Commercial Buildings + Energy Management = $6.8B-a-Year Market

While the debate over how — or if — consumers will want to manage their home energy consumption makes a lot of headlines, commercial buildings suck up 18 percent of the total energy consumption in the U.S. and represent one of the biggest opportunities for energy efficiency improvements and carbon reduction. According to Pike Research, the market for energy management systems — stuff like wireless sensor networks, lighting controls, and heating and cooling management in buildings — will turn into a $6.8 billion-a-year market by 2020 and will generate investment of $67.6 billion between 2010 and 2020.

Startups know those metrics pretty well already. Lucid Design Group, for example, has been selling its energy management system for years to the commercial sector, as well as governments and universities. But while the company has always discussed plans to eventually work in the residential market, Lucid Design has yet to make a big push into homes. As Michael Murray, Lucid Design’s CEO, has maintained in conversations with me over the past couple of years, the energy management market for large commercial buildings is much more accessible compared to energy management in homes.

Think about it this way: Lucid can focus on selling its energy management system to companies like Yahoo, which is using the product for its five building offices in Sunnyvale, Calif., where more than 3,000 Yahoo employees work. That’s one deal and a custom job. Or Lucid could work on packaging its software and sensor product into a relatively low-cost (some think it has to be dirt cheap to sell to consumers), probably low-margin box to sell to a market that’s still in a very nascent stage.

Businesses are also often more eager to save money on their lighting and heating/cooling costs than consumers. The return on investment is much higher for a large building that uses a lot of energy than it is for a single family home. In addition, regulations and shareholder demands increasingly require companies to report their carbon footprints, and energy management systems will help them gather and report that data.

That’s not to say that the market for residential homes in the U.S. isn’t attractive — it’s the holy grail for many energy management firms with dreams of turning their brands into a household name. It’s just a lot more difficult.

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