As Buildings Get a Brain, Do We Lose Sense Over Cents?

Yakov Berenshteyn

Two weeks ago, Cleantech Group wrapped up its second annual Buildings Get a Brain executive summit in San Francisco. To our delight, the two-day dialogue – among about 120 senior stakeholders to the commercial buildings sector – produced great conversation, great connections, and just the right amount of controversy.

Reflecting on our December preview of the event, the event was a great success in digging into these and other topics, but we’ll save some of the conclusions for our upcoming white paper. Instead, this blog post will serve to provide a dose of reality, as raised in some of the more controversial discussions during the summit.

For example, let’s start with one of the most prevalent themes of our summit: the trend towards integrated building technology platforms. There’s been great progress in both creating better platform-as-a-service solutions for intelligent building technologies, as well as designing for their implementation earlier in the building value chain (i.e., by designers and construction). At the same time, summit participants clearly value the trend, but also realize that there will likely never be a completely plug-and-play ecosystem for intelligent building technologies – and that’s OK. Takeaway: we’ll continue to see great progress in this space, but let’s just be realistic about the end goal.

But then there are a few harder truths and baffling contradictions for the sector to swallow, which really question the amount of progress we think the sector is making:

  1. While financing is key to deploying many types of technology solutions, there is clearly a disconnect between technology developers, financiers, and customers in the intelligent buildings space. Without assigning blame, it seems at least three points of contention exist: (1) There is a ton of capital to go around, but it’s not being deployed; (2) There are plenty of existing financing models for building equipment, so it’s not clear that they’re being utilized to the extent possible; (3) New technologies are asked to prove ridiculous ROIs that are never asked of other corporate investments/expenses. No wonder the sector seems to only get anything big done when government steps in (that should be embarrassing).
  1. While our summit expands on intelligent buildings beyond energy efficiency, the fact of the matter is that energy costs and savings are some of the easiest to quantify and are relatively straightforward to price into performance projections (e.g., as opposed to the value of occupant comfort). The problem is that at the end of the day, there is a major vested interest in producing more energy – utilities. Now, while many utilities operate on decoupled revenue models or have their own energy efficiency services, the reality is that they (at least IOUs) are painfully slow to adapt, deliver lackluster customer service, and are chained to shareholders (they’ll tell you they’re chained to regulators, but try to find a big utility-driven efficiency initiative that asked regulators to be shareholder-funded). Despite exciting utility innovation in a couple key states, expect utilities to remain a major roadblock.
  1. Again, while energy efficiency is just one aspect of an intelligent building, it’s a big one. And it’s not just about the dollars and cents. It was noteworthy that while the summit intended to take a holistic view of intelligent buildings, it was primarily the non-corporate, non-startup, and non-finance minority of participants that reminded us about a little thing called climate change. While we’re debating the credit or shareholder risks of certain ROIs of certain investments from operating or capital budgets, we’re not solving climate change – not effectively. While many of the event participants might be truly inspired by environmental sustainability, it’s time to use that mission to elevate the conversation, else we risk being penny-wise and pound-foolish.

The sector won’t solve these challenges overnight, but we can at least be realistic about their existence. We could show you a chart showing massive venture capital flow into intelligent building technologies to show things are pretty rosy; we can also show you a chart of global CO2 concentrations crossing 400 ppm to show things are pretty gloomy; but to solve the challenges in the buildings sector, we’ll need to reconcile more than two pretty charts.