As buildings get smarter and expectations around energy efficiency increase, the traditional building energy management systems (BEMS) companies are pressing ahead with expanding their offerings. The question is whether established companies like Honeywell and Schneider Electric will figure out how to improve their offerings and lock up a new corner of the building management systems market.
As smart grid buildouts continue and we approach full market maturation in the next 7-10 years, the opportunity exists for integrating automated demand response and perhaps even distributed power generation offerings into an overarching control system. What a smart building can do is getting broader and fuller in capability. (For a full analysis of the Building Energy Management Systems (BEMS) market see our GigaOM report.)
Typically demand response solutions and BEMS have been somewhat separate domains. But that’s unlikely to always be the case. The market for integrating these two services for commercial building customers is fairly small right now but Allan McHale at market research and investment consultancy Memoori Business Intelligence is speculating that the situation might change:
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 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.
McHale goes on to consider whether the leading energy service companies like ABB, Honeywell and Schneider Electric may attack the BEMS space through acquisitions. Johnson Controls bought EnergyConnect so it could offer demand response capability. Schneider Electric bought Telvent, adding smart grid and weather tracking capabilities. Siemens acquired Advanced Telemetry, bringing in cloud based energy management.
Companies like Schneider Electric and Siemens become such formidable competitors because they have long histories of existing relationships with building owners that have relied on these companies for decades to help them manage everything from security to HVAC. Adding on energy management services or platforms to manage DR would just require the tools to be fed into existing sales channels.
A similar issue is impacting the data center market. Date center infrastructure management (DCIM) platforms have largely been add on or separate systems than BEMS. But companies like Siemens have now launched their own DCIM tools, aware that there are growing needs beyond just facilities management for companies with extensive data center facilities.
When I spoke with DCIM startup Power Assure last year, its CTO Clemens Pfeiffer expressed his belief that soon data center focused companies would begin with DCIM and build out the rest of buildings management from there, a major shift in how facilities assets are managed. That’s possible in companies where data centers are such a large part of the energy footprint but in other markets we’re more likely just to see the big energy service companies expand their systems management capabilities, either in-house or through acquisitions.
The market remains small for DR and distributed power generation offerings through BEMS though some like McHale are bullish that this could be a bigger market. The growth of renewable energy on the grid with all of its intermittency challenges means that a flexible demand side of the grid will be of value to utilities. If the integration of BEMS with the grid becomes seamless and building owners can easily generate DR payments or even sell back excess power, the market could grow quickly as large buildings effectively become “virtual power plants.”
The handwriting is on the wall for energy service providers: there’s a major competitive benefit to being able to provide energy management solutions that integrate with the smart grid, offering everything from DR to the distributed power generation. The buildings are getting smarter.