The commercial energy efficiency market is growing quickly, driven by strong activity amongst large building owners, service providers and government organizations.  Given their size and scale, these players generally focus on projects with budgets of $5M and above.

Because of this, a big glut of high-value retrofit projects exists in the middle part of the market ($1M-$5M project size. With large players focusing on big projects, a major opportunity exists for smaller players to tackle these midsize projects.  However, a lack of financing, ability to mitigate risk, education and technology tools have all served as roadblocks for smaller participants to play in the retrofit market.

But a number of innovative companies are emerging to reduce these barriers for smaller organizations.  One example is Energi, which provides (amongst other things) insurance products targeted at mitigating energy performance contract risk, helping smaller ESCOs and contractors engage in performance contract work despite their relatively smaller balance sheets.

To help educate more building owners, municipalities and contractors on how they can participate in this untapped segment of the energy efficiency market, Energi, has organized the inaugural “Mobilize Energy Efficiency in America” event. The event will take place on Monday, January 9 at the Boston Convention Center.

“Mobilize Energy Efficiency in America” has formed a great line-up of speakers, including our very own CEO, Bennett Fisher.  Bennett will be discussing how analytics-based approaches can help enable contractors to cost-effectively deliver compelling efficiency services.  If you are interested in attending, you can register for the event here. We hope to see you there!

The year is coming to a close, and that means it’s time to make predictions about how the industry will evolve in 2012.  At Retroficiency, we like to leave the energy predictions up to our sophisticated data analytics platform, so instead of making any proclamations ourselves, we compiled a ‘best of’ list from other industry experts.  These predictions combine to support our view that building energy efficiency is a major opportunity and data analytics software solutions are required to help that opportunity be realized.

IDC Energy Insights (registration required) says that smart building technology investments will continue to gain more traction with utilities, with North America Smart Building Energy Analytics spending growing from $193 million in 2012 to $402 million in 2015.  State energy efficiency mandates, commercial building asset rating systems and voluntary targets will be the key drivers for this increase in spending. Similarly, IDC says that utilities will invest in analytics that help make sense of large sets of data for thing like managing meter data, and to support operations energy trading and customer services.

GigaOm also agrees with IDC on both of these points.

Michael Kanellos at GreenBiz.com states in his year end article that green software will ‘play a crucial role in sustainability’ (#8 in this list). He goes on to astutely note that software vendors will target specific customer segments – and we agree that tailored solutions are required to deliver value for utilities and energy service providers.

The importance of building energy efficiency isn’t only an issue in the U.S.: Stephen Koch of NAIMA Canada believes that companies will be more stringently reviewing their energy efficiency practices in the face of shrinking profits.

Here’s to hoping these predictions come true and for a great 2012!

New data analytics solutions, such as Retroficiency’s, aim to reduce time and expense from process of identifying and evaluating commercial building energy efficiency measures.  These platforms often attempt to analyze energy interval consumption or building asset data to drive towards insights and recommendations.  It’s not surprising then that customers have been asking us: “which approach is better”?

We decided to shed some light on the issue in our new free white paper, “Energy Interval Data vs. Building Asset Data: Understanding the Benefits for Analyzing and Improving a Building’s Energy Performance.” You can download it here.

Interval and asset data are each inherently better suited for certain types of insights, such as large portfolio prioritization or detailed evaluation of building system retrofits.  Our paper highlights this and other key issues – such as benefits and limitation of each approach, data availability, required levels of human intervention and the power of inferences.  Our objective is to help you determine whether interval- or asset-driven data analytics platforms might be a fit for your organization.

Building rating and labeling programs have been around for many years and have been used for many different purposes across the globe. Examples of such rating systems domestically include the US Green Building Council’s LEED program, Energy Star Portfolio Manager (ESPM), RESNET’s Home Energy Raters System (HERS), and ASHRAE’s Building Energy Quotient (bEQ); in Europe, the Energy Performance of Building Directive (EPBD); and in Australia, the National Australian Built Environment Rating System (NABERS). In addition, several cities in the US are leading the way in building labeling efforts through the Institute for Market Transformation, including New York City, Washington, DC and Austin, TX.

