Enterprise Smart Grid
Every day energy, facilities, real estate and sustainability managers receive inbound voicemails from vendors emphasizing that their energy management solutions will help save energy, reduce carbon, save the world, etc….The term energy management is now so overused it has become meaningless.
Its easy to understand how we got here.
Post the 2008 “track your carbon footprint” crash, large vendors shifted their messaging. They recognized that in a down economy “save money by cutting energy consumption” would outperform “cut your greenhouse gases.” At the same time, start-ups on the VC funding hunt needed to describe how their products could universally address a large energy-related market.
And the more vendors started using energy management to describe what they did, the less it began to mean. Even the press (who have heard every pitch and don’t have engineering degrees) started asking “what exactly does your company do? ”
Our Enterprise Smart Grid framework divided the market into eleven application areas, including utility bill management, BMS, lighting and data center/IT. Any vendor in one of these sectors probably describes themselves as energy management. And clearly there are many subcategories within each of these eleven.
Lately, with cleantech venture capital in retreat, a crowded vendor landscape and another year of sales experience behind them, the most focused vendors have started to refine their marketing pitches. Look at the recent EL article covering JCI’s view on building energy management. Or announcements on new VC fundings for data center energy management. A single word in front of energy management makes a big difference. A few years ago this outbound messaging was not happening.
Like most overused marketing messages, it will take some time before energy management is supplanted by a newer term. Let’s just hope whatever replaces it doesn’t use cloud, crowd, mobile, multiplayer or social…
Like study-period before final exams, the days preceding the release of a new Groom Energy report can be wearying, filled with Dropbox editing, graphics tweaking, re-reading text for the fourth time and a little Red Bull. The period leading up to the release of our Enterprise Smart Grid Research Report was no different.
And as usual, the flurry of activity just afterwards required lots of patience, as we replayed our conclusions for industry consultants, Groom Energy customers and the press or calmed irritated vendors who we had positioned less dramatically than they had hoped.
It’s during this post-launch process that we always learn a ton: new customer anecdotes, challenging questions about how we came up with our views or market sizing and new vendors who we have yet to interview. And through these interactions we’re better able to assess (1) did people understand our conclusions, (2) did we characterize things correctly and (3) the report card question – did we missed anything important.
So, from our ESG launch these are our observations:
1. The ESG Management Framework was a hit.
Sometimes a single picture can convey a whole market – in this regard our graphic got an overwhelmingly positive response. New pieces will be added over time, but suffice it to say that a link to this image has been emailed to a lot of people in the last several weeks.
2. The term “energy management” will remain universally confusing.
We identified this confusion during our research, but even after we named “energy management” as a sub-category within the ESG framework, people we talked with continue to have a wide variety of opinions about its precise meaning and what it encompasses.
3. We missed some vendors.
While we interviewed over 50 and compiled and categorized a list of over 200, releasing a new report always brings out a whole new set of players – we’re now busy catching up. Apologies to those missed on the first go-around.
4. We need to develop more formal research on each ESG sub-category.
Although the ESG report was meant to frame the overall enterprise opportunity, its clear that each ESG sub-category can justify its own report (especially if you ask to the vendors in that sub-category). So we’re already in process with this project – and hoping this one requires a little less Red Bull
Today we released our Enterprise Smart Grid research report.
Since starting this research effort 18 months ago it’s stunning to look back at how things have changed, even since we hosted our first ESG conference last fall.
While customers interviews taught us the real business drivers and benefits learned from corporate early adopters, the vendor interviews gave us a different set of opinions and vision on where the market is headed.
Neither was wrong, but the conflict presented a challenge to capture within one report – the reality today versus a vision of where we’re headed.
Interestingly, even as we were conducting vendor interviews, market consolidation was occuring. Ameresco, Constellation Energy, Ecova, EnerNOC, IBM, Johnson Controls, Schneider Electric, Siemens have all made acquisitions during this period.
But we’re now tracking over 200+ vendors who offer solutions which contain the phase “energy management.”
Which explains why customers are confused.
So we’re hoping first that our ESG Management Framework will help folks divide the world down a bit into eleven big buckets of functionality. And we know that the vendor list will likely grow a lot in the coming months.
While 2011 held the promise and controversy of continued utility smart meter rollouts, 2012 may end up becoming the year of submeter.
Coming on strong as part of the emerging Enterprise Smart Grid market, these devices, which provide visibility to energy consumption at a granular and trackable level of detail, are set to see faster adoption in the coming year. As government, utilities, vendors and end-users have slowly shifted toward a “prove it to me” mindset, the submeter becomes the weapon of choice to document energy related performance.
