The smart grid's killer app? Smart buildings, says new study

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Quick Take: Two new reports from IDC Energy Insights highlight the smart grid's latest flavor of the month – namely, the intersection of smart grids and smart buildings. Until now, building owners have installed building automation to reduce energy bills, thereby making their buildings more appealing to tenants. With the onset of the smart grid, they can now tap into an additional payback – utility programs such as demand response and energy efficiency. 

Smart buildings represent several billion dollars in annual sales already, but IDC claims the sector is set to explode, predicting a compound annual growth rate of more than 26%. Wow. At that rate, the market will sit at $10 billion by 2015. – Jesse Berst

A new IDC Energy Insights forecast says worldwide growth in the commercial smart building systems market is taking off in a big way: Spending is expected to reach just over $10 billion in 2015, which translates into a compound annual growth rate (CAGR) of just under 27% from 2010 to 2105. Most of that growth is expected to happen in Western Europe and the U.S.

"The primary motivating factor behind the emergence of smart building systems is cost reduction through energy savings," said Casey Talon, an IDC research analyst and an author of the report. "Energy consumption in the building sector is usually one of the leading line items in operational budgets and thus a tempting target for smart building controls."

A second report details the opportunities and challenges for electric utilities, building owners and tech vendors in the smart building market. The highest growth is expected to be "where electricity markets have decoupled revenue  from the quantity of energy sold thereby monetizing energy efficiency projects. The report also makes recommendations for utilities in non-decoupled areas, like partnering with large building owners in pilot projects.

It also notes that an energy-efficient building that can offer lower energy bills is an effective way to attract tenant interest in a property. Also, the report says vendors can boost their chances for market success by developing a reputation for verified performance data and establishing strong partnerships, as well as relationships with established equipment vendors.

"The smart grid, which has received significant attention, is – in the end – a platform. The smart building might turn out to be the first true 'killer app' of the new smart grid infrastructure,' Talon said.

Jesse Berst is the founder and chief analyst of Smart Grid News.com. He consults to smart grid companies seeking market entry advice and M&A advisory. A frequent keynoter at industry events in the US and abroad, he also serves on the Advisory Council of Pacific Northwest National Laboratory's Energy & Environment directorate.

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