Keywords: Digitalization, Sustainability, Building Automation Systems, Energy Consumption, ARC Advisory Group.
The building automation systems market is undergoing a renaissance. Suppliers almost universally experienced revenue declines in 2020 as the pandemic resulted in deserted office buildings and college campuses. Investments in new building automation systems completely stalled. The year 2021 marked a strong return to growth, mostly driven by sustainability related concerns that originated from a variety of sources.
Buildings remain one of the largest consumers of energy and one of the largest emitters of greenhouse gases. The built environment, including commercial, industrial, and residential buildings generates 40 percent of global greenhouse gas emissions worldwide. Many buildings are older and in desperate need of modernization to become more energy efficient. Pressure from the government and regulatory side is increasing, with major initiatives such as the UN COP 26 climate conference. Activist financial asset managers are increasingly influencing investment, and many major cities around the world are setting emissions limits for large buildings.
New office environments are also propelling growth in the BAS market, and end users look to provide workers with safer and more resilient workplaces that can adjust to hybrid work-from-home and in-office work models. New measurements like office air quality, CO2 concentration, and other variables are suddenly becoming more important. Integrating access control functions with employee management functions can help improve health and safety, so that only the required people are on site.
Meeting these new sustainabilty, resilience, and safety requirements is driving owner/operators to invest in a new generation of building automation systems. BAS suppliers have fully embraced digitalization technology, and the new breed of BAS incorporates cloud and edge computing, analytics, and common data frameworks to provide the end user with a holistic view of building operations across multiple domains, from HVAC control to energy management, access control, fire detection and suppression, and other functions. The new generation of BAS is also capable of integrating with older installed systems, and creates a common layer of visualization, engineering, reporting, and maintenance for environments with a mixture of legacy and new technologies.
While these new technologies and systems enable the business requirements of open data access, analytics capabilities, and advanced reporting of owner/operators, these new systems can also greatly expand the threat surface of the built environment, which is driving BAS suppliers to significantly strengthen their cybersecurity posture.
The Built Environment and Sustainability
Sustainability has become the primary impetus for growth in the building automation system market as end users and owner operators strive to reduce energy and water consumption, use more renewable power sources, and reduce their carbon footprint. End users are adopting aggressive sustainability initiatives due to pressure from regulators, investors, and customers.
Buildings and Energy Consumption
Buildings across all sectors consume an incredible amount of energy. According to the International Energy Agency (IEA), the building sector accounts for 30 percent of global energy consumption and 26 percent of emissions. In the US, the figures are roughly the same. According to the US Energy Information Administration (EIA), combined end use energy consumption in the residential and commercial sectors accounted for 29 percent of total end use energy in 2022.
Commercial buildings are also a leading emitter of greenhouse gases. According to EIA and EPA, buildings are one of the largest sources of greenhouse gas (GHG) emissions. The World Green Building Council states that buildings are “currently responsible for 39 percent of global energy related emissions: 28 percent from operational emissions….and the remaining 11 percent from materials and construction.” This gratuitous consumption of energy combined with massive waste and emissions is getting the attention of regulators and activist investors. Owner operators are under significant pressure to reduce energy consumption, reduce emissions, and provide more accurate ESG and sustainability-related reporting.
The opportunity for considerable energy savings is apparent. Buildings have not traditionally been very energy efficient. While many large building owner/operators have employed sophisticated building automation systems that monitor performance remotely and include numerous energy related KPIs, most buildings do not employ basic energy saving methods such as programmable thermostats. Many BAS suppliers are promising energy savings of up to 35 percent, and for many of today’s inefficient buildings, this is not unreasonable. The building automation business is one where end users can achieve relatively quick return on investment based not only on energy savings but also on reduced operational and maintenance costs.
The Installed Base of Building Automation Systems Desperately Needs Modernization
Modernizing an out-of-date building automation system is the single biggest thing owner operators can do to improve energy efficiency, reduce overall energy consumption, and provide a healthier and more sustainable space. The installed base of older BASs that need modernization is considerable. Like many industrial and critical infrastructure systems, BASs have a long lifecycle of 10-15 years or more. Technology has advanced considerably in the past five years alone. ARC advises end users and owner operators to see if there is a business case for system replacement. The advent of IoT-based building automation and management systems provides end users with more options to gradually replace aging systems in a phased manner.
The ROI of new building automation systems is significantly greater than that of older legacy systems. New systems offer the capacity to adhere to new and emerging forms of compliance, capacity to remove investment risk, ability to attract tenants and workers, and capability to improve brand perception. These capabilities simply don't exist with older systems.
Table of Contents
The Built Environment and Sustainability
Building Automation Systems Embrace Digitalization
Sustainability and EHS Regulations and Initiatives
Cyber Resilience and Buildings
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