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Cheap energy - a game changer for BEMSOctober 2013

Andrew Giles, Director of Worldwide Market Intelligence, BSRIA
There is much in the press these days about the fracking of shale gas, its promises and the potential risks. The US has forged ahead with its exploitation and is starting to reap the benefits of significantly lower energy prices. This piece does not set out to debate the rights or wrongs of pursuing this path, but rather, presents a scenario, perhaps 5, 10 or 15 years from now, assuming that its exploitation has become a reality and asks the question: will organisations invest in building energy management systems if an abundance of cheap fuel means prices are low or even fall? Furthermore, will government have the appetite to enforce its carbon reduction plans if cheap, abundant fuel boosts industrial investment and generates high levels of employment?

Today, the majority of new buildings, and an increasing proportion of renovated buildings are equipped with a range of building controls, automation and energy management systems. These are designed to take care of, in the first instance, basic comfort control requirements and to ensure correct operation and sequencing of heating, ventilation and air-conditioning plant. As these systems have evolved, the software that controls them has become increasingly sophisticated. This has been in response to the desire for better performing buildings and improving the productivity of their users, so that today we regularly speak of “intelligent” and “smart” buildings.

At the same time, as energy costs have risen, operators have come under increasing pressure to use these systems to reduce the amount of energy the connected plant is consuming. This has been achieved through a range of optimising techniques, including time scheduling, set point reduction, and system offsetting according to external conditions, to name just a few.

The other driver has of course been that of protecting the environment. Concern about global warming has led to a raft of climate change policy, strategies, legislation and regulations all aimed at reducing the carbon footprint of buildings. It would not be possible to meet current Building Regulations without the implementation of building automation and energy management technologies.

This has led to a whole new range of cleantech businesses in a drive to develop and install more renewable energy technologies, both within and remote from buildings. There is now a diverse range of offerings, from dedicated energy management software for buildings, energy consultancy, specialised energy procurement, energy retrofits and bureau services to monitor and manage clients’ energy usage. In some countries suffering strains on energy supply due to utilities’ aging infrastructure and limited generating capacity, in particular North America, new businesses have grown up where load aggregators offer demand response and load shedding services to utilities, with the building owners benefitting from monetary incentives.

Now imagine, as a result of the discovery and exploitation of shale gas, the cost of energy plummets or even just flattens. It is clear that in a world of abundant and cheap energy supply, a key driver for active energy conservation will have disappeared. What is uncertain is what the policies of Government will be towards maintaining the carbon reduction agenda. This is a battle that is likely to be fought on the basis of political ideology but in view of the existing momentum for climate protection, it seems most likely that a balance will be struck between investment in industry, jobs and reduction of CO2. In the conflict between market-driven and legislation-driven carbon reduction, the question will be whether or not the Government have got the stomach for the latter.

So where does this leave the smart and intelligent buildings industry? The big themes today can be encapsulated in the acronym SMAC - Social media, Mobility, Analytics and the Cloud. These are starting to have a real impact on the smart and connected buildings community. They are redefining our understanding of a smart building and its meaning in the context of smart cities. More importantly, they go beyond the realm of just energy efficiency and energy management. They enable us to maximise operational efficiency, occupant satisfaction and productivity.

The US now has the cheapest gas market in the world because of its domestic shale gas production, with lower electricity prices resulting from the increased gas supply, energy efficiency upgrade growth is expected to slow because of a longer return on energy efficiency investments. Recent low electricity prices have also caused reduced demand for renewable energy alternatives and in fact flat electricity prices have resulted in several wind and solar power projects being shelved. Consequently, growth in efficiency programs will need to go beyond just energy and include more operating and asset improvements. Furthermore, the trend towards more “green” and energy efficient buildings may slow because of the weakening of energy prices.

Anecdotal evidence from recent BSRIA market investigations suggests that the whole US energy efficiency market may not be growing at the rate BSRIA and suppliers would have expected and this has prompted us to take a closer look at the growth rate in our 2013 in-depth study of the North American building automation and control systems market.

The UK is not the USA - it is highly likely that we will not have the freedom to exploit shale gas at either the same pace nor scale (as them) if only because we have different mineral rights models but a world of cheaper, or flatter energy prices will be a game changer for building automation and energy management systems. It seems unlikely that it would sound the death knell for the intelligent building controls industry. The industry is evolving, taking on new shape and form, with new players and changed suppliers and there seem plenty of opportunities for the future.

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