While the devices themselves are not new, their use will expand as a result of growth applications which require their capability. We’ll see them used more by:
- Companies looking to gain visibility into the current energy consumption of their largest systems and into nighttime and weekend or “off shift” load
- ESCOs providing measurement in their performance contract guarantees
- Demand Response providers confirming for ISO/RTOs that demand has been reduced during events
- Solar installers needing production detail to be eligible for solar RECs payments and
- Commercial and industrial customers producing measurement and verification for their utility rebates
- Industrial firms trying to allocate energy costs to specific product lines, cost centers or government contracts
In the past submeters have brought with them the challenge of data management and reporting. We’ve seen Groom Energy customers who previously installed them across their facilities, but have no easy way to access the volume of information these meters continuously produce. With 2011′s recent flurry of newly introduced multi-user, Internet accessible, database-friendly energy software management solutions, this burden of gathering, managing and providing easy reporting from these distributed submeters will now be reduced.
And once a manager sees the fabled “energy dashboard” showing submeter energy consumption data, you can bet that manager will be ordering a few more of them…
Sub-metering your main meter is a fundamental start to developing a comprehensive corporate energy management strategy. But since this takes time, money or one of the few utilities that offer this as a free service, many companies don’t yet have this visibility.
Unless by chance they’ve signed up for Demand Response.
One of the main compliance hurdles faced by Demand Response providers is proving to the utilities that they’ve reduced demand during DR events. The ISOs need to confirm that the load reductions have been reached or exceeded and without that confirmation the DR providers don’t get paid. So to track their reductions, DR providers typically install their own sub-meters at their customers’ main meters. These sub-meters are connected back to the provider’s network operation, either through the customer’s internet or a cell phone, and enable the aggregation of performance data for the ISO across all of the providers customers.
Sub-metering doesn’t come cheaply, but the good news for DR providers is that they need only front the initial capital cost, as they can deduct these costs from future monthly customer payments. (Not surprisingly, many prospective DR customers learn about their sub-metering costs only as they are signing their contract.)
Ironically, the technical infrastructure DR providers use to initiate customer load reductions (the ultimate reason they’re getting paid) is a little less sophisticated. It’s called outbound calling. ”Hello, this is your DR provider calling, we’re having a demand event, can you please turn stuff off or turn on your generator?” While there is a current effort to make this more automated (called the OpenADR initiative) the phone remains today’s technology of choice.
But the bonus for DR customers, on top of the their monthly DR payments, is new visibility to main meter 15-minute interval data. Rarely before have corporate managers had easy on-line access to this intra-day, intra-week and intra-month graphical display of their consumption. And guess what happens when they see it?
They ask lots of questions.
Which is a good thing.
A thesis for Enterprise Smart Grid is that this type of engagement is only the beginning of the process. Main meter visibility leaves the management team asking for finer granularity on where consumption may be happening – which can be gained through additional sub-metering. And finer grained visibility leads to the need for finer grained control, in order to manage down the consumption where it can be avoided. And this visibility and control ultimately becomes integrated into the organization’s objectives, with on-going measurement, more intelligent procurement based on newly reduced consumption and proactive energy efficiency upgrades for assets that warrant an upgrade.
So perhaps by signing up for DR customers gained something much more valuable than their monthly DR payments?
For years large ESCO’s (Johnson Controls, Siemens, Honeywell, etc.) have been performing Level Three Investment Grade Audits (IGAs), which are required for MUSH/Federal performance contracts. Their audits produce a detailed energy savings spreadsheet which makes it possible for a tax-exempt entity to issue bonds which pay for the retrofits, all leveraging the ESCO’s “guarantee” for the projected savings.
But while the corporate world is moving toward real-time management of energy consumption, traditional Level Two energy audits, producing 100+ page reports with graphs, spreadsheets and efficiency recommendations, remain a throwback to a time before the Internet. In our experience they rarely have a big impact.
Because from the moment the inch-thick document hits a facility manager’s desk it’s outdated. Read by just a few managers, the analysis is normally used only during next year’s corporate budgeting process, allocating capital for select projects to be implemented a year or more later. By then the company’s operating patterns, energy rates and utility incentives have changed, plus they’ve lost the savings during this 18-24 month span. Not exactly real-time energy management.
Obviously the approach is broken.
Instead of a snapshot audit, organizations should approach energy efficiency as a perpetual process, like they do with quality management. ISO9000, Six Sigma and TQM don’t look for product defects once a year. Quality is a management process and companies are always trying to get better - it’s the same with energy efficiency. Last month ISO published it’s 50001 energy management standard which provides a framework for the energy management process.
As part of the process, we recommend that all energy efficiency recommendations be posted to a corporate energy site, where a broader number of employees can review, offer suggestions and act on them. No-capital cost behavior change is a huge opportunity, so this site should also track and report current energy usage for each of the company’s facilities, with sub-metering for all major systems. This usage reporting establishes a public baseline and can be coupled with tracking efficiency projects. What better way to have a system for tracking future progress?
Start-ups like Retroficiency and IBlogix can even provide no truck roll Level 0 “pre-assessments” for sites where no initial on-site analysis has been performed. Their data analytics applications provide energy assessments using only utility bill information, weather patterns, the age of building and some basic building information – that can definitely jump-start the process.
