Buildings and IoT (Internet of Things)

The evolution of building energy is moving toward more connectedness and control.  The objectives of this purposeful evolution are lowering costs and carbon emissions, while maintaining or enhancing comfort, safety, and reliability.  One innovation that will be key to achieving these objectives is IoT, or Internet of Things.

IoT in the context of buildings refers to a next generation of building controls and components that are connected to each other, and to external controls and monitoring. A key feature of IoT is the ability to automate outputs.  Automation using IoT helps optimize the efficiency of building systems such as heating, cooling, air exchange, lighting, snow-melt, water use, and more.

How IoT Automates

IoT systems and components operate in enhanced feedback loops.  Sensors gather data about heat, light, pressure, mechanical stress, noise, vibration, you name it.  That data is transferred through wires or wirelessly to a controller.  Before IoT, that control often comes from a straightforward PID-type control which attempts to maintain the output (such as indoor temperature) at a target value.

With IoT platforms, the control is more sophisticated, incorporating multiple inputs, outputs, and algorithms.   The computing power and control is cloud-based.  Algorithms make it possible to combine more inputs, and add more output flexibility than is the case with hard-wired frameworks using PID control.  As a result, one can say that the system is “orchestrated” through the cloud.

Examples of IoT in Buildings

IoT can monitor and control features that we don’t think much about, but that can have a material effect on energy costs and CO2 emissions.  For example, for buildings with large glass facades or south-facing windows, the control of window shade positions can make a big difference in energy use.  Window shade positions, and louver angles can be tied to variables such as indoor temperature, room occupancy, time-of-day, day-of-week, time-of-year, and even current and incoming weather.  By automating the control of light and solar heat gain, and radiative heat loss through glass, the building is more comfortable while using much less energy.

Another example of using IoT in a building is controlling the demand for power with a microcontroller. Let’s say that a large building has its utility power disrupted, and it switches over to back-up power, such as a traditional on-site generator or fuel cells.   The amount of power produced may not be as high as is normally consumed through the grid.   With an  IoT platform, a microcontroller can reduce power to motors, pumps, irrigation systems, ventilation systems, etc. that are equipped with ECMs (Electronically Commutated Motors) and VFDs (Variable Frequency Drives), and cut off the power to non-critical (and less efficient) on/off components.

By reducing demand for power, the building reduces energy use, making available back-up fuel supplies last longer. Reducing demand also saves money on equipment costs, by reducing the size of the equipment that’s needed for back-up.

Other Benefts of IoT Platforms

IoT is useful in reducing maintenance and repair costs, as motors and pumps, for instance, can be monitored for on-time, heat and vibration.  When a motor approaches its maximum “pitch count”, or begins to operate outside of its normal parameters, that motor can be fixed right away, swapped out right away, or added to a maintenance schedule so that it doesn’t create an unexpected shut-down at an inopportune time.

Furthermore, older equipment that continues to run within normal parameters can be kept in service, rather than doing the “safe” thing and taking it out of service early in order to avoid those unscheduled, and costly shut-downs.

Extra:  Integrating IoT with BIM (Building Information Modeling)

BIM is the 3-D modeling of a building process using specialized software.  This software makes the building process easier, by streamlining the information stream  (e.g. system design, engineering changes, etc.) that’s created and used for building a building.

BIM software programs (or SaaS) give more flexibility to the process of building a building because information can be kept up-to-date in real time, and can quickly provide cost scenarios for different options. These programs can also help to reduce costs and implementation errors.

As an increasing part of large building structures and systems, IoT platforms and infrastructure need to be integrated with these software programs.  As IoT continues to evolve, BIM needs to adapt and account for these changes.  This is a challenge that will be made easier as dialog and partnerships evolve along with the underlying technology.

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Resources: A further resource for IoT-related subjects is IoT Hub

Control and Reduction of Peak Power Loads

Peak power loads are high points, sometimes spikes in demand for power. Peak loads are a problem for utilities and their customers alike. For utilities, peak loads must be balanced with supply to avoid power shortages. When the utilities can’t respond quickly enough with their own power, they need to source power on the open market, where price spikes of 1000% or more are possible. Utilities will often attempt to reduce the occurrence of demand spikes by charging power users higher rates for peak power. It’s then incumbent on the customer to reduce or eliminate spikes in power consumption to avoid those charges.

