The amount of water that is unaccounted for across the world is staggering – with annual losses at approximately $141 billion, according to a conservative estimate from the World Bank – greater than Hungary’s GDP. This unaccounted for water, or non-revenue water (NRW), is water that has been treated by the water utility and then is distributed, but does not get billed. The International Water Association highlights the three different components of NRW:

• Unbilled authorized consumption, such as fire hydrant use or line flushing
• Apparent or commercial losses, such as water theft and metering inaccuracies
• Real (or physical) losses through distribution system leaks

Additionally, the World Bank estimates that in developing countries, NRW accounts for approximately 50% of treated water. In the United States, NRW accounts for roughly 25%. A 2008 report from the American Water Works Association (AWWA) found that the 30% reduction was a result of utilities switching from flat-rate billing to universal metering. Smart water meters are clearly a means to decrease the amount of NRW in both developing countries and developed countries. In developing countries, utilities will shift from having no penetration of any meters to smart meters – also known as the “leapfrog effect.” Countries like Brazil and India will drive smart water meter deployments via new meter installations. This will also be the case in developed countries – especially in cities like Chicago. While it is true that Chicago is located on one of the largest lakes in the world, Lake Michigan, and Chicagoans are used to cheap water, there are many other drivers for smart water meters. The city still has 71% of residential properties without water meters – smart or not. But, and here’s the kicker, the Windy City calculates water bills with a century-old formula, and the main inputs are the width of parking lots. This has caused large discrepancies in water bills, as homes without a water meter – no matter the size of the home – are paying more for water than larger homes (in some cases with pools) that have installed a meter. But, it must be noted that Chicago has set up a water meter program – MeterSave – and only 2% of the 350,000 eligible households have signed up. The voluntary program is free of charge and includes the installation of the AMR meter.

The impact of metering will bring fairness to Chicagoans through more accurate water bills, but will also assist with water conservation, thereby decreasing NRW. Implementing AMI for the City of Chicago will help get both the utility and customers out of Muddy Waters.

A major advantage to working with Pike Research is our expertise in both legacy and nascent cleantech markets, with each analyst focusing on specific areas of coverage. Where the real value-add comes into play is when Pike analysts bring to the forefront their knowledge on adjacent markets. This is especially true for the smart building industry when analyzing potential M&A opportunities and is deeply relevant for Building on Grid (BOG) markets. With so many channels for vendors to get into the building and onto the grid, the space is defined by fierce competition between age-old rivals in the building and building automation space. Another defining characteristic of the smart buildings market and the players associated with it is the co-opetition that occurs. Players like IBM and HP are getting into the buildings through partnering with more traditional smart building vendors like Johnson Controls, Inc. (JCI) and Schneider. Additionally, there are many small companies with sophisticated technologies at the starting line of the BOG market and many companies are waiting to see who has the longest legs before moving in for M&A opportunities.

There are many ways companies can get into the building and onto the grid. Over the next few blog posts I’ll look at several.

Building Energy Management Systems:
One channel into the BOG industry is through the Building Management Systems (BMS) and more specifically, the subset of BMS, Building Energy Management Systems (BEMS). A building energy management system (BEMS) is similar to a BMS, yet is specifically focused on energy efficiency optimization and energy management. While a BMS does have energy management aspects, it also includes the monitoring of fire systems and security systems – among other building and mechanical controls. In contrast, BEMS are brought to market by vendors that solely focus on energy efficiency and energy management as their means to penetrate customer channels.

Two types of BEMS are in the market today – passive and active. Passive BEMS will read both weather and meter information and then report past energy usage. These systems are great for smaller buildings and can be employed in buildings without a BMS quickly and cheaply. Less sophisticated end users can look to vendors like MACH Energy that specifically serve office buildings and focus on consolidating and organizing data on the flow of electricity into office buildings. A passive BEMS does not interface with every sensor in the building for several reasons, none more important than striving to keep costs down and not producing overly complex algorithms to increase predictability. The passivity of these BEMS is exemplified by the daily reporting and minimal inputs/outputs.

Active BEMS operate at a level of higher intelligence and automation. Beyond accomplishing all of the inputs and outputs of the passive BEMS, active BEMS will interface with a commercial building’s BMS sensors, meters, and submeters. The BEMS will actively read BMS sensors and subsequently control real-time data. Additionally, the BEMS will enter in a growing list of inputs (such as building geography and position) to determine inhabitant comfort levels. This is characteristic of offerings from firms like BuildingIQ.

