The ability to integrate technology and scale effectively will provide great value to building owners and providers of technical building services.
Buildings account for nearly 50% of the nation’s energy use, 40% globally. Significant economic value can be created by making buildings more efficient. In the process of becoming more efficient, buildings often become better-functioning, more comfortable and safer.
One high-value energy efficiency measure is to ensure building systems (HVAC, controls, chillers/boilers, lighting, distributed generation, power quality and reliability equipment, etc.) are interacting and functioning as designed and in an optimal fashion. Building systems can become out of tune, working against each other and functioning suboptimally. Many buildings were never in tune to begin with. Commissioning services tune up building systems, saving money, increasing occupant comfort and safety, and optimizing building performance. Commissioning services are often categorized into three areas (see Exhibit 1):
- Commissioning (Cx) refers to the initial commission of new construction or major retrofits.
- Retrocommissioning (RCx) refers to applying commissioning techniques to an existing facility that has become inefficient.
- Monitor-based commissioning (MBCx) extends the idea of RCx by using technology to continuously monitor building systems and keep them functioning optimally. MBCx is sometimes referred to by alternative names, such as continuous commissioning or persistence commissioning.
Along with the advancement of technological applications, all types of commissioning continue to evolve and grow, providing an increasingly valuable service to building owners.
Discussions confirm that the industry is changing quickly with the adoption and utilization of new technologies. This integration is creating new, comprehensive service offerings and delivery systems. The evolution of commissioning services will produce increased value to commissioning businesses and building owners alike.
The demand for Cx services has experienced strong growth over recent years. Solid demand for new building Cx persisted through the most recent construction downturn, as its value was increasingly realized by project owners and managers. As the construction market picks up, so too will the demand for Cx services.
RCx, on the other hand, relies on an established and aging building stock in place. An average RCx project saves between 10% and 20% of energy costs, and often has a payback period of around one year. This investment provides cost savings for three to five years (before losing its effectiveness) and has an average cash-on-cash return on investment of more than 90%. At an average cost of less than $1 per square foot, the investment in RCx is typically considered low-risk and high-return for both the customer and the service provider. In its aggressive modeling scenario, Pike Research predicts that the market for RCx services in the U.S. could be worth more than $1.8 billion by 2014 (see Exhibit 2).
The opportunity for the industry to grow domestically is large. The stock of existing buildings still untouched by commissioning services provides domestic growth opportunities for many years to come. In 2010, more than 81 billion square feet of commercial floor space in the U.S. existed, and this is projected to grow to more than 100 billion square feet by 2035.
The opportunity for RCx to add value to building owners renews itself over time, as systems age and move toward imbalances and technologies improve. This dynamic naturally leads to MBCx — continuously monitoring and balancing buildings to operate in an optimal fashion. Accordingly, MBCx is thought by many industry participants to become the highest growth sector (based on revenue percentage) of commissioning services.
The market of commissioning service providers is currently fragmented. Cx and RCx services are provided as part of comprehensive offerings of large firms or as individual services by smaller companies. Increasingly, commissioning services are part of the solution set offered by larger organizations, such as multinational mechanical controls providers and engineering firms. “They are trying to be the one-stop shop not just for the systems, but for the services,” states Kelly Decker, president of Primary Integration, LLC, a leading commissioning and sustainable operations services provider, in reference to these larger entities. The need for talented and experienced commissioning professionals and a record of project success has led many international conglomerates to seek acquisitions involving established commissioning businesses.
International opportunities are abundant as well. Decker believes the U.S. is a clear leader in the commissioning industry. The growth of commissioning services as part of larger offerings by multinational companies is a way to bring the leading knowledge and processes currently applied in the United States to other areas of the globe. As Decker put it, “In the rest of the world, the opportunities are huge. They are [several] years behind us in their processes, yet they are all attempting to use the latest and greatest technologies.”
