An interesting discussion formed around the weak branding and marketing of the local technology scene.  In Silicon Valley, successful entrepreneurs are revered, celebrated, and even idolized.  There was strong consensus that the start-up community locally must find a way to get news and media more tuned in to our entrepreneurs and their companies’ successes.  That attention, in turn, would help create a virtuous cycle of getting more talent excited to stay local and more venture money hopefully deployed – both necessary to build even greater companies.

One great example of a city that has successfully built significant momentum as a technology start-up hotbed is Austin, Texas.  The question is, how did they do it?  One thought is that it is partly driven by the notable annual South by Southwest event the city hosts – one of the ‘coolest’ technology conferences out there, blending bleeding edge digital marketing trends with music and film festival.  While it’s not the only explanation for Austin’s success (large anchor technology stalwarts like DELL help), it is certainly a marquee event that further put the city on the technology community’s radar screen.

Bringing it back to Cleantech – is there an opportunity to rebrand Massachusetts as the Cleantech leader?  Recently named as the top state for energy efficiency by ACEEE, Massachusetts is an efficiency pioneer, and combining that with the elite local universities and talent makes for an interesting dynamic.  That said, there are many great emerging Cleantech companies in other cities throughout the country, so competition is tough.

Can Massachusetts become the Cleantech leader? What’s required to do so – a South by Southwest type of event? What regions will serve as the biggest ‘competition’ to Massachusetts? We have some thoughts, but would love to hear yours.

The study analyzes savings opportunities across three main building categories – residential (multi-family buildings), commercial and institutional – with projected savings in each of those segments 1892, 293 and 848 TBtus, respectively.  Looking specifically at commercial and institutional, mercantile (e.g., retail goods), office and education segments offer the large potential for energy reduction.

A significant underlying assumption in the study is that buildings built before 1980 can achieve 30% savings.  An analysis we conducted of energy audits executed on Retroficiency’s Automated Energy Audit solution of pre-1980s buildings suggests 30% is a reasonable assumption.

However, as we’ve stated before, our analysis also shows significant variability in savings potential amongst buildings in a portfolio.  The chart below illustrates the standard deviation from the mean savings across several building vintages.  While the mean across these vintage segments ranges from 24%-32%, any single building could be materially below or above the average.

This demonstrates the importance of determining which buildings offer the best savings opportunities and pursuing those first. Leveraging data analytics solutions like ours can help utilities, energy service providers and building owners do just that.

The release of the 2007 CBECS survey results – which used a new lower-cost methodology – were infamously canceled when the Energy Information Administration deemed that the data was not statistically significant. Then, in 2011 the EIA canceled the project entirely when its budget was cut.  The move left the energy efficiency industry reliant on information from the 2003 survey and received widespread (negative) national media attention from places like The New York Times.

In a turn of events that largely flew under the radar, the EIA recently announced on its Website that work on CBECS will be resumed. While a survey like CBECS can always be improved, we view this as a positive for the industry as it will provide publically available, up-to-date information of commercial building energy consumption.

CBECS followers will need to remain patient, as the EIA will field a survey for the reference year 2012 in April 2013, and will not publish the results until 1H 2014.

Our growth continues to accelerate, as we recently hit another milestone: our platform has evaluated 50 million (and counting) square feet of commercial building space for efficiency opportunities.

We thought it was a good time to step back and analyze all of that data, to see what it tells us about commercial building energy efficiency.  Thus, the Commercial Building Energy Efficiency Opportunity Report was born.  The report addresses four key questions we were wondering about:

• What’s the difference in expected savings between a high potential building and a low potential building if payback-friendly operational and retrofit energy conservation measures were implemented?
• How well do traditional metrics for prioritization – such as utility spend / square foot and Energy Star scores – correlate to actual expected savings?
• What are other indicators of potential savings, such as age of building and size of building?
• Of the major end use types – heating, cooling, lighting and ventilation – which ones are most ripe for energy consumption reduction?

If you’d like to see the data in detail, please fill out the form here to receive the full report. We found the final data and answers interesting, and we hope you to do.  Once you’ve had a chance to read the report, we’d love to hear about other data you’d like to see in future reports.

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!

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!

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.

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.

• 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

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