Peak Power Background

In buildings, peaks in power usage are often, but not always associated with a high demand for cooling on summer afternoons. Aggregations of power users all using their air conditioning at the same time result in demand peaks. It shouldn’t be surprising that these aggregations of power consumption are hardest to control because they are all independent of each other and are all responding to the weather, which is out of their control. On the other hand, larger consumers of power may be better able to reduce their peak power consumption by taking steps to reduce power purchases during these peak times. This is possible either by anticipating power peaks and taking proactive steps to reduce demand from the utility during those times, or by supplementing with other power sources.

Utility Rate Structures for Power

Energy Rate

Utilities charge for the power they produce by charging for delivered energy. Energy in the form of electricity is sold in units of kilowatt hours (kWh). Along with a charge for distribution, the energy charge covers most of the costs incurred by the utility for the power it produces and delivers. What these charges do not cover are the added fixed and variable costs associated with peak power production and delivery.

“Demand Rate” for Peak Power Consumption

Where the utility has reliable base load but is challenged in meeting peak loads, they may institute a demand rate billing structure. The demand rate structure imposes a higher charge for power consumption at peak times. The demand rate structure is common in industrial and large commercial application, and has been seen in some residential applications as well.

Responding to Demand Rates

As utilities impose demand rates as a response to their challenges is meeting peaks in demand, a logical response by the customer is to lower demand at those times. If a utility charges different rates depending on time of day, the natural response is to buy energy at the less expensive time of day, and use it when rates are higher. An example of this is when a power buyer makes ice at lower rates, and then melts the ice for cooling purposes during peak rate hours. This is great for cooling, but if electrical energy is what’s needed at peak hours, then other solutions are needed.

Combined Heat & Power (CHP)

CHP is a technology that large energy users can turn to for producing their own economical baseload power, while also reducing peak levels of purchased power. As described on the CHP post, the technology can be cost-effective on its own, in economically producing heat and power, and by increasing the reliability of power. The cost savings CHP can offer by avoiding costly demand rates can also be compelling.

SCADA

Demand control for large energy users can also be accomplished with SCADA applications. From a simple metering device with peak demand warning to a full monitoring network, SCADA can be used to reduce power usage automatically or manually, as needed. This type of demand response is appropriate in situations where reducing power consumption in an ad hoc manner is realistic. Therefore, this may not be a good option for hospitals, hotels, and commercial buildings.

Throttling down, or completely shutting off power to one or several powered items is called load shed. It makes sense to shed load from one application in order to temporarily provide load somewhere else, and when the power is constrained in some way. The constraint may be peak power pricing, or it may be a limitation in the power infrastructure. In any case, load shed is most often a temporary measure, and SCADA can be used in that way.

Conclusion

Building owners and operators have multiple avenues available for reducing energy costs through peak shaving. Having a working knowledge of these options is a step in the right direction. Contact CIMI Energy for support in your quest to reduce your energy costs.

Additional Resources

An industry group called the Peak Load Management Alliance exists, with more detailed information about peak loads and demand response.

Building Energy: Evaluate, Plan, and Act


An evaluation of energy use, energy assets and systems is a worthwhile undertaking for any large user of energy. Whatever the end use of the energy in question, a thorough evaluation provides a foundation or baseline for any planning and action that takes place after. Although the focus of this post is on building energy, the takeaway is equally valid for energy used to support industrial processes.

The goal of an energy evaluation is have enough information to create a strategy that upon implementation leads to lower costs and equal or better reliability. To find the best course of action for reducing energy costs and increasing reliability, an organization should make that evaluation comprehensive. To be comprehensive, think broad and deep. It should cover all aspects of power and heat consumption, including historical and anticipated consumption data, energy pricing, equipment condition, maintenance requirements, reliability, location, and so on.

How to Begin

Choose a Evaluation Plan

It may not be clear at first, but a decision will need to be made about whether the plan will include outside help. An internal team may be sufficient for when the broad set of energy assets are still in good operating condition, and if energy costs are satisfactory and a relatively small part of the budget. On the other hand, when energy costs are significant, and/or assets are unreliable, and causing extra maintenance, it’s probably worthwhile to bring in an external team. The external team adds some costs, but also brings expertise, and leaves the home team with the time to focus on their jobs.

