Buildings consume significant amounts of energy. The Energy Information Administration (EIA) in the Department of Energy (DOE) reported that buildings accounted for 72 percent of total U.S. electricity consumption in 2006 and this number will rise to 75% by 2025. This is split almost 50/50 between commercial and residential buildings.
Pre-recession, the ratio of new commercial building construction versus demolition was about 4:1. New buildings are generally more energy-efficient, and sometimes more sustainable than existing infrastructure. But are any buildings ready to take on new roles as active participants in the Smart Grid? For some answers, I spoke with Clay Nesler, Vice President of Global Energy and Sustainability for Johnson Controls to learn about their strategic perspectives on the role of commercial buildings in the Smart Grid. According to Nesler, Johnson Controls wants to “keep pushing to realize the opportunities and promises of the Smart Grid by increasing building intelligence and managing building performance over time.”
Like ships, buildings get “commissioned” to test that electrical, mechanical, plumbing, and other systems meet design intent and occupant requirements. Whole building commissioning ensures that buildings operate at their full design potential. But occupant numbers, functions, and operations can change over time. Building management objectives have changed over time too. Nesler has seen a shift from “once and done” commissioning to periodic “re-commissioning” and “ongoing commissioning” – similar to the continuous improvement processes embodied in quality management systems. Information and communications technologies (ICT) are critical to this commissioning trend– collecting and analyzing data from a variety of building and equipment systems to verify equipment integrity and optimize system performance.
New buildings often have this intelligence embedded into them, but existing building stock needs to be retrofitted to become more intelligent. This is a core business for Johnson Controls, which worked with Jones Lang Lasalle and the Rocky Mountain Institute to reduce energy consumption up to 38% in the venerable Empire State Building. But the retrofit business is more than improving energy consumption in buildings and prepping them for active Smart Grid-enabled participation – it’s making buildings themselves more sustainable. Nesler has a broad definition of building sustainability. It has to address “efficient use of resources such as energy, water, and materials; the quality of building environment and safety for occupants; and the impacts that the building has on the environment over its entire lifecycle.”
Building owners and managers understand the financial, environmental, and infrastructure impacts of energy and water consumption in their structures. In fact, the majority of their retrofit projects include water conservation as well as energy conservation. But the bottom line is still the decisive factor to the vast majority of building retrofit projects, with private sector projects seeking a 2-3 year payback whilst public enterprises can tolerate up to a 4-5 year payback. Financing innovations such as Energy Performance Contracts and PACE programs are gaining acceptance and expanding the investment pool and possibilities for more commercial building owners.
Energy Performance Contracts open up new project possibilities for public sector organizations across the country, leveraging private sector financing to make building improvements that are paid over time out of energy savings, and extending guaranteed payback periods to 10-15 years. Property Assessed Clean Energy (PACE) programs for commercial buildings are also gaining traction in the market as innovative financing instruments that allow building improvements to be paid over time through an assessment on the property bill. This allows investment in longer term improvement measures and solves many of the classic financing problems like alignment of owner/tenant incentives, transfer of financing to new owners and providing security to 3rd party lenders. That’s extremely welcome news – because reducing the ongoing operating costs for energy and water increases property value and frees that capital for other sustainability projects. And making buildings smarter in their consumption and their levels of integration to the electrical, gas, and water grids helps accelerate the benefits that the Smart Grid delivers. Johnson Controls has an initiative called the Institute for Building Efficiency that contains information about financing building retrofits, smart buildings, and more. It’s a worthwhile site to gain knowledge about the critical roles buildings will play in delivering on the promises of the Smart Grid.
Clay Nesler is a featured presenter at the November 12-13 Verge@Greenbuild conference in San Francisco, where he will talk about PACE programs.