started. Demand for these systems will only grow in the coming years.
“Actions speak louder than words,” he continues. “That’s why we like to show potential clients how we’ve reduced the energy usage at other facilities. We demonstrate to customers how it is done, where it is done, and what the results have been.”
And which companies will thrive in the energy management field as demand increases? For Green, that’s an easy one to answer: the companies that deliver on their energy efficiency promises will be the ones to succeed.
Green points to a college in California with several buildings. Different building automation systems govern the energy use at the facilities. This means that Schneider, when competing for business at this college, must go up against three or four different competitors, he says.
How do they earn business here? It’s all about doing a good job. “If you do the job well, you will be rewarded,” says Green. “If you are providing efficiencies for your clients, they will come back to you. If you are a proven performer, you will do well. This is definitely a performance-based business.”
Author’s Bio: Dan Rafter is a technical writer and frequent contributor.