In any case, an evaluation will start by evaluating energy assets as deployed at present.  Look at the condition of those assets and factor in the amount of maintenance that’s required to keep them in working order. Connect those energy assets in the evaluation with energy consumption and pricing data.

Also consider your building’s energy needs at present, and anticipate what they will be in the future.  Consider the expected remaining life expectancy of the equipment.  Prioritize which needs are most urgent, and which ones are not.

Power Review

Have a professional evaluate your power consumption and the price you’re paying for it.  Are there demand charges?  At what point do they kick in? Are there other energy providers worth looking at?

Cooling & Refrigeration

How does cooling factor in?  Is cooling something that’s used year round, or just at certain times of year?  If cooling is a significant expense, a cooling demand estimate should be calculated.  Chart it over time.  Does cooling cause a spike in demand?  Is that spike in demand causing expensive demand charges?

How does refrigeration factor in, if at all? If it does, an evaluation of refrigeration assets is probably worthwhile.

Heat Review

Review the demand and uses of heat.  Space heating is typically seasonal.  A heat loss calculation can be made to estimate demand for space heat over time.

Process heating is usually more consistent over time rather than tied to the heating season.  Still, process heating demand may ebb and flow based on time of day, or with some periods peaking, and others where it’s non-existent.  The more you know, the more useful the evaluation will be.

When you have all this information and data together, you can then make a judgement on the best course of action.

Nonlinear Effects of Efficiency Upgrades on Energy Use and Cost Savings

Care must be taken to factor in the nonlinear effects of asset upgrades. That is, when selecting efficiency upgrades, the energy reduction will count for more than the amount of efficiency increase. The cost savings will be greater. The following chart illustrates this using the examples of two sets of pumps; Pump #1 and Pump #2.

The example shows the nonlinear effects of an efficiency upgrade. Two choices are available in this example: an efficiency upgrade for two types of pumps, and the effects of an efficiency upgrade on each. With a much bigger drop in energy use connected with the efficiency upgrade of Pump #1, the example shows that cost savings are 3 times higher. This can seem to be surprising because the efficiency of the upgraded Pump #1 is still lower than the efficiency of Pump #2, even before an upgrade. To summarize this example, the graphic shows that the best upgrade, when faced with an either/or choice, is the one that decreases energy use the most, even though the increase in efficiency is much smaller.

A good example of this effect is the large but short-lived cash4clunkers program described below.

Taking Action on Findings

Your completed energy use evaluation should include a set of next step recommendations.  The recommendations should be weighted with regard to level of urgency, amount of expected costs savings, and expected increase in energy security, if any.  Those recommendations should be actionable in some way.  The recommendation could be direct, such as recommending an investment in CHP.  Or the recommendation may be to look more deeply into the calculus of an issue before significant capital is deployed or obligations are entered into.

Decisions will have to be made on how best to actuate changes.  An internal team may be sufficient to manage the process if the fixes are simple.  Alternatively, hiring an outside team will bring expertise to the process, and allow internal resources to be deployed in other ways.

Keeping Evaluations Up-to-date

If you’re a very large energy user, the energy evaluation should be templated and updated yearly.  For moderate consumers of energy, the original evaluation should be updated with new data every few years at least.

Paying for Energy Upgrades

Investments can be made in a standard way; out of free capital, a lease, or with loans.  As a further option, the equipment and installation can be obtained through an energy service agreement (ESA).  With an ESA, there is no capital or lease required. You purchase power and heat from the 3rd party investor but you don’t own the assets at the start.  Once the equipment is fully depreciated, you take full ownership.

