Last week in Silicon Valley BMW convened a group of transportation, electric vehicle (EV), and energy thought leaders to participate in a dialogue with their senior executives and talk about sustainability, energy, and mobility services. It was a thought-provoking day and I shared my perspectives on V2G (Vehicle to Grid) integrations and pondered new Smart Grid convergences with sustainability principles.
BMW’s guiding view is that sustainability along the entire value chain is inseparable from their corporate self-image. The company has been systematically reducing energy use in facilities through energy-efficient materials, products, and processes; and in vehicles through use of regenerative energy technologies. The production facilities for their electric BMW i cars will incorporate renewable energy – and from a Smart Grid perspective, this is a significant development. Industrial plants and processes are major electricity consumers. Adding renewables to their energy mix reduces reliance on fossil fuels, and in Germany, helps address the looming retirement of that nation’s nuclear fleet as well. Co-located generation with consumption also reduces the need for buildouts of the transmission infrastructure and eliminates the energy losses that would otherwise occur in long distance, high voltage transmission.
All of these activities merit commendation, but the discussion group’s consensus was that creating programs that encouraged BMW dealerships to adopt renewable energy production and energy–efficient building technologies and processes would be an even more powerful means to visibly demonstrate commitments to sustainable practices. Since many of BMW’s customers fall into the affluent and green categories, rooftop and parking lot solar installations and energy-efficient lighting could reinforce the brand’s image – and particularly with the new electric BMW models. BMW doesn’t own dealerships nor their real estate, but some outside of the box thinking combined with that strong corporate commitment to sustainability could yield surprising innovations.
For instance, car manufacturers like GM have become financial institutions to structure car loans for customers. Could BMW create their own green bank to help dealers finance renewable energy and/or energy efficiency investments? Could they help dealers in specific states like California, which continue to enhance building codes for energy-efficient operations, with guidance on how to leverage technologies to save electricity costs?
There are no easy answers, and BMW has to make money at the end of the day, so any programs targeted to dealers have to show some positive impact to the corporate bottom line. However, helping dealers save money on operating costs by reducing energy use does contribute to the corporation’s sustainability philosophy and brand values.
However, there’s another possibility for BMW to consider that integrates the principles of sustainability with their business models and has direct benefits to grid modernization. EV batteries are depleted over time but still have potential for other energy storage applications once their useful auto life is over. Community energy storage (CES) and home energy storage can potentially repurpose used EV batteries for supply during localized power outages to deliver grid resiliency. Used EV batteries could also supply electricity to homes during peak times to reduce grid loads and improve grid reliability. One electric utility, AEP, has already piloted community energy storage with used EV batteries.
There are many more questions than answers about repurposing EV batteries, and several studies are focused on providing those answers. A car manufacturer like BMW could think about batteries from a complete sustainable product lifecycle (cradle to cradle) perspective – and use battery technologies that have not only the best performance for autos, but the best performance for home energy storage or CES use. Beyond battery technology itself, there’s a need to determine the best business models to cost-effectively repurpose EV batteries. Could BMW innovations extend beyond sustainable product design to sustainable business models for repurposed EV batteries that create compelling economic value for their EV customers, dealers, utilities, and help deliver grid resiliency and increased reliability? It’s an intriguing thought.
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.