Costs, Savings, and ROI for Smart Building Implementation

I’m pleased to welcome guest blogger Steve Raschke to the IoT@Intel blog. Steve is the chief executive officer of CANDI and has over two decades of experience leading teams focused on networked data and building control systems. He has authored numerous patents, white papers and industry articles, and holds awards for innovations in control systems and electronics. Enjoy the read!

Costs, Savings, and ROI for Smart Building Implementation

Candi CEO Steve Raschke

Steve Raschke

A fundamental shift is occurring in building controls. Driven by a new generation of affordable, powerful Internet of Things (IoT) devices, commercial buildings and industrial sites can now generate large amounts of valuable data for analytics and automation. And building owners and managers reap the benefits.

This granular new data and control capability lets them fine-tune processes at a greater number of building systems to lower energy and maintenance costs. It also lets them invoice tenants accurately for their utility use, and can increase tenant appeal with improved comfort and sustainability. The resulting savings from IoT-based energy management alone can provide compelling return on investment (ROI), even for buildings under 100,000 square feet.

Building energy management systems are critical but complex

According to the U.S. Green Building Council, buildings consume 70 percent of the electricity load in the United States., and account for 39 percent of U.S. CO2 emissions. Data from the Department of Energy shows that buildings account for 40 percent of U.S. energy use  and waste 30 percent of the energy they consume. Altogether that’s a massive amount of the annual energy used and wasted and excess carbon produced in North America, reaching over $100 billion in operational costs per year.

Hundreds of millions of square feet of real estate and millions of remote equipment assets are not monitored or managed at all for energy or operational savings.

Building management systems (BMS) or building automation systems (BAS) are the traditional solution to addressing the problem of energy waste. Companies such as Johnson Controls, Trane, and Honeywell make excellent, sophisticated BMS systems tailored for applications in very large buildings, typically focused on HVAC system management. Unfortunately, BMS is traditionally expensive, complex, and requires specialized installation, programming, and maintenance.

The average cost to deploy a basic BMS is at least $2.50 per square foot and can be as high as $7.00 per square foot, equivalent to at least $250,000 for a 100,000 square foot building. The very high cost of traditional BMS means ROI is a challenge for all but the largest buildings; often it takes at least four years to recover the cost of a BMS installation.

Low ROI limits the willingness of owners to invest in BMS deployments in over 90 percent of buildings. Where BMS is deployed, it is usually only to control the HVAC system in high-traffic areas in the very largest buildings, well over 100,000 square feet. And these buildings make up only 10 percent of the U.S. commercial real estate stock. Even in these buildings, BMS usually isn’t applied to low-traffic areas such as warehouses, stockrooms, or garages, or to distributed equipment such as pumps, generators, or parking lot lights on campuses and industrial sites.

This leaves about 90 percent of the total building stock in the United States without any smart technology installed. That’s hundreds of millions of square feet of real estate and millions of remote equipment assets that are unmonitored or not managed at all for energy or operational savings.

IoT shift overcomes capital barriers

So what about all the energy being wasted in the other 90 percent of buildings? Solutions are now arriving in the form of IoT-generation connected devices. Advancements in sensor and controls technology enable a new wave of advanced, non-invasive, cost-effective, and quick-to-install products. Because properly installed and connected IoT products can overcome the capital barriers of installing traditional BMS, a vanguard application for these devices is for energy management in buildings and remote equipment.

For the first time, these new products can be cost-effectively deployed by non-specialized personnel to extend the reach of existing BMS systems, or even begin to replace BMS in mainstream applications in under-100,000 square foot buildings. The “big data” these new IoT devices generate can be gathered into cloud-based management and analytics services via existing networks, and the devices can be easily monitored and controlled by facilities managers via smartphones and tablets.

Focusing on HVAC, lighting, and some types of electrical loads, it is reasonable to expect savings in the range of 10 percent to 25 percent when implementing proactive energy management programs in mid-sized buildings.

Costs, savings, and ROI for new IoT energy management systems

Costs to add IoT-based controls and monitoring to a building can range from as little as $5,000 to $50,000. That’s a fraction of traditional BMS costs. IoT is still a new industry, but CANDI sees IoT energy management system prices averaging around $0.75 per square foot, which is at least 5x less expensive than traditional approaches.

The IoT device deployment process typically requires a systems integrator or in-house electrician and IT network professional. We also recommend including an energy engineering specialist on projects over $20,000 to help plan the strategy, analyze the data, and make recommendations on process optimization and automation in order to maximize savings.

Focusing on HVAC, lighting, and some types of electrical loads, it is reasonable to expect savings in the range of 10 percent to 25 percent when implementing proactive energy-management programs in mid-sized buildings. For a typical 75,000 square foot building with energy bills averaging $2.32 per square foot per year, this equates to an annual potential savings of $15,000 to $50,000 per year. Some buildings in high-load areas such as the U.S. Southwest or on utility peak demand/TOU tariffs can save over $100,000 annually.

ROI from properly-applied IoT sensors, switches, and analytics can occur in six months to two years, a fraction of the time it takes to recoup investment in traditional BMS systems. Beyond the pure monetary savings, additional benefits related to reduced truck rolls, tenant appeal, retention, sub-metered billing, sustainability, and environmental stewardship can also be realized, with detailed data to support them.

Solving the interoperability challenges

Perhaps the biggest challenge to providing cost-effective, high-ROI energy management to mid-sized buildings has been the lack of interoperability between devices. The interoperability problem is compounded by the need to interconnect both legacy equipment in buildings (such as roof-top chillers, electric meters, and lighting control panels) with next-generation “over the top” (OTT) devices such as sensors and switches.

A further level of complexity is introduced in normalizing data across the subsystems, and delivering it accurately and securely to cloud-based services or apps for analytics, dashboards, control, and reporting. There are dozens of protocol standards and literally hundreds of different implementations just among the best-in-class of these devices and services. It’s not uncommon to find 10 or more incompatible protocols, devices, and communications requirements in a deployment for a single building or campus.

The Intel Building Management Platform (Intel BMP), integrated with Candi PowerTools, solves this interoperability challenge. CANDI’s software, built into leading Intel-based gateways, translates communications bi-directionally between IoT devices and the cloud-based services that analyze and act on the data. These CANDI-enabled gateways are quick and easy to install, and operate at a very low cost. This enables a new wave of smart building benefits for the mainstream market such as reducing energy waste and cost, and delivers a compelling ROI to owners, operators, systems integrators, and service providers.

Come see Intel’s BMP, integrated with Candi PowerTools, in action at Intel’s IBcon booth #901

June 21-24, 2016 in San Jose, California.

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Gunjan Rawal

About Gunjan Rawal

Gunjan Rawal is a digital and social strategist with more than a decade of experience at Intel. Gunjan specializes in digital strategy, product marketing, campaign planning and management, and social media marketing,. Gunjan graduated with a BE in Electrical Engineering, from the College of Engineering Pune. You can follow her @rgunjan on twitter.

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