Contact CIMI Energy for more information.
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The Federal government’s “Cash for Clunkers” program from 1999 was a prominent example of this effect. The program was one where “clunkers”, low-efficiency cars and trucks were permanently scrapped and replaced by cars with significantly higher efficiency. Although the primary purpose of the program was billed as a stimulant for the economy, the government also recognized that a relatively small pool of older automobiles was providing CO2 emissions far beyond their numbers. A lot of money was already being spent on increasing automobile efficiency, but those marginal gains were outweighed by the smaller numbers of old gas guzzlers people were driving around. An incentive was set up pay people to scrap their “clunkers” and buy a new automobile with higher gas mileage. The program was controversial as it was mainly judged on the cost vs benefit of the economic effects, where the economic returns from higher new car sales were judged to be less than the $3 billion spent on the program. Nevertheless, the program undoubtedly had an outsized effect on reducing auto emissions nationwide.

CHP (Combined Heat and Power)


Combined Heat and Power (CHP), also know as cogeneration, is a fast-growing energy technology in North America and around the world. A large reduction in energy costs  (up to about 50%) is the primary reason for this growth.

For typical applications, where there is no change of fuel, the energy cost savings result from dramatically higher system efficiency (power + heat instead of just one or the other), and minimal distribution losses due to power produced on site.  In industrial applications, another cost-saving benefit is peak shaving (the reduction of peak power load bought from the utility). Lowering peak power purchases can greatly reduce costs by avoiding demand rates when they spike.

In areas where electricity costs are high, and natural gas prices are low, CHP yields an excellent payback on investment due to the inherent efficiency in maximizing the utilization of the energy content of whatever fuel that’s used.

How CHP works

As its name suggests, Combined Heat and Power creates both heat and power at the same time.

Various fuels can be used for CHP, such as natural gas, oil, or biomass chips or pellets.  The most efficient and cost effective systems us natural gas.  Creating power from the combustion of a fuel yields heat as a byproduct.

Ordinarily, most of the heat that’s created during power production, such as at a utility-owned power plant, is wasted.  That’s because heat is not transferable over distance the way electric power is.  Heat has to be used nearby to where it is produced, and at the time it is produced, or it is lost.

By using the byproduct of power production, heat, CHP uses a higher proportion of the energy content of a fuel than is the case with power production alone.

Reliability and Resiliency

One of the great advantages of CHP is the capability to provide heat and power to a building even during power outages.  This is a great advantage where the grid is not so reliable, or where large storm events like hurricanes, tornadoes, ice storms , and human-caused events can cut power.

Not every CHP unit is capable of providing power during a blackout.  The only units that can do so have inverters.

Typical CHP Applications

As mentioned above, CHP is most attractive in areas where electricity costs are relatively high, and where natural gas prices are comparatively low.   Applications such as large multifamily buildings, industrial plants, hospitals, and schools are all good candidates because they all use both heat and power, which is what you want because the CHP unit is producing both.

Selling Electricity for a Profit with CHP

In some multifamily buildings, power comes in through a single metered connection, from which power is separately metered to individual units.  In such cases, it may be possible for the landlord to pay a lower, commercial rate and charge tenants a higher, retail rate.  This adds to profits, as well as to the value of the building.

Investigating CHP

CHP is worth investigating to cut energy costs, increase your capacity to produce heat, and to lower your peak power from your utility.

Take a look at the blog post on evaluating your options here.

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Distributed Energy


A powerful business case can be made for harnessing distributed energy, making it a fast growing category within the energy field. The fast pace of growth results from a combination of the maturation of a variety of alternative energy technologies, and the unwinding of utility regulation. The alternative energy technologies that typically comprise distributed energy provide building owners with the ability to cut energy costs, increase energy efficiency, reduce carbon emissions, increase reliability, and eliminate peak utility charges.

The Energy Market Transforms

Distributed energy equipment suppliers have invested heavily in hardware and software in order to achieve the goal of safe and dependable integration with the grid.  Having achieved this goal, the available options for building owners to utilize alternative energy have broadened out.

A “mature” distributed energy sector means that all aspects of a distributed energy network operate safely, predictably, reliably, and cost effectively.  Tying in new energy sources becomes a straightforward matter, and doing so does not adversely affect production and distribution from other parts of the grid.  A mature sector also means that the power produced meets acceptable standards.

As noted above, deregulation of energy markets has been a driver of growth in distributed energy as well.  With the elimination of utility monopolies, competition from new sources of power give organizations a choice in where they get their power. Among the available choices for building owners is to produce their own power, in whole or in part.  In such cases, consumers become producers as well, leading to the label “prosumer”*.

