August 2013

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Smart Building Smart Grid Interface Market

Why Energy Management Suppliers should be Excited about Connecting BEMS in Smart Buildings to Smart Grid

Allan McHale

Allan McHale,

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Just look down a listing of Enterprise Energy Management (EEM) suppliers and you will find a mixture of some of the world’s leading ICT organisations and small new start specialist software companies fighting hard to get established in this burgeoning market. The two major prongs of the 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 which is often referred to as Big Data. 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 framework 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 CO2 emissions and are being forced to phase out their fossil fuelled generating plant. In the US particularly they are encouraging their major consumers, coincidently Smart Building owners, to join DR programmes and are entering into arrangements to take their Distributed Power. This provides a ready and fast growing market for all those companies that have the software products and skills to interface Building 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 which we have been tracking for the last eighteen months 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 should reach 1.7 billion by 2017. This is therefore a sizeable business but is made much more attractive by the fact that by far the biggest component is the latent potential waiting to be realized in existing Smart Building stock. It may be a smaller market but it delivers a solution to a problem that has to be solved; it can’t wait for Smart Grid to be in place or Smart Buildings to have incorporated a fully comprehensive EEM.

So for all the budding EEM suppliers that’s the good news but the bad news is that there are some other suppliers out there that are hungry for this business. They are BEMS suppliers and Energy Service Companies (ESCO’s). Although not particularly well known for their prowess in EEM, as our report shows, they have been acquiring companies with this expertise for the last five years. These companies include Johnson Controls, Honeywell, Schneider, Siemens and ABB, they are the world’s leading suppliers across both businesses and the last four are also leading international suppliers of Smart Grid products and services.

This puts them in a very strong position for two reasons. The first is that 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 on. The second is that 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 the buying decision.

Despite their strong potential hold on this market EEM suppliers have an important role to play but this is unlikely to be achieved if they don’t form alliances with the BEMS and ESCO companies or their System Integrators. This is particularly true for smaller EEM companies where they will need to target the priority markets. This is a very fragmented market with hundreds of thousands of Smart Buildings and identifying the buying influence will not be an easy task.

Reliable Controls It is a different matter for the major EEM companies because most of their clients will be owners of very large Smart Building real estates and they will have contact with sources that will influence the buying decision on EEM purchases. These companies will be targeting comprehensive EEM systems in Smart Buildings. However even here we have noted the interest in forming partnerships with the major BEMS companies. Schneider 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 whilst Schneider Electric, a global specialist in energy management will provide innovative and comprehensive energy management solutions.

Connecting BEMS in Smart Buildings to Smart Grid to deliver DR and DE is a niche market that is needed now. It could be provided through Smart Buildings installing fully comprehensive EEM or waiting ten to twenty years before ADR is fully operational within Smart Grid in the developed countries of the world. The cost of installing it is less than 1% of the investment needed to deliver Smart Grid. The return on the investment is attractive and it reduces the CO2 emissions and gets the utility companies out of a hole.

This has been abstracted from our report “The Market For Connecting Smart Grid with BEMS 2013 – 2017” which will be published later this month. 


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