Principal Business Drivers
Competitive Positioning
Building owners and managers are always positioning their properties in comparison to other nearby similar properties. They understand that potential tenants look at many aspects of a building during the evaluation process. Site location is a not negotiable. For most, common areas are not negotiable. Build-outs can always be handled by allocating enough dollars to the work. Energy costs, traditionally, have been viewed as not manageable - until more recently. More potential tenants view energy as just another manageable cost. In point of fact it seldom is. The mechanical and electrical design of buildings is such that controlling HVAC, lighting and plug loads is very difficult. The need to control these costs just wasn't in the design criteria for building architects and engineers. And the added cost of providing the appropriate structure to support this flexibility was seldom, if ever, budgeted.
Today, however, tenants are asking questions about how they can control energy costs. Property managers are responding with so-called "green" leases. Cleaning materials made from organic chemicals are in vogue. A few scattered occupancy sensors turn overhead lighting on and off. Still, this approach isn't close to that needed for an effective green lease. Tenants want control and, for the most part, they don't have it in the buildings of today. Overhead lighting is often switched for entire floors. Is dimming possible? Not with conventional fluorescent systems. Air conditioning systems come to life early in the morning and run until late at night. Is there an alternative? No - not as long as building automation systems are installed and programmed to run as large multi-office zones. Positioning a building to use green leases requires a different approach. It requires is better understanding of how energy is used within a building. Most of all, green building market positioning requires physical changes to accommodate tenants looking for a green approach to their daily work environment. Solving this problem will be a challenge.
Energy Costs
Traditionally building automation vendors have cited energy costs as an an important manageable cost. Is it? Not when the property manager looks at the combined charges for running a building. A number of observers make the point that energy costs per se are a small and not very compelling component of building operating costs. History shows this is true. Cost containment efforts seldom continue as an integral part of daily management. One reason: energy costs are not readily visible. Another: it is very difficult to assign responsibility to individuals for containing and managing energy costs in tenant occupied buildings. (It might even be extremely difficult.) The usual maintenance staff motto is "no complaints, then everything must be OK."
Still, the cost of energy (more specifically electricity) continues to rise. Just as importantly, tenants know that it is rising. And they want to have some type of control over their energy costs. In a most first class leases, space rental costs often ranges from $18 to $25 per square foot. Energy costs, buried in these numbers, usually runs from $1.50 to $3.00 per square foot. As a percentage it is less than 10%. Why is such a small percentage of lease cost perceived as so important to tenants? Because that perception fits the way energy usage is believed to contribute to global warming, a modern way of life, conservation of resources and global competitiveness. In other words, it is not the cost of energy that is so interesting as the perception that energy is affecting our modern world.
Energy Shortages
If energy costs are only a small percentage of space lease costs, then what about energy availability? This is the big-dog lurking in the energy shadows. If a building loses it's source of energy, occupant productivity comes to a screeching halt. Fast. Instead of affecting the small $1.50 to $3.00 of energy costs, it immediately affects the $25 to $100 of productivity costs. Clearly outages are rare. But when they happen, buildings become immediately unusable. Property managers have no recourse. Or do they?
Every modern building has emergency generators to handle critical lighting and related electrical needs when an outage occurs. Seldom are these generators sized to handle lighting, plug and computer loads. Still, the ability to deal with shortages (temporary outages) is very important to all building owners and managers. So many building management teams are taking steps to protect their cash flow by working with tenants to have an effective energy management program ready to deal with shortages. These "energy plans" are an important driver in competitive positioning of a building for landlords as well as tenants.
Energy Mandates
There have been a number of rush-to-judgement mandates by governing authorities. Some government agencies have made declarations that coal-fired plants shall be converted to gas or, in some cases, completely shutdown. This leaves building owners and managers scrambling to meet energy requirements. Can modern buildings run on solar power? Not in 98% of today's buildings and certainly not at night without significant electrical storage. Mandates are draconian measures and require comparable responses. The answer is complex. On-site power generation, from gas-fired generators, can help reduce demand. Solar panels work on sunny days. But the cost of these options is well outside the normal investment boundaries of most commercial businesses. Utilities look at power plants over a 20 to 50 year life expectancy and factor costs appropriately. Clearly mandates are a radical and transforming initiative. Just as clearly building owners must deal with the added cost of supplementing their current energy sources with on-site energy generation and improved energy management. Building automation vendors are not well equipped to deal with these issues. Their revenue model relies on technology sales and on-going support.
They don't offer in-depth energy support, at least the kind needed to work within recent mandates. Another approach is needed.
Energy Efficiency
Energy efficiency is linked to energy stewardship. While property managers are traditionally bottom-line driven, many tenants are also concerned about being good stewards of the resources provided to them. This activist approach has become more important as movies and slide presentations about global warming dramatize the unwarranted use of energy. Energy efficiency, especially with traditionally high energy usage equipment, like computers, has become a marketing opportunity for manufacturers. Where previous marketing efforts emphasized " 'Our Product' Inside", now they emphasize " 'Our Product' Efficiency Inside". Still, how are such products operated to leverage energy efficiency features? Not well, for the most part. Yes, the technology is there but it is not well utilized. More is needed to optimize energy efficiency. Why, for example, do buildings with a peak load of 1,000 kW during the day, have a 400 kW load at night? Where is this energy going? Does anyone know? Clearly there is an opportunity to improve energy efficiency and, just as clearly, tenants want support from their building managers in reducing energy usage. What's needed, then, are the enabling tools to make it happen.
