March 2012

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Smart Grid in Smart Buildings

Looking To Outperform Utility Smart Grid In Growth & ROI

Allan McHale
Allan McHale,

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Memoori’s annual report The Smart Grid Business 2011 to 2016 shows that some 40% of the world's annual spending on Electrical Transmission and Distribution Equipment goes to the Industrial and Commercial markets. It’s therefore not surprising that whilst the main body of the industry preoccupies itself with the utility market the traditional manufacturers are also targeting the industrial and commercial business.

Some 15 years ago they started to quietly investigate how they could meet the Industrial and Commercial client’s need for a more secure, efficient and better quality electrical supply. This market was being badly served by the Utility companies in a number of countries through delivering “dirty power” which was causing outage problems to their internal electrical network.  

In the case of commercial and industrial buildings such as hospitals, data centers, banks, pharmaceutical, general process and assembly plants; constant electrical power is absolutely critical to their operation. The solution was to overlay intelligent controls across the network to monitor and control it.

Since then these suppliers have interfaced the “internal smart grids” to the Building Management System (BMS) providing their clients further security and efficiency gains, and a reduced energy bill. In the case where they generate their own power through a micro-grid they can balance out supply and demand and sell their surplus power. These operations are now installing VRS which they can deliver to the grid at very attractive feed in tariffs and gain significantly more revenue.

Some of the suppliers including Schneider Electric, Siemens, Honeywell and Johnson Controls are delivering these packages as part of a “Total Energy Management Solution”, whereby they invest their money in the controls and energy saving equipment, manage and maintain the plant, and get paid from the guaranteed reduction in energy consumption. Recently they have taken the service a stage further by taking responsibility for buying the energy, and to this end they have recently acquired companies that buy and sell energy. 

But the opportunity to expand this business does not stop there. For as the report shows they are now in a strong position to take advantage of aggregating the output from these contracts through Virtual Power Plants (VPP). They can join up these distributed generation plants through the Internet. Collectively they present a better commercial proposition for supplying electrical power to the Smart Grid and generate higher unit revenues.

Reliable Controls This looks like a very attractive business model which offers a better return on investment and has fewer road blocks than the Smart Grid for the utility market at this time. Unlike the utility market which so far is taking a step by step development, a holistic solution is both practical and affordable in the industrial and commercial markets. It provides the benefits of distributed generation, giving a more flexible power delivery and reduces energy consumption on the site. Through “cloud based” hosted services other value add services can and no doubt will be supplied 

At this time the “Total Energy Management Solution” service is purchased purely on the basis of the building owner getting a satisfactory ROI.  In some countries CO2 reduction can now be traded,.which provides an additional incentive to interface Building Energy Management Systems with the internal and external Smart Grid. 

About Memoori
Memoori is an independent market research and business intelligence provider. Our intelligence and advice helps technology companies and investors create sound strategies for future success. For more information, visit


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