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Looking for a smart city on-ramp? Consider smart buildings

Submitted by jesse_berst on June 22, 2016

Cities have many reasons to get smart. Climate mandates. Economic development. Operational efficiency. New research suggests that you can make gains on these and other goals by working towards smart buildings. First, by updating the city’s own buildings. Second, by using building codes and incentives to encourage the private sector to follow suit.

As researcher Allan McHale explains in the excerpt below, much of the dollar value from “smartness” will come from saving energy. And where’s the easiest place to save energy? Yes, LED street lights are one venue, but buildings represent a far larger potential savings… especially if they are linked to a smart grid. — Jesse Berst

According to estimations by the McKinsey Global Institute, the Internet of Things (IoT) will have a total economic impact of up to $11 trillion by 2025. Some of this will come from the huge energy savings from increasing visibility of the grid’s performance, identifying where we lose energy, and therefore discovering where the savings potential really lie – “efficiency”.

The key to the efficiency-enhancing power of Internet of Things lies in peak usage periods. Electricity is of course much more expensive in the hours when it is in most demand. However, the majority of consumers around the world are still billed purely on how much power they use. This baked-in inefficiency increases overall costs for both the utilities and the average consumer. The consumer is guarded from the spikes of peak usage periods, and the utility companies are either willing to absorb some of the extra cost or pass this on to the bill payer with regular price increases.

Nowhere is this situation more evident and impactful than for small and medium sized enterprises (SMEs). For these businesses the cost on energy is often a sizeable proportion of their operational expenses; therefore any product or service, like the IoT, that promises to reduce their energy costs will be highly valued.

Our recent report exploring the interconnection between Smart Grids and Smart Buildings estimated that the overall market for Energy Software in Smart Buildings came in at $6.35Bn in 2015, and is expected to rise to just under $9.8Bn by 2020, representing a very healthy CAGR of 9% per annum. Of this, Enterprise Energy Management Systems (EEMs) make up the largest proportion of the market in 2015, at around 46% of overall sales. Furthermore, the EEMs market share will grow further to 49% by 2020, the report predicted.

Organizations can manually lower their energy needs by switching off unnecessary lights or adjusting heating and ventilation systems. However, the greatest savings will be found by lowering their energy use at peak hours. For entities like supermarkets, hotels, offices, campuses, hospitals and factories reducing peak time consumption can help the national grid manage peak loads and, at least in developed power sectors, they will receive considerable dividends for doing so.

Read more, including an explanation of how distributed energy storage can play an important role.