Smart Grid Participation
The Smart Grid is coming. We read about it regularly. We think the word "Smart" is cool. But what does it mean - "Smart Grid"? How will building owners work with the Smart Grid? In fact, the Smart Grid provides a combination of advance energy metering along with timely information about how we use it. The Smart Grid is so smart that utilities may will use this technology to adjust energy prices as often as every five minutes. Is this possible? Certainly. Count on it in certain areas of the country where energy sources have been curtailed by mandates, generating plant shortages, or global-warming concerns.
If the Smart Grid is so smart, then can it manage building energy consumption too? Certainly it can. But utilities seldom venture beyond the building meter unless by invitation. Building managers must plan on working with and within the boundaries of the Smart Grid. Like it or not, utility charges will move from fixed levels to dynamic pricing. Current thinking will move from static energy use planning to dynamic energy use management. Where are the tools to deal with this change? How will the current infrastructure of building automation vendors, mechanical and electrical contractors, and even utilities, work with the Smart Grid? The answer is they will need physical and intellectual tools to make it all happen - that haven't been invented yet.
Demand Response Participation
To deal with peak energy shortages, utilities and grid operators have developed Demand Response as an initiative. Demand Response contracts with building managers to reduce peak demand when requested and to do so for specific amounts of reduction. In most buildings emergency generators run to offset demand loads. In others, air conditioning is restricted to reduce demand. But approaches to reduce demand by restricting air conditioning conflict with the need for it during the warmest days of the year. Restricting air conditioning is not cool - it's hot. People get irritated. Yet, if occupants understand the reason for the restriction their tolerance will improve, at least for the short time it is restricted.
Will Demand Response end soon? By many accounts the answer is yes. Demand Response as a business is expected to transform into a general demand reduction business. Yet this too would require a change in Demand Response incentives, contract arrangements, property management methods, tenant and occupant participation, and even green leases. There is no simple solution to reducing building demand for energy. Quite frankly the tools are not yet available to transition to an automated demand reduction program.
BAS Vendors
For years building automation vendors have held building owners and property managers in a contractual vise designed to squeeze fees at every opportunity. Customer's don't mind paying for value received. However, most building owners seldom view their building automation vendors as providing good value for the fees charged. Given an opportunity, then, changing the competitive options where building automation vendors have an effective competitor is important to reducing the costs of improving building operating efficiencies. Clearly there is a need to bypass building automation vendors and their real stranglehold on access to building HVAC operating methods.
IP Integration
One of the most interesting alternatives to proprietary approaches for equipment communications is emerging from the IT industry. The emphasis is shifting to use the Internet Protocol for managing all building technology. This includes security, elevators, lighting, and HVAC. Historically technology communications has used custom protocols to link managers to its operations. This has meant that the equipment from one vendor will not inter-operate with that of another. Vendors use these protocols to deny competitors from replacing their equipment. Low first-bids can lock a building into long-term maintenance contracts that are worth far more than the installed gear. This is the promise of IP integration. Get rid of custom protocols and switch to ubiquitious IP. But it's not easy.
The cost of IP devices has plummeted in recent years. Connections are very inexpensive. In a sense, IP integration is the holy grail of modern building communications. If it can be achieved, then building managers will be able to cut operating costs, now buried in the lease charges, and reduce their dependence on specialized training for proprietary protocols. This is not just a minor annoyance either. Custom protocols drive operating costs up. Circumventing custom protocols will drive operating costs down. That's what's needed.
Energy Awareness
Energy awareness is both a concept and a call to action. Conceptually we understand that energy is consumed for all types of devices from cell phones to TVs. Only in recent years, however, has energy awareness become a call to action. Homeowners can translate their personal energy awareness to a change in energy habits. Turning off lights when not needed is a form of energy awareness action. But it's not possible to turn off lighting in most buildings. Cubicles with personal lighting can be managed but not the overhead lighting. For that matter, it usually isn't possible to turn off plug loads in most cubicles. A plug strip can help but there some devices, like computers, that are usually not turned off completely. Which devices are candidates for personal energy management? It's often hard to determine unless you are technically aware of the impact it could have.
Energy awareness as a call to action is generally limited. What's needed, then, is a channel for energy awareness. A way to share ideas with others both within and outside the company. Moreover, energy awareness usually does not extend to common building energy usage such as space air conditioning and overhead lighting. The quest to provide personal space energy management may forever be only that - a quest. Further, the number of individuals who are personally interested in energy awareness as a concept may well be many more than those who consider it a call to action. How, then, will energy awareness - the concept - be translated into a call for action for the vast majority of building occupants? Where are the tools to make this happen?
Energy Cost Allocation
If the cost of energy can change dynamically, as is expected, then how will energy cost be allocated internally to a building? Is the shipping department more important than the executive offices when it comes to energy usage? For that matter, can energy costs even be assigned to a group of individuals or area of a building? More practically, tenants will want the ability to control their energy costs and, to make it happen, will need sub-metering that reasonably reflects their energy usage. It is entirely possible that tenants will make their own deals with energy suppliers and leave building managers out of the negotiations completely. If this is possible then it will probably happen. Will it be widespread? Certainly it will take awhile. But there is no denying the movement to internal building cost allocation and the increase complexity of building infrastructure to make it happen. Where, then, are the tools to smooth the way?