With distributed energy, power sources can be placed on-site  (such as on-site CHP), or off-site, such as from renewable energy sources like solar, wind, and biomass (usually as CHP). The power sources need not be local, as innovative energy contracts allow buyers to purchase the output from remote energy sources.

The Impetus for Distributed Energy

For building owners, making an investment in distributed energy must of course make sense from a timing perspective, as something that’s working is not ordinarily high on the priority list for change.  The initial impetus that shifts an organization’s “energy inertia” can come from failing energy assets (such as a heating or cooling system that breaks down), or simply an energy audit that reveals costs above achievable benchmarks.

In most cases, there are several benefits that can be identified in advance.  Opportunities in cost savings, as well as in enhanced efficiency and increased security and reliability are usually all present when the decision is made.

Benefits of Distributed Energy

Cost Savings

The most salient reason organizations give for choosing a distributed energy solution is to save money.  The IRR (internal rate of return) for investing in distributed energy must be greater than the anticipated return offered by alternatives, including not doing anything (i.e. maintaining status quo) if that is a possibility.

With the fast pace of advancements in energy systems in recent decades, there are often good cost savings available just from reduced maintenance and repairs.   By incorporating the right solutions at the outset, an on-site CHP project such as producing electricity while making process heat, space heat or hot water can bring predictable cost savings to the user.

Efficiency

Decentralization can also lead to higher efficiency where energy assets allow more energy to be captured from the fuel.  A great example of this is when an organization produces it own power, and at the same time captures the “waste” heat for some internal process.  Combined Heat and Power (CHP) is inherently more efficient than a case where standard power generators are used.

Higher system efficiency is to be had where companies with large electricity demand such as server farms (e.g. IT Services, ISPs, Amazon, Google, and other cloud services) are locating in out-of-the-way places that are newly served by the expansion of distributed energy. Server farms create a lot of heat, so their locations are often being located where electricity is cheap, and either where the climate is cool (making cooling the equipment much more efficient), or where the waste heat from the server farm can be used for some other purpose.

Security and Reliability

The electric grid is old and suffering from technological senescence. It is vulnerable to damaging natural and man-made events. Flooding events that cause power outages are more threatening than they used to be, particularly alongside rivers and sea coasts where much of the traditional power producing infrastructure is located. Wind storms, ice storms, fires, and human threats are thankfully uncommon, but real enough to be taken seriously.

Businesses rely on power. Distributed energy makes the power supply more reliable for those businesses with the foresight to take advantage.

Reduced Carbon Emissions

Alternative energy sources reduce carbon emissions. This result is caused either through the higher utilization of the energy content of fuel (i.e. efficiency), displacing a high-carbon fuel with a lower carbon fuel, or through the utilization of some form of renewable energy, such as wind or solar.

Hedging Against a Possible Carbon Tax

The idea of imposing a carbon tax is routinely discussed in Washington these days.  Supporters include market-oriented conservatives, and progressives concerned about climate change. If a carbon tax were to be passed into law, it will be advantageous for organizations to be positioned with low-carbon utilizing assets in place.

For energy investments in durable goods expected to last 5 years or more, the possibility of a carbon tax is definitely something to weigh.

Eliminating Peak Energy Charges

By providing an alternative source of energy to traditional utility-provided grid energy, additional cost savings can be secured by avoiding peak energy charges. More on this topic will be available in a separate blog post on this topic.

How to Proceed with Distributed Energy

What is required to reach cost savings, efficiency, and reliability goals with distributed energy is good planning, modelling, and execution.  These are essential to achieve long-term success.  Working with a team that has experience with all these working parts, and which is willing to learn about your businesses energy needs is probably the best way to achieve success.

CIMI Energy will serve as a conducer, working with you and your internal team to ensure a successful result.


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*An equivalent producer/consumer word blend to “prosumer” is “conducer”.  But what I thought might have a lower chance of getting baked into the language, “conducer” is, as it turns out, actually a word in the dictionary. It means a person or thing contributing to a specific result 🙂

Pros and Cons of Energy Services Agreements (ESAs)

Energy Services Agreements (ESAs) are an innovation in how energy is managed and paid for. ESAs provide funding for energy-related capital improvements. They also provide other benefits as described in the list that follows. As might be expected, there are limitations that organizations need to weigh when considering entering into an ESA.

