September 2008

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Is DR Hype?
Or, is DR real and a potential short-term game changer for building automation?

Anto Budiardjo
President & CEO,
Clasma Events Inc.

Contributing Editor

There have been numerous issues that have adorned this website over its past decade, from open systems to industry change, new specifying approaches to IT and IP. Many have regarded most of these as hype, with no real immediate impact on building automation; to a great extent there is truth to such remarks.

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The reason behind this “negativity” is due to many of these issues being technology looking for a solution, technologies with questionable value propositions or visionary statements that go against the status quo of traditional building automation practices (and corporations). These negative sentiments make the issues difficult to understand and implement in a business environment. After a while these issues fall off the radar once the hype period is over. However, most of these issues then come back, some time later in products, solutions and industry behavior, once they have been distilled and the economic values have been exposed – some things just take time (I should know, I’ve been doing “change” for 20 years!).

There is, no doubt, a buzz about Demand Response (DR) today. Is this the new hype that will go away and maybe reappear years down the road? Or, is DR real and a potential short-term game changer for building automation?

Let’s break down the issue down.

DR 101

Many view that Building Automation Systems began life as energy management; in the ‘70s and ‘80s, energy was indeed one of the value propositions of controls. As such, controlling consumption with input from external signals has always been a fundamental function of BAS. Many people roll their eyes when DR is mentioned these days; the general comment is, “We’ve been doing that for years!”

So, we should not need to explain what DR is at this site, readers will know the fundamentals of DR.

Climate Change 101

Unless you’ve been on vacation since the spring of 2007 (many would argue the realities have been known for decades), you will know that we humans have over the past 150 years of industrialization, caused a significant change in the earth’s climate. While experts still argue about the extent of change, even the brightest picture of this impending catastrophe will change our world within the lifetime of even the most senior members of this community.

The new reality of a world turning away from fossil fuels to reduce GHG (Green House Gasses) will drive trillions of investment dollars that will affect every facet of our world. Buildings, and thus building controls and the energy supply to buildings, are not only part of this, but arguably one of the low-hanging fruits – thus the trend towards Green Buildings.

Energy Supply 101

If we focus on electricity, the major energy source for buildings now and increasingly in the future, we now know that around 70 to 80 percent (in the U.S.) of it is being generated using fossil fuels, compounding the Climate Change issue. We also know that energy suppliers are finding enormous challenges as they build new generating plants and transmission lines to transport electricity from where it is generated to where it is typically consumed. Delivering renewable and green energy (typically wind and solar) to consumers is also a major problem – after all, the Pan-handle of Texas and deserts of the West are not where many people want to live (for good reasons).

Simply put, the energy suppliers cannot generate enough energy in the coming years for the anticipated demand – period.

Smart Grid 101

Much is being written, developed and invested into what is now commonly called the Smart Grid. Think of the Smart Grid as building controls on steroids, not only within a building, but the control of energy from generation source, through transmission, distribution, metering, and into the consuming entities (commercial buildings, residential and industrial applications).

Smart Grid will help to achieve many things, principally energy efficiency, balancing between supply and demand, increased reliability, and quality of power, as well as susceptibility from threats from natural and man-made sources (dare I mention terrorists and weather). In the scope of DR, Smart Grid is a critical element of true automated DR.

[an error occurred while processing this directive] New World Economics 101

We know about China and India, the two emerging economies of the world that will consume energy at alarming rates in the next few decades. The impact of these new economies will be reflected through oil prices (we know this as we fill up with gas) and through almost all other energy-related commodities that are traded on the world markets, not to mention affecting the ability to build electric infrastructures and finding qualified engineers to build and run them.

The second part of the new economics is a change in societies and in our culture to demand sustainability. If Wal-Mart, who has been viewed by many as the “capitalistic devil”, is turning its whole strategy towards sustainability and socially responsible [green] capitalism, it must be clear to us that something is changing in how we live our lives as it relates to energy. Green is now on the lips of boardroom debates and CxOs; green tsars in corporations are emerging as key positions to change corporate culture.

Automated DR 101

The fact that you are reading a website about automation would suggest that you understand the concept of automation, namely the use of technology to automate the behavior of a system. Auto DR (as some would refer to this) is in essence the use of building automation to automate the responses that the building can make from signals received from energy suppliers. This is not rocket science! It’s BAS plus some outside signal.

The confusion and complication people seem to fear is the utilities which have a history of not being sensitive to the issues of the demand-side players (where BAS lie). Well this is changing partly for the reasons outlined above, and partly through the creation of a new breed of companies, the DR Aggregators – companies that provide a very valuable technical and business interface between building owners and energy suppliers (mainly utilities).

Markets 101

OK, so I’m not an economist, but I know the fundamentals of what makes a market: you need a supplier (utilities), a demand (customer / buildings), a product (DR), a driver for need (Climate Change), and a mechanism to regulate, value and trade the product (DR programs, aggregators, and later dynamic pricing).

The last components needed are players that will transact, implement and deliver the product. This is where you come in, as BAS contractors and integrators. You have the skills, you have the customer relationship, you should have the will to increase business and returns of your investments.

DR and BAS

It is clear that the four major BAS companies are making their moves on DR. Within a short period of time, most control vendors will have a DR strategy that will involve providing products that interface their systems to DR signals. Work is also being done to develop signal standards that DR Aggregators will make for buildings, including the development of existing BAS standards such as BACnet, LonMark, oBIX, and new variants and entrants from organizations vying for position in this new and lucrative space, including NIST, LBNL, NewEnergy Alliance, etc.

If you are a BAS contractor or integration company, this is nothing short of a golden opportunity, to be ahead of the curve, to learn about how DR can increase your business, your margins, and your position in the market.

DR Needs You!

How do you learn more about DR? One option is at DR-Expo in Toronto, October 6-7. Leaders including Ahmad Faruqui from the Brattle Group, and DR providers including Constellation and EnerNOC will join BAS and technology vendors to map out the route for your organization to leverage this unique opportunity. See

Hype is defined as “extravagant or intensive publicity…”. Most would agree that something is hype if the promise is essentially empty. The billions of dollars available for participation in DR would suggest that it is not hype, but I guess only time will tell if you’ve missed the bus.


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