For project capital companies should implement an energy efficiency “fund,” which sits outside the normal capital budgeting process. This would allow the company more rapid response to new utility incentive program or for projects with a 6 to 12 month simple payback. Harvard University uses something like this with its Green Campus Loan Fund. The fund should also include equipment that is nearing end of life where savings can pay for proactive replacement.
When asked by our customers, yes, our team will still deliver old fashioned energy audits - but we’re doing our best to convince them instead to take this new process based approach.
And since even the word audit makes people cringe, we’ve got to come up with a better name for it as well.
Of course the conventional view is that the smart grid market will be “huge” – and the target for smart grid today is squarely on the residential market. So it shouldn’t be missed that within days of each other both Google and Microsoft killed their initial home energy software applications.
First came Microsoft, shutting down their Hohm effort, saying “due to the slow overall market adoption of the service” they would focus instead on the commercial market. Then came Google announcing it was stopping support for PowerMeter, their consumer home energy visibility tool, saying it had “not scaled as quickly as we would like.”
This is not the first time a high tech company has overestimated the adoption rate for home networking and software applications. And the reason for the overestimate is similar to earlier miscues.
Home networking is hard.
When a consumer needs to plug hardware from one company into software from another, things get tricky. It’s the reason why most homeowners still don’t have their home printers hooked up to Ethernet. It’s why Apple’s Airport Express is mostly used for a single application; rebroadcasting iTunes.
Unless it works out of box with a plug, home networking system integration projects are only for serious DIYers. Not to say there hasn’t been progress with early smart meter rollouts to the home, but the facts are today it’s still very early.
Even a programmable thermostat is too hard for the consumer, so Comverge has found a way to turn this into a utility DR delivery business. Unless the utility pays for and implements early home networking apps on the backs of their initial smart meter rollouts, adoption in the home will continue to move very slowly.
At least Microsoft says they’re focusing now more on commercial market applications, a practical shift for them. Businesses have IT and facility managers. They can deal with hardware and software integration projects – directly or by using outside service providers as they do already.
And the bulk $ savings for energy application networking in businesses is more significant – which makes the pain of figuring out which plug goes into which box more worthwhile.
Today we launched our new site enterprisesmartgrid.org. Our idea to develop it came as we were conducting our initial customer research on the ESG market. As we tested the three functional areas, (Visibility, Control and Integration) with corporate energy, facility and sustainability managers, some began commenting that even the term “Enterprise Smart Grid” resonated with them.
So using Marketing 101 we knew that by developing a .org vendor neutral, collaborative blog, twitter, newslisting we could likely bring together an even broader group of interested people around the ESG concept.
As we learned when we launched the term “Enterprise Carbon Accounting” in 2009, sometimes a market’s name can take on a changed, broader meaning as more people begin using it, something no one person or organization can control – now we’ll get to see if that’s the case again with “Enterprise Smart Grid.”
Today’s hype around Smart Grid 2.0 continues to be focused on utilities and the homeowner.
Policy makers predict intelligent networks of electrons flowing in and out of the home. The theory is that during peak-pricing, high-demand periods, utilities will save homeowners money by automatically slowing down their air conditioners and refrigerators and buying electricity from their solar array and the electric vehicles plugged into their garage. And consumers, receiving continuous electricity usage & cost updates via web, email, text, Facebook and Nintendo, will change their behavior.
This last point is the trickiest. Our engineers can model energy savings from intelligent systems based on past operating history, but predicting savings from behavior change is more challenging. We’ve seen $4 gasoline drive behavior change. At some price, consumers will choose to dry their clothes at 11pm instead of 4pm. But for now we’re still guessing on how significantly electricity cost signaling can drive consumer behavior change.
Recently we installed an energy monitoring and control system for a large industrial customer. Like the utility Smart Grid, this Enterprise Smart Grid provides our customer with visibility, intelligent control and integration into their business.
The system monitors facility-wide consumption of gas, electricity and water. Instead of monthly utility bills sitting in boxes in the purchasing department, current and historical usage is continuously reported, visible across the corporate intranet, with alarming for extraordinary events enabled.
The business rules around controlling demand, integrating with OpenADR and participating in Demand Response events can now be built into the system.
But the system’s most powerful effect comes from its integration with the company’s accounting system.
Previously energy costs were considered general overhead, assigned pro-rata to each department or product line based on an annual management estimate. As line managers couldn’t change this overhead allocation, they had limited motivation to reduce energy consumption. Participating in Demand Response events was an annoyance. And when our team installed an energy-saving retrofit project somewhere in the plant it didn’t show up on that manager’s radar screen.
With sub-meters on pumps, presses and furnaces actual product line energy usage and costs are now reported into the P&L, giving line managers a new metric: cost of energy per product produced. Which means it matters. Demand Response dollars can now flow back into their business as contribution margin. All of a sudden shutting down a large gas-fired furnace for the weekend during a quiet period has a direct impact on their bottom line. And all this affects that manager’s performance bonus.
Now that intelligence really has the chance to drive behavior change.