Pros of ESAs

1. No capital costs for retrofit borne by building owners
2. Net cash flow positive for building owners (usually)
3. Planning and execution of capital upgrade costs handled by ESA contractor
4. Maintenance of capital equipment managed, and costs borne by contractor
5. Organization management can stay focused on organization’s mission
6. ESAs often enable needed improvements to take place more quickly
7. Larger financial benefits can accrue when an ESA enables capital upgrades to be made near-term rather than waiting for capital to become available
8.  ESA payments can be treated as an expense
9. Gas is cheaper in some locations when used in CHP

Cons of ESAs

1. Upgrades to existing energy and water assets can cause temporary disruptions that need to be planned for
2. Contracting organization must have trust in ability of contractor to plan, execute and manage properly

Energy Services Agreements and Their Alternatives

CIMI Energy’s funding partner is a premier provider of Energy Services Agreements (ESAs). ESAs provide organizations with off-balance sheet funding for energy retrofits. For the term of the agreement, the provider of the ESA maintains ownership of the equipment, and provides maintenance. Energy costs are paid by the customer, with the ESA provider receiving compensation through a portion of  the energy large energy savings.

Owner execution risk is low, and there are NO upfront costs.  The net result for the customer organization is a reliable and cost-saving energy system  that requires no cash and no debt.  It’s an off-balance sheet solution with short and long-term benefits. For more details on ESAs, visit our dedicated page on that subject.

Alternatives to ESAs

Self Funding

Energy retrofits can be achieved in a number of other ways.  The most common way is self-funding, either with cash on hand, or with a combination of cash and borrowing.  However, because the capital costs for large energy retrofits can be very high, this requires tying up a lot of capital.  Furthermore, by planning and investing capital for purposes outside the core mission of the organization, management can get distracted, and takes on execution risks.
Nevertheless, if an organization has a lot of free capital, and no higher yielding alternative uses, this can still be a good approach.  But if the organization can use that capital for other purposes, either right away or off in the future, then it’s prudent not to spend it on an energy retrofit.

Operating Lease

There’s less upfront capital required with an operating lease, and  less execution risk than self funding.  An operating lease is essentially renting, and payments are expensed.  This method of funding is not suitable for many types of integrated hard assets such as heating and cooling equipment, and other large equipment that’s an integral part of a building system.

Capital Lease

A capital lease is attractive for having low upfront cash requirements.  The downside to capital leasing is that the responsibility for project management and ongoing maintenance falls upon the lessee.  These are small issues when the products are straightforward, as is the case with trucks, furniture, and computers.  For complex projects like large energy retrofits, this is a management responsibility that can require added manpower.

Performance Contract / Energy Services Company (ESCO)

Performance contracts, also known as Energy Savings Performance Contracts (ESPCs) or Energy Management Services (EMS) have achieved some popularity in recent years.  They provide a way to fund capital improvements for energy management, maintenance, and energy generation.  They typically bundle together investments with short and long-term paybacks, with a resulting medium-term payback for the bundle.

The ESCO is the entity that proposes the ESPC (or EMS), and that carries the responsibility for engineering & design, equipment purchasing, construction management, maintenance, training, measurement and verification (M&V), etc.

Upfront capital costs are high.  On the other hand, there is a performance guarantee for up to 20 years as part of the contract.  Savings are shared between the organization and the ESCO.

Power Purchase Agreements (PPAs)

Similar to ESAs (see at top), Power Purchase Agreements (PPAs) require no capital, and have low execution risk.  While ESAs are for efficiency, PPAs are for power, typically produced on site.  A typical example is an installation of a large power producing asset, such as a district heating plant, where power produced is billed, as is the heat (byproduct).

Property Assessed Clean Energy (PACE)

PACE loans are loans which are paid for through property taxes.  They are specific for what they can be used for, with energy reduction or efficiency upgrades being accepted investments.  As they are geography-specific, they are only available in some communities.

CIMI Energy partners have the experience and expertise to manage PACE-supported projects, and others.  Together we can find the right balance of risk, capital, project management, and ongoing equipment management to meet your goals.

Summary

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