Connecting BEMS in smart buildings to smart grid

By Allan McHale, Memoori Business Intelligence

Just look down a listing of enterprise energy management suppliers and you will find a mixture of some of the world's leading IT organizations and start-up software companies fighting hard to get established in this burgeoning market.

The two major prongs of this business lie in making smart buildings much smarter and the smart grid fully ADR right across the transmission and distribution network by providing a real-time analysis of supply and demand. These two markets alone have the potential to spend upwards of $225 billion by 2030 with smart buildings looking the more attractive and robust business. Installing smart grid is highly dependent upon changes to the regulatory control procedures and the utility companies finding the $2 trillion investment needed to deliver a fully operational smart grid around the world.

In the meantime, the utilities are coming under increasing pressure to reduce carbon dioxide emissions and are being forced to phase out their fossil fueled generating plants. In the U.S. particularly, they are encouraging their major consumers, coincidentally smart building owners, to join demand response programs and are entering arrangements to take their distributed power.

This provides a ready an fast-growing market for all those companies that have the software products and skills to interface buinding energy management systems (BEMS) in smart buildings to deliver demand response and distributed energy. This is therefore becoming a niche market, not least because we can't wait for ADR to produce a fully operational smart grid.

This market is currently worth around $350 million but the technical market potential to retrofit these two functionalities to smart buildings has a potential value of $30 billion and we forecast it should reach $2.65 billion by 2017. This is therefore a sizable business, but it is made much more attractive by the fact that by far the biggest component is the unrealized potential in existing smart building stock. It may be a smaller market, but it delivers a solution to a problem that must be solved — it can't wait for smart grid to be in place or smart buildings to incorporate a comprehensive enterprise energy management.

So for all of the budding energy management suppliers, that's the good news. The bad news is that there are some other suppliers out there that are hungry for this business. These are BEMS suppliers and energy service companies (ESCOs). Although not particularly well-known for their energy management prowess, they have been acquiring companies with this expertise for the past half-decade. These companies include Johnson Controls, Honeywell, Schneider Electric, Siemens and ABB. They are the world's leading suppliers and the last four are also leading suppliers of smart grid products and services.

This puts them in a very strong position for two reasons:

• They are in daily contact with the owners of smart buildings who are existing clients both through installing their BEMS and also taking their ESCO service. This gives them a massive heritage estate to work with.
• They have the practical ability to bring all the various electrical loads in the building together and not all are being controlled through BEMS. Both are important factors that will influence buying decisions.

Despite their strong potential hold on this market, energy management suppliers have an important role to play. This is likely to be unrealized unless they form alliances with BEMS and ESCO companies or their system integrators. This is particularly true for smaller energy management companies where they will need to target priority markets. This is a fragmented market with hundreds of thousands of smart buildings and identifying the buying influence will not be an easy task.

It is a different matter for major energy management companies because most of their clients will be owners of large smart building real estates and they will have contact with sources that will influence buying decisions on energy management purchases. These companies will be targeting comprehensive energy management systems in smart buildings. However even here, the interest in forming partnerships with the major BEMS companies.

Schneider Electric has just signed a strategic technology agreement with one of the world's major software companies, OSIsoft. OSIsoft will provide their PI System, a leading infrastructure technology for the management of real-time data and events while Schneider Electric, a global specialist in energy management, will provide innovative energy management solutions.

Connecting BEMS in smart buildings to smart grid to deliver demand response is a niche market that is needed now. It could be provided through smart buildings installing comprehensive energy management or waiting 10 to 20 years before ADR is operational within smart grid in the developed countries of the world.

The cost of installing it is less than 1 percent of the investment needed to deliver smart grid. The return on investment is attractive and it reduces the carbon dioxide emissions and gets the utilities companies out of a hole.