To date, however, most of these programs have focused on Operational Ratings.  While such programs do provide value in efforts to improve efficiency, the Massachusetts Department of Energy Resources recently launched a Commercial Building Energy Asset Labeling (BEAL) Pilot Program, with a goal of informing the US DOE’s National efforts.

This post will discuss some of the differences between Asset and Operational Ratings, as well as some key success factors required to enable Asset Rating Programs to drive true change in commercial building energy efficiency management.

Why Asset Rating?

According to the Massachusetts Department of Energy Resources (DOER), “Building energy asset ratings are designed to facilitate direct comparisons of energy performance among similar buildings. In contrast to operational ratings, which are based on actual energy use (i.e. energy billing data), asset ratings evaluate the energy performance of the building based on the thermal envelope (e.g. insulation, windows) and mechanical and electrical systems, irrespective of tenant behavior. The goal of asset ratings is to educate stakeholders and enable the real estate market to value energy performance, thereby increasing investments in energy efficiency…. In the absence of an established U.S. commercial building asset rating program, efforts in the U.S. have focused solely on operational ratings.”

The table below from ASHRAE’s Building Energy Labeling Program: Implementation Report June 2009 summarizes key differences between Operational Rating (OR) and Asset Rating (AR) in more detail. According to the Department of Energy, OR and AR different, but they are complimentary in achieving building energy outcomes.

Is Asset Rating a new buzz word or a true driver of transformation in building energy consumption?

In our view, the short answer is, it depends. Below are some of the critical success factors that we believe would make BEAL a true driver of transformation.

• Technical scale vs. statistical scale. It must be based upon a technical rating scale, which compares a building’s performance to technical reference points, for example Zero Net Energy, building code and or published standards (e.g. ASHRAE 90.1).
• Reasonable targets. Identify reasonable, fixed, targets by building type. For example, utilize energy modeling to establish targets by building type and/or utilize DOE established benchmarks by building type. Do not rely on a statistical scale that establishes a building’s rating based upon a comparison to other building’s energy performance.
• Normalization of operational characteristics. An asset rating must normalize for operational parameters such as climate, operating hours, occupancy, plug loads, and outdoor air ventilation rates.
• Cost and scalability. Utilize information technology and modeling tools to automate the process, improve consistency, reduce the cost and enable building rating to be performed at scale.
• Labeling. Simplicity is important when considering the various stakeholders with varying degrees of sophistication and interest – building engineers, real estate appraisers and owners, tenants and citizens. Consider a scale that converts modeled energy use into a grade (similar to ASHRAE bEQ) or an indexed scale (similar to HERS)
• Energy Efficiency Recommendations. To make an asset label effective in leading to greater energy efficiency investments, it is critical to ensure that building owners and operators are provided with recommendations on where the significant opportunities to improve energy performance exist, and possible options for achieving such improvements.
• Post Implementation Verification. Provide a system for verification that implemented retrofits are providing the desired benefits.
• Complemented by good operational practices. In order to maximize energy savings, installed building components as may evaluated by an Asset Rating program, must be complemented by good operational and maintenance practices as may be evaluated by an Operational Rating.

We are excited to monitor the developments of BEAL and other Asset Rating programs and the impact they may have in the years to come.

The Urban Land Institute recently released their annual Climate Change, Land Use, and Energy report for 2010.  The report is definitely worth a full read but I thought I’d quickly pull out some of the most interesting points:

