September 2012

Innovations in Comfort, Efficiency, and Safety Solutions.

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Why Make Smart Buildings Smart Grid Compatible

Virtual power plant technology provides the opportunity to aggregate their supply and demand and EMSCO’s and other third parties.
Allan McHale

Allan McHale,

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Over the last 20 years many billions of dollars have been invested throughout the world in making commercial and industrial buildings energy efficient. Much of this has been spent on more efficient HVAC hardware and further improving efficiency through DDC control systems. Initially the driver was to reduce operating costs through minimising energy consumption but making the building environment more comfortable and more recently legislation to meet new standards have been active drivers. The Building Energy Management Systems (BEMS) that are now installed provide the interface with Smart Grid to deliver further energy cost reductions through Smart Grid load management programs that can reduce operational costs for both the utility companies and building owners. The rationale for interfacing demand and supply goes much further because without it the primary goal for Smart Grid to play a major role in reducing CO2 emissions in the low carbon economy of the 21st century cannot be achieved. But to make this market move forward there also has to be a commercial gain and a viable return on the investment.

The Commercial Drivers
Memoori’s report “The Smart Building to Smart Grid Interface Business” shows that in most developed countries Industrial and Commercial Buildings consume 40% of all generated electrical power and the vast majority of these buildings are already fitted with fully automatic DDC controls. A significant proportion already generates their own power and many are investing in more efficient systems including renewable power. Virtual power plant technology provides the opportunity to aggregate their supply and demand and EMSCO’s and other third parties that manage large real estates and are in a strong position to move this business forward on the demand side.
This fits in pretty well with what major Electrical Utilities want. A fine tuned system that automatically receives the data from the Smart Building control systems and balances supply and demand in real time. Also many Smart Buildings can provide a clean source of distributed electrical power to meet its CO2 reduction targets whilst reducing the investment that they would need to make in new generating facilities. It would be to the utilities advantage if it could achieve this through aggregating electrical generation and consumption through joining together a large number of plants. This can be achieved by EMSCO’s through having contracts at many sites through treating them as virtual power plants. But what makes the proposition even more attractive is that the investment needed to achieve this represent only 1% of the total investment needed to deliver a fully operational Smart Grid and the return on the investment in the short term looks much more attractive. Equally as important is the fact that private money will be available for around 70% of the investment.

There is an almost perfect case for interfacing Smart Buildings with Smart Grid because all the stakeholders win. However whilst utility companies are fully behind interfacing to achieve load management control they are less attracted to buying distributed power from the commercial and industrial sector.

Their business model is to retain central power generation for as long as they can and load management control will help them achieve this through the first phase of decommissioning their coal fired generating plant. This programme may well be delayed as the introduction of CO2 emission policies are relaxed whilst the present poor economic conditions persist and this gives them a little more time to hold on.
However in the long term they will be forced to accept power through distributed generation because utilities will not be able to finance both the investment in new generating facilities and the Smart Grid at the same time. Nevertheless this policy of “beggar thy neighbour” in the mean time will prevent the adoption of best solution. For distributed energy can be operated in several power exchange modes, such as import and export, as well as “islanding,” to achieve operational energy independence from the grid. This flexibility and redundancy provides a huge increase in capability for how and when energy is consumed and purchased from, or sold to, the wholesale energy markets. Smart Building control architecture is essential for achieving real-time adjustments to the various components of the facility and to optimize the benefits and savings potential.

There is a massive latent potential waiting out there to be exploited by the building controls hardware and software manufacturers and as our report shows there are strategies that can be adopted to take both the market for load management control and the distributed power interface systems business.


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