Building energy management systems – The route to net zero

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Summary

The implementation of building energy management systems (BEMS) will continue to increase. National net-zero emissions policies coupled with corporate environmental, social, and governance (ESG) goals act as catalysts for this drive toward better energy management and the reduction of energy use in buildings.

Net-zero emissions targets

Net-zero emissions targets have risen to the top of government and private sector policymakers’ agendas worldwide. Most nations have set 2050 as their targeted date to achieve net-zero emissions. To ensure that targets are met, decarbonization measures are being enacted and incorporated into legislation. Nations are also enacting policies aimed at generating energy from renewable sources and legislation aimed at reducing emissions in energy-intensive industries. As a result, Omdia believes that BEMS will play a key role, as they can help lower the energy intensity of buildings and achieve wider national net-zero emissions targets.

Environmental, social, and governance policies

ESG policies are acting as a key driver in the future direction of corporations. ESG criteria, such as employee well-being, energy reduction, and ethical working practices, play an influential role in the investment community's financial decisions. The environmental aspect of ESG metrics has resulted in sustainability and carbon reduction targets being driven from the C-level. The achievement of these sustainability targets is not only being driven by investors, as corporations are also witnessing increased demand from their customers and employees. The use of BEMS will play an important role in helping to achieve these targets.

Implementation

End users are driving the shift in the business models of solutions providers. These users are embracing BEMS in various ways, which has created a need for more flexible and scalable solutions. In this context, the BEMS market is leaning toward the provision of software as a service (SaaS) and cloud-based systems. In addition, collaborative service offerings within the market are also on the rise.

Software as a service

The demand for BEMS software being provided through an SaaS model is being driven by building owners and operators, resulting in vendors adjusting their business models accordingly. Skilled personnel shortages, increased IT involvement in BEMS, and flexibility requirements are all helping to push this demand. The shortage of skilled personnel who can use BEMS is driving the implementation of SaaS business models. It allows building owners to focus the time and money needed to find qualified staff into other avenues, leaving the management of the BEMS in the hands of the software providers. IT departments are also becoming more involved in decisions concerning BEMS solutions. As a result, products offered under a SaaS model are increasingly being sought out, as these departments are more familiar with buying software in this way. Finally, the flexibility provided by an SaaS system is more appealing to end users, as they can adjust the services that they require on an ad hoc basis.

Moving to the cloud

BEMS software providers are driving the move away from the premises to the cloud, as an increasing number of companies are now offering purely cloud-based solutions. Customers are also playing a role in this shift to the cloud, as they are starting to understand that these cloud deployments provide greater flexibility, scalability, and convenience. In terms of energy management and sustainability, cloud solutions allow users to get a more detailed outlook of their buildings. The cloud enables users to store and process more data points, which also allows them to get a more granular information around the energy intensity of their buildings. Increased cloud-based system implementations are influenced by the trend of building owners trying to connect their facilities across a single smart portfolio or multi-site facility management software. Geographical differences in view of the cloud are causing this shift to move at different rates across the world, with North America leading the market for cloud-based suppliers in the energy management space.

Collaboration

Collaborative agreements between software providers and service companies are becoming more commonplace and helping to offer a complete solution to the market. Competition for building management projects has historically been fierce, but more end users are combining product offerings from market participants due to an increased demand for interoperability. Competitors are gradually learning to collaborate in order to provide more comprehensive solutions that leverage each other's strengths to meet the needs of end users.

In energy management, pure software suppliers understand they lack the resources to provide personnel who can physically apply modifications at the building level. Due to this, software providers collaborate with service firms to supply on-the-ground personnel who can use the software's insights and recommendations for their day-to-day operations. This collaborative working arrangement has been put into practice by C3.ai and Engie at the Ohio State University campus. Ohio State University signed a 50-year Comprehensive Energy Management Contract with Engie, which includes a target of increasing energy efficiency by 25% at the campus over 10 years. Engie and C3.ai formed a partnership to work on this campus, developing the "Smart Institutions” service. This service uses artificial intelligence (AI) software to help the university achieve its sustainability and financial objectives through energy optimization, capital planning, and campus engagement.

Figure 1: BEMS business models Source: Omdia

Barriers

Demand for BEMS software is set to continue to increase; however, several barriers are slowing this growth. Issues concerning the burden of cost, cybersecurity, and selection of the right system are acting as a hindrance.

Costs

The problem of who pays for implementing BEMS can occur in tenant-occupied buildings. Demand for such systems comes from the tenants seeking to reduce their energy usage from a sustainability and financial perspective. However, tenants do not have control over implementing such systems and feel the burden falls on the building owner. There is very little incentive for landlords to make the necessary investments needed to implement BEMS, as the tenants cover the costs of energy use in the building. Furthermore, investing resources into such systems would only make sense for landlords if their facilities were located in a competitive market where attracting tenants was a priority.

One way this issue can be overcome is if tenants provide financial support for implementing these systems. However, it is also unlikely that most tenants would supply this support unless they are guaranteed to remain a party in their lease. This divide on who pays is limiting the implementation of BEMS in tenant-occupied buildings. As a result, solutions providers are targeting owner-occupied buildings, as they find it easier to sell their services to them.

Cybersecurity

Organizations are becoming more conscious of the importance of cybersecurity, and the number of security standards that consumers are looking for is increasing. Concerns around the security of BEMS software are acting as a growth barrier. Software vendors have stated that conversations with customers are increasingly focusing on the security of their product, and there is a greater need for them to convince customers that their product is secure. Vendors are doing this by obtaining Cyber Essentials and Cyber Essentials Plus certifications, and ensuring that their software meets ISO 27001 standards. However, cybersecurity is a complex issue that lacks a simple solution, and has many disparate standards and certifications; therefore, vendors are investing an increasing amount of time and money in this space.

Confusion

The BEMS software space has become a confusing arena for building owners and operators. These customers have a variety of different solutions that they can select; however, this is a hindrance to the market's growth. The market remains fairly fragmented, with a plethora of companies developing smart building technologies, including driving efficiency and energy savings through building automation and lighting systems, hot-desking, occupancy monitoring, and space utilization applications. The abundance of choices creates a situation in which these customers are not sure about what solution is right for them. As a result, they are delaying their decisions, as they would rather not choose a system instead of choosing an incorrect one. This creates a problem for suppliers, as they are left in a situation where they are not sure if potential customers will go ahead with their offer. Further consolidation should enable a more optimized and integrated approach to smart building projects.

Figure 2: Barriers to growth Source: Omdia

The future

The future of the BEMS market will be driven by participants from the corporate level to the operations teams. Sustainability targets will play an influential role in driving the greater implementation of these solutions. Suppliers recognize this ever-increasing need for their solutions, shifting their business models, and providing more flexible and enhanced services.

Appendix

Author

Bahzad Ayoub, Senior Analyst, Smart Buildings & Energy Infrastructure

askananalyst@omdia.com