September 2014

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Taps Open for Energy Efficiency Retrofits

And it's up to System Integrators, Equipment Operators and Facilities Managers to make the new financing models based on energy savings work.

Therese SullivanTherese Sullivan,
BuildingContext Ltd

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In recent weeks, there has been a wave of announcements about new models for energy efficiency retrofit financing.  Schneider Electric’s Chris Hummel sites four reasons that energy efficiency financing is back. And, it’s not just the deep-pocketed ESCO’s (energy service companies) that can make the upfront costs of energy retrofitting a commercial building go ‘poof’ and disappear. There are new third-party financing models that similarly enable projects to be financed based on projected savings. Building owners have grown familiar with the lease-type arrangements due to their use by solar energy companies. This source of upfront capital would eliminate ‘lack of funds’ as a reason to not do an energy upgrade. So get into position for a rush of projects in coming months and years, the money tap is opening.

Why was there ever a hold-up in getting such financing packages to market? These financing contracts stipulate that the energy savings resulting from the retrofit must be proven, so the measurement & verification (M&V) technology had to catch up to the theory.  As that theory goes: a building owner does the work immediately, and then makes payments to the financing company. Those payments should be less than what the owner is currently paying in energy and also cover the costs of financing. The financing company pays the new lower utility bill out of this payment and also pays down the costs of the project and new equipment – all while making a little profit due to the projected energy savings.  Certain of the VC-funded building analytics start-ups with IT-industry DNA have pivoted into this financing business, with their building operational analytics software as the IT solution that will enable M&V of energy savings. Certain control start-ups are getting into financing too.

It’s understandable why excitement for these models is building so fast.  Yet, I hear one voice from our industry saying “Fast. But, not so fast.” I’m talking about Paul Oswald’s May editorial “Analytics Do Not Save Money.” President of ESI, the systems integration company that is leading the U.S. GSA’s Smart Building Analytics project, Oswald has as reliable a perspective as anyone on the strengths and limitations of today’s building operational analytics. So, when he followed his declarative title with the rhetorical question “Sounds absurd right?,”  I asked myself “Who is he talking to?” People that know buildings would say “No, that’s not absurd at all.” After reviewing last weeks flurry of press, I think he is just reminding those that would believe in the easy measurability of savings – that investing in just the M&V component of continuous optimization for better building energy performance is not going to actually get you the savings.

As Paul Oswald explains, the building operations staff that will be using the IT applications and the System Integration professionals that support them will be responsible for continuously tuning the rules and doing the corrective actions required. Theirs is the talent that will determine the success of the data-driven approach and the degree of measurable savings, so they need to be recognized and compensated for that.

What’s the deal with operational technology professionals? Why do people like Oswald have to remind those in IT and finance not to overlook them in their grand schemes. An old truism is that if your building is operating well, facilities staff are invisible. And if it’s not, they’re hiding because they can’t really do anything about it. One aspect of retrofitting a commercial office space for high energy performance is that empowering technology is put in place. Your facilities manager should be as visible and active as an IT system administrator during an enterprise-wide operating system upgrade. “How is the temperature. Can we turn down the heat, or turn up the set point on the air conditioning? How are your lights? Can we dim them down?” The master system integrator is equally proactive about finding and correcting energy-wasting faults in building equipment operation. Empowered building operators are a new breed.  We’re seeing many individual top-performers emerging from a profession that has spent a long time in the shadows.  Another building operations industry hero, Rick Warner of OME, explains what led to the shadowy times in a recent blog post:

“…Historically, automation system networks were deployed on separate infrastructure, utilized proprietary protocols and avoided open standards adoption to protect vendor interests… Most industry vendors focused on creating automated applications to insulate the field resources from the underlying IT complexities instead of requiring the resources to increase their level of competency. To compound matters, the long adopted practice of acquisition via lowest bid created an environment where talent development was further suppressed in favor of lower cost resources.  It was cheaper to create a “self-configuring” product that the current talent pool could deploy than maintain higher qualified professionals capable of adapting to the rapidly changing technology landscape.  As a result, talented resources migrated to other industries where they could find more lucrative compensation…”

Breaking this negative spiral is imperative for the data-driven approach to facilities management and building operations to succeed. As Warner points out, it is imperative to an enterprise’s overall information security too. (ref: Target breech). The new financing models and the energy data accountability they insist on will quickly reveal the high costs of lowest-bid preferences. The retrofit projects that succeed will be those that have made the proper investment in hiring and training Building Operators and Systems Integrators.  Respect for these professions will grow and talented people will be attracted to the fields.

To sum up, if you want to make a big splash in the new financed efficiency retrofit market and your systems integration firm has the sought-after data skills, it’s time to market your business. All the well-funded efficiency start-ups, big enterprise IT companies, and the traditional ESCOs will be seeking partnerships with you. Your biggest challenge is finding and building the right talent in your company to staff all the potential projects. If you’re a young digital native with a willingness to learn the coding techniques and to build know-how in mechanical/electrical/physical and energy systems, you should look into the facilities management and building systems integration professions.


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