• One of the most immediate challenges for building efficiency is financing the improvements
• The more specific problem lies in generating objective, accessible, peer reviewed information for the tools, technologies, and full costs associated with the energy savings over specific payback periods.
• In 2009, the overall market value of major commercial retrofit and alteration projects initiated in the United States was approximately $41 billion.  About two-thirds of that investment related to energy efficiency improvements, according to McGraw Hill.
• Almost three-quarters of existing commercial floor space was constructed more than 20 years ago.
• Brand image and reputation in the marketplace are powerful motivators for energy efficiency.  Consistent with broad growth in corporate and social responsibility, many companies are in the process of publicly stating their progress toward voluntary carbon-reduction goals—and have identified energy efficiency in existing buildings as the simplest way to begin meeting these goals.
• Student and senior housing assets are historically the worst abusers of energy.  Even if you’re putting all of these fantastic technologies into your building, if you don’t handle tenant education correctly, you’re doomed.
• The market potential for commercial building retrofits is projected to be $190 billion over the next ten years, or roughly $19 billion annually
• There are very few building owners today with current cash positions who are eager to have an energy service company go out and earn a 17 percent or 20 percent IRR on their property. We’re seeing a stall there.
• Overall growth of ESCO revenues is projected to jump 26 percent annually, largely due to federal government efforts to green its own building stock using American Recovery and Reinvestment Act (ARRA) funds
• On the investment side, most investments are limited to 2-3 year paybacks because lenders are reluctant to lend longer term.
• Other challenges to investors and lenders include lenders wanting loans to be subordinated and a lack of easily accessible and standardized data, metrics, and verification practices, making it difficult for the marketplace to act in an efficient manner.
• The market needs more investments that are data heavy, analysis rich, transparent, replicable, and non-proprietary—and that provide a return that can be guaranteed by the contractor doing the work.
• If lenders are willing to work with third-party experts to determine and verify costs and potential savings of energy efficiency, this information can be rolled into underwriting and enhance security

The American Council for an Energy-Efficient Economy (ACEEE) recently released their annual State Energy Efficiency Scorecard.  This year, Massachusetts continued to close the gap on California while successfully defending the second place ranking.  The State Energy Efficiency Scorecard ranks states based on six criteria: utility and public programs and policies, transportation policies, building energy codes, combined heat and power, state government initiatives, and appliance efficiency standards.  Here is how the two states have matched up over the last three years (the maximum score a state can earn is 50):

Whether or not Massachusetts can continue to threaten California’s winning score is yet to be seen, as marginal increases are likely more difficult to achieve as a state approaches a perfect score of 50.

There are many other interesting results on the national level, including:

• State budgets for energy efficiency have nearly doubled from $2.5 billion in 2007 to $4.3 billion in 2009
• $12 billion went to state energy efficiency programs as a restulf of the American Recovery and Reinvestment Act
• 20 states have commercial building codes that meet or exceed ASHRAE 90.1-2007, 2009 IECC, or an equivalent building code

The 2010 Scorecard Map for all states is below and the full report can be found here

While the majority of people attend Greenbuild to become smarter at any of the 100 or so educational workshops, I spent the better part of 2 days meeting with a variety of companies and networking on the expo floor.  The following is a summary of the top things I learned:

1.  There is a STAGGERING number of green building products and services out there:

It blew me away.  If I were a Facility Manager, I would have run and hid.  I literally got lost…twice. While daunting, it was truly incredible as the entire production was a well oiled machine.  Each exhibitor had a set space, there were maps and people to help everywhere, and they recycled absolutely everything – including my gum.

2.  This overall market is very crowded even within the specific product categories:

I think I spoke to 8 different types of insulation manufactures, 5 different rainwater capture applications, and at least 35 different types of wind turbines (almost).  Every one was different and had something interesting to say.  So which is the best for my building and which do I choose?  That’s the billion dollar question…

3.  Manufacturers and distributors spend some serious money to differentiate themselves as evidenced by their exhibits:

In addition to being in awe at the number of exhibitors, I was blown away by the actual exhibits themselves.  Things were moving, glowing, talking, etc.  Some (yes, more than 1) were even powered by people riding bikes.

Why go through all of this trouble?  Because they have to.  I heard from a number of vendors that they often end up at the table with other similar products and have to differentiate themselves.

4.  Building managers often request that these manufacturers get some type of 3rd party verification that their specs are correct:

This verification often involves a detailed building energy model that is produced by a third party company.  The purpose here is to see if the estimated specs will really have those effects on the identified building.

