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How to Capture Building Management’s Untapped Middle Market

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In the building energy management sector, big commercial spaces are served by a host of established building automation system companies and their partners; individual home energy management is meanwhile the focus VC-backed startups and IT giants. But small to mid-size commercial properties — restaurants, stores and small offices — have largely been left out of the industry and relegated to the “mushy middle gap” due to cost and scalability challenges.

The right combination of low-cost and enhanced customer service, however, could open this untapped market for energy efficiency, demand response and smart grid-based revenues. That prospect is causing a renewed interest in the mid-level space, both from home energy management companies looking for faster payback and industry giants seeking to scale down to the retail level. Watching how these players approach this sector provides some clues for others seeking to capture the mushy middle ground.

Austin, Texas-based energy management software Incenergy, for example, is working with electronics distributor DSI Systems on several deployments in the Dallas-Fort Worth area and the Austin offices of French utility EDF. Incenergy combines its own software with hardware and networking from various vendors, including Powermand, Sequentric, Radio Thermostat Co. of America and Digi International. More importantly, it includes circuit-level monitoring, which is more expensive than a simple smart meter hookup but provides more detailed data and fine-tuned control of energy use. Those are features commercial customers with exposure to wholesale energy pricing and peak demand charges are likely to require more than homeowners.

What are the disadvantages of Incenergy’s approach? Scalability may be one. Working with lots of gear and comms partners means each site has to be tackled as an individual project. Solutions that can be “pre-integrated,” so to speak, for different types of small commercial spaces could gain a foothold across certain sectors.

One example of this is French BMS giant Schneider Electric’s recently announced partnership with Verisae, a startup that specializes in grocery stores. San Diego, Calif.-based Advanced Telemetry has taken another slice of the market — HVAC controls for fast food chains. And Siemens last week announced it was buying Austin-based startup Site Controls to utilize its technology for office building HVAC systems by monitoring carbon dioxide levels in rooms.

Site Control’s SureGrid platform also manages multiple sites in order to lessen energy use when the grid is under stress. Such functionality will be key to helping smaller commercial clients maximize ROIs by adding demand response premiums to energy bill savings. Almost all demand response today happens in large industrial and commercial spaces and widespread residential load control programs. Platforms that can pool smaller commercial sites into power-saving blocks — say, by cutting deals with fast food franchises and chain stores — could be valuable additions to DR portfolios. Demand response incumbents are also looking to bring smaller commercial customers into the fold. EnerNOC recently bought SmallFoot, a wireless controls startup aimed at the small and mid-size commercial market.

Not to be forgotten are the bigger players. Cisco’s EnergyWise platform and Building Mediator product are meant to link smart grid and smart buildings via an IP network. Meanwhile, IBM is taking on buildings with sensors and software on one end and enterprise energy management on the other. Both have multiple BMS vendor partnerships and can certainly scale up to meet market demand. Both are also likely to have designs on smaller commercial customers.

Finally, all these contenders vying for the “mushy middle” of building energy management will need to handle the simultaneous demands of low-cost deployments and greater levels of customer support. Fast food chains and strip malls don’t have energy experts on hand to manage the day-to-day optimization of power use; vendors in the space will be tasked with providing that expertise, either embedded in the systems themselves or through some kind of control platform that ties multiple sites together.

Related Research: An Assessment of the Lighting Control Market Segment

Question of the week

What’s the secret to bringing energy intelligence to the small and mid-size sector of building energy management?