Buildings and Facilities Energy Efficiency Insights: Part 1

Industry Expertise

Over the lifetime of a building, up to 75% of its costs will be associated with operations. That can translate to 10-20 percent of annual indirect expenses in industries such as retail, real estate, transportation, and manufacturing where managing facilities is a key aspect of doing business. Advances in Internet of Things (IoT) technologies offer opportunities reduce these costs by optimizing operational elements like maintenance, occupant experience, and energy consumption. However, IoT adoption lags in the buildings and facilities management space.

We sat down with energy and technology expert Kevin Klustner to discuss the state of buildings and facilities management as well as insights around optimizing energy efficiency. Kevin is the executive director of the University of Washington’s Center for Advanced Materials and Clean Energy Technologies (CAMCET). His past experience includes executive roles at a variety of companies in the technology and energy spaces. Prior to CAMCET, he was the CEO of Powerit Solutions, a cloud-based industrial energy efficiency platform, which was acquired by Customized Energy Solutions. Kevin has also served as CEO of Verdiem, an energy efficiency software company, and Chief Revenue Officer of Witz, a national construction company.

Part 1 of our conversation follows below. Part 2 is available here.

Bsquare: At its core, is buildings and facilities management really about energy management? In other words, for companies in this space—be it a bank, retailer, manufacturer, or grocery store—is it actually about optimizing energy use and operations?

Kevin: In any facility you’ll find all kinds of control systems, whether it’s to manage the production line, HVAC, refrigeration, you name it. So, there are a lot of things that require power inside these buildings, making energy an important part of overall management. However, it’s not the only important part.

Bsquare: Are energy issues at the top of the list for businesses operating in the buildings and facilities space?

Kevin: It depends on the industry. For instance, in manufacturing, the answer is no. At any plant, production is at the top of the list. It’s the key to the business, and the production managers on the manufacturing floor don’t want anything to screw it up. That’s not to say energy consumption isn’t material to the bottom line, but any initiatives to improve efficiency cannot impact production. Installing other types of systems and controls makes them very nervous unless it’s blessed by their experts.

Now with commercial buildings, I think it [energy management] is a high priority because energy represents such a big portion of expenses. Furthermore, the systems inside a commercial building are much less complicated than those on a manufacturing floor, and installing energy management systems doesn’t run the risk of damaging the core product. So, in that area, I think energy management can rise towards the top of the list because of the potential cost savings. You can impact the bottom line and integrating won’t screw anything up—you’re not going to shut down production, for example.

Bsquare: Over the last 15 years, have you seen any consistent, ongoing, commonplace obstacles that companies run into when it comes to energy management?

Kevin: That’s a broad question, but yes. The “don’t mess with my production line” attitude I just mentioned is one of the most prominent examples. That output prioritization mindset isn’t going away, so finding a solution that works seamlessly with the existing control systems is critical.

To overcome this roadblock, it’s helpful to understand how those existing systems ended up on the production line in the first place. OEMs like Rockwell Automation and Johnson Controls built up multibillion-dollar businesses selling instruments, controls, and software into the manufacturing space. This didn’t happen overnight. These companies spent a long time with experts and have developed an expertise and credibility inside the manufacturing world. Now plant managers will take their recommendations, especially if they’re already using products from the same OEM in other areas of process control.

Companies should look for the same commitment in an energy management solution. Has the solution vendor put in that effort to build up credibility in your respective industry? Will they send technical people, experts on site to really work with your SMEs to figure out the best way to implement a solution?

Major players in control manufacturing have not necessarily integrated energy management into their product lines yet. I think they want to do that and partnering with companies specializing in energy management is the logical next step. Integrating an existing energy management system into process controls that are already in place can help these bigger, established OEMs to bring solutions to market on a shorter, more efficient timeline.

The capital outlay associated with integrating into the production line is also a big obstacle, and always has been. These systems can go for upwards of $150,000 to $250,000. Yearly budgets don’t necessarily include a line item for energy management, it’s an afterthought. The problem is that energy management is viewed as really nice to have, but it’s not a must-have. And a lot of the times decision-makers have never even budgeted for anything like that, so ignorance of how to even find the money compounds the problem.

Lack of awareness is a major underlying issue. Energy management is not necessarily top of mind in day-to-day operations at a steel plant or food processing plant. They’re focused on production and want to leave those systems sacrosanct. So, to initiate the mindset shift that an energy solution won’t screw up production and warrants a budget line item, an organization must first recognize that this is a problem they need to solve and there are competitive benefits to doing so.

That said, energy management is starting to crawl up the ladder in terms of mindset and awareness. More and more companies are setting sustainability goals and energy consumption goals. It’s good timing to begin thinking about this because I think energy consumption will become a mainstream business concern that we’ll begin to see incorporated into the planning for all kinds of new buildings and facilities, such as production plants and office parks.

Bsquare: What factors do you believe are driving the increase in awareness? Business demands, climate change and environmental sustainability, some combination?

Kevin: Well, external sustainability drives corporate decisions in terms of doing something to address the issue. Once a company embraces it [sustainability] and sets a goal to reduce its carbon footprint by 50%, then it becomes a key performance metric. And that’s when new line items start to show up in the budget. This forces production managers to think about energy consumption and how to manage it in the context of their production facilities.

Of course, it’s a little bit different with buildings outside the manufacturing sector, because the landlord doesn’t pay the electricity or energy bills. They just pass it along to the tenants. That said, green buildings—and energy efficiency by extension—are increasingly becoming a selling point. So now construction of energy-efficient new buildings is on the rise, which requires better overall controls and energy management systems built in from the start.

Check out the second half of our conversation with Kevin Klustner. There, we’ll dive deeper into the application of technological innovations and energy management in buildings and facilities.