5.  Manufacturers rely heavily on distributors and channel partners to sell their products:

This one was somewhat of a surprise to me as I had assumed there would be some level of internal sales.  This was not the case for most vendors as they relied primarily on independent regional distributors to push their products.  These distributors usually only rep one type of a specific product so competition for the best distributors is also intense.

6.  Most products have some sort of ‘calculator’ on their website for potential customers to play with:

A good example here is WattStopper as they allow you to calculate the loads and load savings for printers, copiers, etc.  These tools are a good start but whole building modeling is really needed to see how all of these individual systems fit together.

7.  The bigger energy savings companies (ESCOs) like JCI, Honeywell, etc tend to dominate the market on buildings above 200k square feet:

Under 200k square feet – it’s the wild west.  The market here is extremely fragmented as the larger players naturally price themselves out of the smaller buildings.  Luckily for the smaller guys, the under 200k market makes up 99% of the total number of buildings in the US (although only 90% of total square feet).

8.  Utility rebates are thought to be the answer but currently provide too little money, have too high a threshold to meet, and require too strict reporting:

There are a couple of interesting points on this one.  First, utility rebates are thought to be a saving grace as building owners/managers realize that these are needed to really move the dial on retrofits.  Second, the utilities themselves need to provide larger rebate amounts and be less stringent on requirements in order for this to scale.  Any utilities out there ready to ante up and play?

There are a lot of  “green” products out there on the market these days.  In the past few years, I’ve been seeing a number of companies marketing electric heaters as an efficient alternative to meet your space heating needs.   They generally present electric resistance heaters as a green solution because they are 100% efficient.  While this efficiency is technically accurate, it’s important to consider the generation, transmission, and distribution inherent in the production and delivery of electricity to your building.

100% of electric site energy (or the energy used at the building) can be converted into heat.  However, due to the losses I mentioned above, your primary energy requirements are about three times as high.  In the US, the delivered electric efficiency is about 32%, a number that has been stagnant since the 1960s.   So, when considering primary energy, your electric resistance heater is probably only about 32% efficient.  You’d probably be better off just reusing those old incandescent light bulbs and getting some light along with that heat.

This isn’t to say that electric heating should never be considered. For example, if you’re getting your electricity from a renewable source, then you’re not bound by the fossil fuel efficiencies of the grid.  Electric heating can also be a good solution if you’re using a heat pump.  A heat pump is basically an air conditioner in reverse. It moves heat from a cooler source to a warmer sink.  Heat pumps often have a coefficient of performance (COP) of 3 to 4.5, which means that for every unit of energy that you put in, you get 3 to 4.5 units of heat out.  So what does this mean for your primary energy requirements (without getting into any complicated second law analyses)?  If we account for the typical grid losses, 1 unit of primary energy yields about 0.32 units of site energy.  A heat pump with a COP of 4 would output 1.28 units of heat for every unit of primary energy.   A pretty attractive output!

When it comes to applying new ideas to save energy in commercial buildings, with the intended goal of saving money, often, two issues of concern are: to what degree of inconvenience will result from the change, and how long until it pays for itself.

According to the linked blog post, a solution from Cavet Technologies attempts to make a large impact on reducing electricity usage for powering fluorescent lights.  The article states:

• Lighting accounts for 17.5% of global electricity use
• Fluorescent lamps generate 70% of world’s artificial light, and in the U.S., it accounts for 85% of lighting in commercial office buildings

Cavet’s LumiSmart product is a microprocessor-controlled device that modifies the electrical waveform used to power fluorescent lights.  It simply shuts off the electricity powering the lights for brief periods of time (on the order of nanoseconds) which results in no perceptible drop in light emitted.

Installation is as simple as 40 minutes of an electrician’s time to install the device with 2 screws and 4 wires.  Devices sell for $2000 per unit which supports up to 150 lamps and pay for themselves in as little as one to two years depending on the cost of electricity.

While I have not personally verified the claims made about LumiSmart, this type of solution should be just what facility managers and energy usage professionals are looking for and we look forward to hearing how the initial pilot tests perform.