TODAY’S STUDY: THE NEW INTELLIGENT ENERGY EFFICIENCY

Intelligent Efficiency: Innovations Reshaping the Energy Efficiency Market

Stephen Lacey, April 2013 (Greentech Efficiency)

How energy efficiency is evolving into “intelligent efficiency”

The last two major economic revolutions were caused by the convergence of two factors: communications and energy.

In the 1800s, the convergence of printing technology and steam power created the fi rst form of mass communications – bringing with it sweeping changes in literacy and education. In the 1900s, the convergence of radio and television with electricity and the oil-powered combustion engine created the modern consumer-based society we know today.

We are now on the verge of a third revolution, argues economist Jeremy Rifkin. This one will be abetted by the convergence of the internet and distributed energy, creating new ways to do business, communicate, and build wealth. Rifkin calls this a “new economic paradigm for the 21st century.”

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This new paradigm is already reshaping the way we think about energy efficiency. All around us, embedded in every commercial building, manufacturing facility and corporate campus, is a vast, untapped energy resource: efficiency. In the past, that resource was hidden, ignored or misunderstood by the companies sitting on the potential, and recognized only by a small group of energy professionals.

But with dramatic advances in web-based monitoring, real-time data analytics and utilities using peak pricing, that hidden resource is now becoming something tangible – an asset that companies can measure, manage, procure and sell.

This isn’t the stale, conservation-based energy efficiency Americans often think about.

“In the past, energy efficiency was seen as a discrete improvement in devices,” says Skip Laitner, an economist who specializes in energy efficiency. “But information technology is taking it to the next level, where we are thinking dynamically, holistically, and system-wide.”

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This emerging approach to energy efficiency is information-driven. It is granular. And it is empowering consumers and businesses to turn energy from a cost into an asset. We call this new paradigm “intelligent efficiency.”

That term, which was originally used by the American Council for an Energy-Efficient Economy in a 2012 report, accurately conveys the information technology shift underway in the efficiency sector.

The IT revolution has already dramatically improved the quality ofinformation that is available about how products are delivered and consumed. Companies can granularly track their shipping fleets as they move across the country; runners can use sensors and web-based programs to monitor every step and heartbeat throughout their training; and online services allow travelers to track the price of airfare in real time.

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Remarkably, these web-based information management tools are only now coming to the built environment in a big way. But with integration increasing and new tools evolving, they are starting to change the game for energy efficiency.

Although adoption has been slow compared to other sectors, many of these same technologies and applications are driving informational awareness about energy in the built environment. Cheaper sensors are enabling granular monitoring of every piece of equipment in a facility; web-based monitoring platforms are making energy consumption engaging and actionable; and analytic capabilities are allowing companies to fi nd and predict hidden trends amidst the reams of data in their facilities and in the energy markets.

This intelligence is turning energy efficiency from a static, reactive process into a dynamic, proactive strategy.

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We interviewed more than 30 analysts and companies in the building controls, equipment, energy management, software and utility sectors about the state of the efficiency market. Every person we spoke to pointed to this emerging intelligence as one of the most important drivers of energy efficiency.

“We are hitting an infl ection point,” says Greg Turner, vice president of global off erings at Honeywell Building Solutions. “The interchange ofinformation is creating a new paradigm for the energy efficiency market.”

Based on our conversations with a wide range of energy efficiency professionals, we have identified the five key ways intelligent efficiency is shaping the market in the commercial and industrial (C&I) sector:

• The decreased cost of real-time monitoring and verifi cation is improving project performance, helping build trust among customers and creating new opportunities for projects;

• Virtual energy assessments are bringing more building data to the market, leveraging new lead opportunities for energy service professionals;

• Web-based energy monitoring tools are linking the energy efficiency and energy management markets, making efficiency a far more dynamic off ering;

• Big data analytics are creating new ways to fi nd trends amidst the “noise” ofinformation, allowing companies to be predictive and proactive in efficiency;

• Open access to information is strengthening the relationship between utilities and their customers, helping improve choices about efficiency and setting the foundation for the smart grid.

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At its core, energy efficiency is still about the nuts and bolts of changing equipment and improving the physical components of a facility. Information is not a panacea and is not a substitute for the physical integration of new systems. But it is becoming the glue binding the holistic, system-wide approach that is starting to defi ne the intelligent efficiency business.

“It is rapidly becoming much cheaper to measure efficiency and analyze that data alongside lots of other information so companies can actually take action,” says Robert Hutchinson, managing director of the Rocky Mountain Institute. “These information technologies are transforming the efficiency business. They are incredibly powerful.”

Driven by the convergence ofinstantaneous communication and distributed energy resources, the world is entering a new phase of economic growth. The evolution ofintelligent efficiency parallels that larger shift that is now underway. In this report, we detail crucial pieces of that shift…

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The revolution in energy efficiency

“When energy revolutions occur, they require communication revolutions that are agile enough to manage them,” says economist Jeremy Rifkin about the emergence of a third industrial revolution. “You can’t really do one without the other.”

This precisely describes the conditions driving innovation in intelligent efficiency. As communications technologies become mature enough to create meaningful change – perhaps even revolutionary change – in the built environment, a vast number of companies are setting the stage for a new economic paradigm based on distributed energy.

The companies and technologies mentioned in this report represent only a tiny sliver of the ecosystem ofinnovation in the intelligent efficiency sector. There are thousands of companies working to bring low-cost software, cutting-edge equipment, and innovative business models to the efficiency market.

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“This is a world where entrepreneurial, venture-backed companies are colliding with goliaths,” says McKinsey’s Stefan Heck. “This is a really dynamic time as a lot of these technologies compete. In many cases it isn’t clear how it will play out.”

Which companies fail and which succeed may alter the course of specifi c technology adoption. But it will not shift the macro trend underway: the built environment is getting smarter and companies are using the vast new reams ofinformation to increase their level of sophistication in how they deploy projects. In turn, utilities and other energy providers are getting deeper insight into how their customers operate, further boosting the potential for efficiency.

Historically, energy efficiency was a one-dimensional process that involved replacing discrete pieces of equipment. But with instant communications and deep analytical capabilities, efficiency is becoming an ongoing process – one that is connecting energy management, storage, distributed renewables, and traditional efficiency sectors to create a dynamic market. It is also enhancing project performance as real-time monitoring allows for ongoing adjustment and verifi cation across broad portfolios of facilities.

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“Think about what a paradigm shift that is,” says Allen Friefeld of Viridity Energy. “It’s a diff erent way to think about the traditional efficiency customer.”

Energy efficiency is also stereotypically known as being “boring.” That is no longer the case. Intelligent efficiency is making energy visible, turning retrofi ts from something a company “does” into something a company manages like any other physical asset.

Embracing energy efficiency as a dynamic resource is still a new concept for many businesses. But it is happening. Just like new drilling techniques and surveying capabilities are unlocking previously inaccessible resources in the oil and gas sector, information technologies are uncovering a deep well of efficiency reserves and reshaping the way companies think about how they use energy.

We have just begun to scratch the surface of what intelligent efficiency can deliver.

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