M&As of Note: JCI acquires EnergyConnect (DR): This is extremely interesting, as DR response is inextricably linked to BEMS. This move by the multi-product, multi-channel vendor is telling in that Pike Research analysis shows that DR will most likely not exist as a standalone technology moving forward, rather will be an application within a holistic energy efficiency platform for commercial buildings. Additionally, JCI clearly sees the trend of smaller (less than 200,000 SF) commercial building looking for a “lighter,” more affordable building and energy management system, which is the BEMS sweet spot.

Honeywell acquires Akuacom: While both of these acquisitions would seemingly fit squarely in the DR section presented last time in this series, it is evident that Honeywell is thinking next step BEMS includes AutoDR as an application that will help bring buildings onto the grid by connecting them to utilities.

Carbon Management:
The carbon management market is extremely fragmented and this fact, along with the politicized terms “carbon” and “carbon management” (at least in the United States) has caused carbon management vendors to rebrand and focus on carbon management as an application within the energy management umbrella. Initially, there were several high profile acquisitions, including IHS’ acquisition of Environmental Support Solutions (ESS), and SAP’s acquisition of Clear Standards. The more recent trend has been strategic partnerships.

First, software and enterprise management companies with an energy management offering are partnering with carbon management firms to provide end-users a complete view of the energy value chain. Just recently, HP and Hara announced a partnership that will provide both firms the ability to get into large federal and commercial buildings. As building technologies and services become more sophisticated, the smart building sector as a whole is going to become a massive new driver of information and analytic needs. Carbon management software will be one of the services that IT and energy management companies will slot into their overall energy services offerings. The sheer data requirements and analytic capabilities of IT firms will have to support the growing needs of the smart building sector and support business and capital decision.

Partnership of Note: HP partners with Hara: HP announced an energy and sustainability management suite that will leverage the carbon management firm Hara’s software.

A major advantage to working with Pike Research is our expertise in both legacy and nascent cleantech markets, with each analyst focusing on specific areas of coverage. Where the real value-add comes into play is when Pike analysts bring to the forefront their knowledge on adjacent markets. This is especially true for the smart building industry when analyzing potential M&A opportunities and is deeply relevant for Building on Grid (BOG) markets. With so many channels for vendors to get into the building and onto the grid, the space is defined by fierce competition between age-old rivals in the building and building automation space. Another defining characteristic of the smart buildings market and the players associated with it is the co-opetition that occurs. Players like IBM and HP are getting into the buildings through partnering with more traditional smart building vendors like Johnson Controls, Inc. (JCI) and Schneider. Additionally, there are many small companies with sophisticated technologies at the starting line of the BOG market and many companies are waiting to see who has the longest legs before moving in for M&A opportunities.

There are many ways companies can get into the building and onto the grid. Over the next few blog posts I’ll look at several.

IT Integration Software and Service Providers:

Smart buildings service providers will play a key role in integrating IT hardware and software, and to other management aspects of operational functionality, including asset and environmental management, all while connecting to other buildings on a portfolio basis as well as the smart grid and utilities. As commercial buildings continue to become integrated with a perpetually more intelligent energy grid and utility or energy provider, IT hardware, software, and services will present a huge potential for vendors with IT and professional service capabilities.

Enterprise resource planning (ERP) tools from SAP and Oracle also play a key role in energy management. There is a logical fit between the two. The tools needed to measure, monitor, manage, analyze, and report on energy data in smart buildings are not very different from those used to do the same with financial, inventory, and other business process data managed by enterprise solutions. This highlights the convergence being seen with energy management and ERP solutions. Vendors with a comprehensive energy management solution, or those who form strategic alliances, will have a clear path to market success. An adaptive architecture and a multitude of services, from analytics to cyber security, will represent the future market for energy management and the services market associated with it. This will evolve to enterprise energy management that will encompass asset management and other facilities operational management aspects, all of which will be on the network. Security is imminent here.

Most enterprise wide initiatives require information technology (IT) to enable an effective and successful implementation of any application or system. Therefore, the ability to leverage certain applications and systems and the development of new technologies that specifically address energy management – both for the business as well as for the IT department – have been and will continue to be a critical driving factor in energy management.

There is a host of software applications that already help organizations, both the business and IT functions, become more energy efficient. Among the more essential solutions or approaches are those that address the energy output in IT itself, within the smart building. This can involve simple measures like having lights and computers shut off automatically at set times or more complex programs, including data center consolidation, server virtualization, cloud computing or software-as-a-service (SaaS), wireless sensor network (WSN) technology, service-oriented architecture (SOA), teleworking, and upgrading to more energy efficient hardware.

A SaaS (or “hosted services”) delivery approach is especially interesting from an energy management perspective for smart buildings. It essentially allows an organization to outsource much of its IT function by letting a SaaS provider in a centralized facility manage multiple solutions for multiple companies. Consequently, with no hardware and software to purchase and maintain, the energy to power that hardware and execute that software is eliminated or at least significantly reduced. In addition, the organization does not have to worry about appropriate recycling and disposal of its hardware.

