Buildings Get a Brain – Putting Theory to Practice

Cleantech Group is pleased to host the second annual Buildings Get a Brain executive summit Thumbnail_BGAB 2015sponsored by Johnson Controls and Navitas Capital. After a few years of talking about the potential for intelligent buildings, this year we will highlight real customers deploying real hardware and software products to make the built environment smarter, more comfortable for occupants, and more energy efficient.

Buildings pose a huge untapped resource for energy and other resource savings, yet the market for smart building technologies continues to evolve cautiously. What is needed to truly catalyze the industry? What can building owners and investors do to take advantage of the latest technology advancements? How can finance play a role in attracting greater private capital? Below are a few of the solutions we think are critical to accelerating holistic building intelligence.

Understanding and Meeting Customer Needs

There are countless vendors providing solutions across the vast building value chain, with new takes on old technologies emerging seemingly daily from flashy new digital startups (actually, we counted – ask us for a demo of our i3 platform). The resulting fragmentation within intelligent buildings, whether in direct building controls, informational dashboards, billing services, occupant engagement, or other platforms, has stifled collaboration and growth in the space.

While these solutions represent great advances in technology and opportunities for better building performance, analytics, big data, and other buzzwords are merely means to an end. Yet many technology and service vendors in this space market themselves according to these terms rather than by the actual capabilities that they utilize or by the results that they enable within a building. This challenges the nascent sector as vendors and customers struggle to speak the same language about outcomes.

These vendors will need to re-orient their messages to meet more nuanced customer needs. These will certainly vary from building to building: while a college campus may wish to attract students and parents via sustainability, a hospital may optimize for indoor health and a commercial office building may optimize for operating and maintenance costs (O&M). Further segmentation of additional considerations is highly specific to each type of building. Join us at our executive summit to hear how the most prominent building managers in San Francisco engage with new innovators, as we’ll hear from Timothy Danz (Chief Engineer, The California Center), Danny Murtagh (Director of Engineering, The Embarcadero Center – Boston Properties), and David Starkey (General Manager, One Front Street – Jones Lang LaSalle) about the solutions that are working in their buildings and their lessons for entrepreneurs.

Elevating the Conversation

In order to better target customers’ nuanced building and operations performance goals, technology and service vendors need to have sales conversations with customers at senior management levels, including the C-suite. Facilities managers have traditionally made O&M decisions within buildings, but may be unfamiliar and uncomfortable with new, digitally enabled solutions. In addition to cultural issues reflected in a lack of understanding of new technologies, the uncertainty of cost savings and other benefits of equipment upgrades is still widespread given the lack of standardization across the building industry. While these cultural challenges will need to be alleviated through education and engagement of labor groups, vendors must also craft more strategic sales conversations that are compelling to more senior decision makers with purview over building performance, such as CFOs.

In addition, building solution vendors will need to better define their impacts not just on energy consumption, but on comfort, more granular real estate demand optimization, employee productivity, indoor health, and other factors, all in terms that resonate better with the C-suite. At Buildings Get a Brain, we’ll hear how Andrew Krioukov’s Building Robotics platform drives occupant engagement around thermal comfort and how Tim Pauly engages diverse WeWork occupants while delivering a scalable real estate optimization solution.

High performance in these areas serves to improve the value of a building as both a real estate asset and a business performance tool. However, no single group of stakeholders has done a compelling job of translating these metrics into performance criteria that a CEO, COO, or CFO can compare across different buildings or several potential operating scenarios for one building. Not only will stakeholders in the buildings ecosystem need to better define these comparable metrics, but they will need to develop an understanding of how much these values matter to a given customer. From design and architecture to construction to maintenance, aligning stakeholders along common metrics will inherently help align goals across the building lifecycle and will help create more holistic solutions. We’ll aim to help connect these dots, with speakers including Ted van Der Linder of DPR and HOK’s SVP and Design Director Paul Woolford representing design and construction, and Lucid CEO Vladi Shunturov and EnerNOC’s Zach Robin bringing their perspectives on digital optimization.

Making the Money Talk

At the end of the day, real estate is a financial game. To build a marketplace around these evolving metrics, building owners, operators, and financiers will need to align on valuation systems that reward better holistic performance and provide a standardized platform for driving building innovation investment decisions. As Hannon Armstrong President and CEO Jeff Eckel will show us, new financial vehicles have emerged to help unlock building energy savings and remove the high upfront costs associated with efficiency upgrades.

Modeled after the PPA structure that has taken off in the solar industry, these new mechanisms aim to bring institutional investors and large energy service companies together in a previously underexplored building segment: commercial buildings. There are of course still hurdles to overcome: institutional investors are not yet comfortable with non-investment grade projects and building owners are still reticent about the purported energy savings stemming from new, digitally enabled efficiency upgrades.

State and local policies have gone a long way to enable new financing mechanisms. Here in San Francisco, legislation requiring building owners to report energy audits every five years has helped enable PACE and On-Bill Finance projects to begin to flourish in the commercial building sector. The market is experiencing growing pains similar to those of the solar industry, but is slowly gaining traction across the US, and San Francisco’s PACE Program Manager Richard Chien will share his battle scars at Buildings Get a Brain.

At our Cleanweb in the City summit in NYC last month, stakeholders in the built environment stressed the need for further standardization of financial metrics for the built environment. These standards must be incredibly simple to understand (participants noted their appreciation of NYC restaurant letter grades, for example), but must have the clout of credit rating agencies (e.g., S&P, Moody’s) in order to be applied at scale by the real estate and financial communities.

Such standards will help enhance and drive the nascent market for energy efficiency securitization. They’ll ideally also incorporate other non-energy metrics mentioned above, though resource efficiency is perhaps the easiest to translate into financial savings and cash flows in the near term. Using such capital-oriented standards, stakeholders across the buildings ecosystem could better communicate and incentivize each other to improve building performance. By increasing appeal to financial firms, this would in turn move intelligent, efficient buildings away from a government mandate-/tax incentive-driven market to a more dynamic free-market system, a story that seems to repeat itself successfully throughout cleantech.