Demand for Cx, RCx and MBCx services can be attributed to a number of drivers as shown in Exhibit 3.
In addition to cost savings, reliability is an increasingly important driver for building commissioning. Properly tuned systems have a lower chance of failing. Hospitals, data centers, certain military installations and similar mission-critical facilities cannot afford systems failure or downtime. Many commissioning firms focus heavily on the energy-savings equation, but Decker has found commissioning services are driven by both reliability and energy savings. While mission-critical facilities need to function flawlessly, they also seek to improve their power usage effectiveness (PUE).
THE EVOLUTION TOWARD MBCX
Service providers are deploying software-based monitoring systems, allowing for a real-time view into building systems and operations and the application of analytical tools. Such monitoring and analysis allow imbalances and suboptimal systems performance to be identified and addressed on an as-needed basis. Instead of retrocommissioning a building every five years or so, the building is under continuous review, increasing and sustaining the effectiveness of the commissioning services. On its website, SCIenergy, an international energy management company headquartered in the U.S., describes MBCx this way: “MBCx systems will give a building operator the ability to preserve the results achieved through retrocommissioning so that this year’s low-hanging fruit becomes a self-sustaining orchard of savings.”
The wider adoption of monitoring and analysis technology has the ability to change the business model significantly from routine and scheduled inspections to an ongoing MBCx service. Numerous software-based solutions are being developed and marketed to help lower building energy use and maintain reliability and performance. This push towards automated systems is still in its early development, but it is generally expected to have a significant role in optimizing building functionality over the longer term.
In addition to large controls companies, providers such as SCIenergy, Northwrite and many others are among the ranks of the companies offering software solutions to help enable MBCx-related services. The emergence of these systems allows for more choices for the service providers who leverage the use of software with their building system expertise.
TECHNOLOGY AND PEOPLE MATTER
While digital solutions have the ability to measure and monitor the building through sensors and data streams, they cannot always pinpoint, analyze and address problems that an on-the-ground engineer can. “There is a lot of push from the software industry to make everything into a software problem, and buildings are hardware and you need people to look at them. What we need to find are ways to make use of software and automated systems to assist our efforts, but there are a lot of things that need to be done by someone on-site who knows what to look for,” states Jim Kelsey, president of kW Engineering, an independent provider of energy engineering services specializing in commercial, institutional and industrial mechanical systems. This is especially true due to the wide range of building systems, old and new, that exist in today’s building stock. There is no one-size-fits-all option. Liz Fischer, executive director of the Building Commissioning Association, confirms that much of the existing building stock does not have the modern (digital) control infrastructure required for effective MBCx. Accordingly, there is a balance of software solutions and on-site engineering talent required to address market opportunities.
Engineers need the right experience and skill set to be successful in providing commissioning services. Jim Kelsey states, “Web-based project logs and iPad apps are helping make the commissioning process more streamlined, and as the industry integrates these technologies, the most valuable applications emerge and gain broad acceptance. This tech adoption can have an immediate fiscal impact.” This posturing around new technologies sets the stage for the future of the industry. As Mark Miller, principal of Strategic Building Solutions, states, “There are some challenges along the way for the adoption of technology, but ultimately, I think it will be a benefit. We are still early in technology adoption, and I don’t think we have achieved the full benefits yet.”
The ability to integrate technology with talented engineering resources and scale effectively will provide great value to building owners and providers of technical building services. Successful energy service companies (ESCOs), commissioning service providers and other building service providers are taking note of the new technologies available and utilizing those that allow them to best improve their service or add additional offerings.
Tim Huckaby is a managing director with FMI Capital Advisors, Inc. He can be reached at 303.398.7265 or via email at email@example.com. Russell Clarke is a research analyst with FMI Capital Advisors, Inc. He can be reached at 303.398.7249 or via email at firstname.lastname@example.org.
1 Pike Research: Energy Efficiency Retrofits for Commercial and Public Buildings, 2010