Schneider’s acquisition of Summit Energy Service: This acquisition, much like JCIs recent industry movement, highlights a larger ESCOs move into the BEMS, DR, and SaaS model of the BoG markets. The acquisition highlights Schneider’s, and the greater BOG industry, plan to move into the building sector by varying means, at varying price points, for varying end-users.

IBM acquires Tririga: Tririga is a top performer when it comes to designing, developing, and deploying Integrated Workplace Management Systems (IWMS). An IWMS is an enterprise-level platform that helps organizations manage and optimize facilities, infrastructure, and other assets. Aspects of Tririga’s IWMS solution include facilities management, maintenance management, carbon accounting, and other facility solutions. Tririga’s flagship sustainability solution is the TREE’s solution. TREE’s is an environmental management solution that collects and reports energy consumption and emissions data for a building combined with a sophisticated analysis engine that allows building owners and managers to better calculate and evaluate the ROI on different building energy efficiency initiatives.

A major advantage to working with Pike Research is our expertise in both legacy and nascent cleantech markets, with each analyst focusing on specific areas of coverage. Where the real value-add comes into play is when Pike analysts bring to the forefront their knowledge on adjacent markets. This is especially true for the smart building industry when analyzing potential M&A opportunities and is deeply relevant for Building on Grid (BOG) markets. With so many channels for vendors to get into the building and onto the grid, the space is defined by fierce competition between age-old rivals in the building and building automation space. Another defining characteristic of the smart buildings market and the players associated with it is the co-opetition that occurs. Players like IBM and HP are getting into the buildings through partnering with more traditional smart building vendors like Johnson Controls, Inc. (JCI) and Schneider. Additionally, there are many small companies with sophisticated technologies at the starting line of the BOG market and many companies are waiting to see who has the longest legs before moving in for M&A opportunities.

There are many ways companies can get into the building and onto the grid. Over the next few blog posts I’ll look at several.

Demand Response:

Pike Research believes that DR will become an application within a company’s energy management platform. Players from adjacent sectors will enter the market and either capture market share in the DR space or acquire the smaller, high tech CSPs, bringing greater revenues and attention to the DR market. The companies in adjacent markets are already touching customers who demand energy efficiency products, solutions, and services, and can therefore capitalize on existing customer relationships. These players would come from a number of other markets, including, but not limited to:

• Building Management Systems
• Energy Management Systems
• IT
• Carbon Management Asset Management Microgrids Communications

The demand response business model as a pure-play market will not last through the decade. Rather AMI deployments, building energy management systems (BEMS), and other smart grid technologies will be implemented, enabling dynamic pricing structures and more sophisticated energy management applications that will provide demand response as a piece of a turnkey solution.

Most influential in spurring this shift from traditional load curtailment and peak load shifting will be the entrance of BEMS, BMS, and IT players who currently do not offer curtailment as a standalone service. BEMs from Johnson Controls, Honeywell, and Siemens will continue to provide the electro-mechanical building optimization services they have historically offered, with a more acute focus on energy management. Additionally, these large OEMs will partner or acquire specialized energy efficiency technology companies with deep analytical abilities, such as the energy efficient HVAC vendor, Optimum Energy.

The entrance of BMS players who do not currently provide clients with standalone DR will also shake up the industry. Firms like Minneapolis-based Verisae will provide both software-as-a-service (SaaS) and a software play increasing visibility to the building, or a portfolio of buildings, and enhancing building optimization. Specific to Verisae, they will provide end-users with a BMS (of which DR is a component), asset management, and carbon management – all on the same backbone.

Additionally, the major IT companies, notably Cisco and IBM, are currently analyzing the smart building space. They will majorly disrupt the traditional DR market, providing devices that will be deployed on an open network that is integrated with a BEMS. This will increase the amount of granular energy consumption data, expanding the opportunity for DR services. The powerful combination of Cisco’s EnergyWise switching technology with IBM’s Tivoli software will manage consumption of IP-compliant devices on the network – managing BEMS assets (HVAC, lighting, security) and providing real-time-pricing (RTP) DR.

M&As of Note: EnerNOC acquires SmallFoot: The SmallFoot acquisition will strategically place EnerNOC in a position where the firm can address the small commercial energy management industry. SmallFoot technology will allow for demand control solutions within the EnerNOC offerings of DemandSMART, SiteSMART, SupplySMART, and CarbonSMART.

Constellation Energy acquires CPower: This highlights the first of many acquisitions by ESCOs in the DR space. Constellation will be able to slot CPowers DR capabilities into an energy efficiency suite, which will help keep ROI periods shorter and long term energy performance contracts (EPC) at bay.