SPARK16 Presentation by Benjamin Freas – Principal Research Analyst, Navigant Research

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IoT, Data, and New Business
Models Are Disrupting Building
Energy Efficiency Economics
Benjamin Freas
Principal Research Analyst
Navigant Research

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DISRUPTING BUILDING ENERGY
EFFICIENCY ECONOMICS
IOT, DATA, AND NEW
BUSINESS MODELS
SEPTEMBER 15, 2016

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NAVIGANT RESEARCH INTRODUCTION
RESEARCH PROGRAMS:
Energy Technologies
Utility Transformations
Transportation Efficiencies
Building Innovations
RESEARCH OFFERINGS:
Research Reports
Subscription Research Services
Custom Market Research
• Custom Market Analysis
• Market Sizing and
Forecasting
• Primary Research
• Go-to-Market Services
• Strategic Advisory
Sessions
• Commercial Due Diligence
• Technology Evaluation
NAVIGANT RESEARCH PROVIDES IN-DEPTH ANALYSIS
OF GLOBAL CLEAN TECHNOLOGY MARKETS.
The team’s research methodology combines supply-side industry analysis,
end-user primary research and demand assessment, and deep examination of
technology trends to provide a comprehensive view of the Energy Ecosystem.

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BUILDING
INNOVATIONS
Intelligent Building Management Systems
Energy Efficient Buildings
Lighting Innovations
Smart Cities
RESEARCH SERVICES
TRANSPORTATION
EFFICIENCIES
UTILITY
TRANSFORMATIONS
ENERGY
TECHNOLOGIES
Wind Energy
Grid-Tied Energy Storage
Microgrids
Distributed Generation
Electric Vehicles
Advanced Transportation Technologies
Transportation Forecast
Natural Gas Vehicles and Infrastructure
Advanced Batteries
Grid IT and Communications
Grid T&D
Residential Energy Innovations
Demand Response
Utility Innovations

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TECHNOLOGY EVOLUTION IN SMART BUILDINGS
SOLUTIONS
LOCALIZED
EFFICIENCY
NETWORKED
INTELLIGENC
E
LOCALIZED
INTELLIGENCE
SERVICES
Energy efficiency financing
Smart building
managed services
Demand response
Energy procurement
Energy service companies
(ESCOs)
HARDWARE/
MECHANICALS
Energy efficient HVAC
Fluorescent lighting
Building materials
Building automation
systems (BAS)
Submeters
LEDs
Smart meters
Distributed renewable
energy systems
Energy storage
SOFTWARE
Building energy
management systems
(BEMS)
Building management
systems (BMS)
Energy dashboards Auto demand response
Software-as-a-service
(SaaS) applications

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IOT ENABLED BUILDING INTELLIGENCE
IoT
• Infrastructure for connectivity and data
acquisition for actionable insights and
system improvement
BEMS
• Analytics that utilize data from BMS and
BAS, plus external data such as utility
billing, grid signals, or weather
BMS
• Software plus networking/protocol
translation hardware that coordinate the
operation of multiple BASs
BAS
• System of individual components to
automate the control in a single
building function
Decision
support for the
C-suite,
enterprise, and
operations
Frontend
decision
support for
operations
HVAC, lighting,
fire & safety
controls
Enabling
hardware and
communicationsInternet of
Things
Building
Energy
Management
Systems
Building
Management
Systems
Building
Automation
Systems

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THE ENERGY CLOUD
EMERGING
The Energy Cloud
TODAY
One-Way Power System
TRANSMISSION &
DISTRIBUTION
INDUSTRIAL
RESIDENTIAL COMMERCIAL
POWER PLANT
• Large, centrally located generation
facilities
• Designed for one-way energy flow
• Utility controlled
• Technologically inflexible
• Simple market structures and transactions
• Highly regulated (rate base) and pass
through
• Distributed energy resources
• Multiple inputs and users, supporting two-way energy flows
• Digitalization of the electric-mechanical infrastructure: smart grid and
behind the meter energy management systems
• Flexible, dynamic, and resilient
• Complex market structures and transactions
• Regulation changing rapidly around renewables, distributed generation
(solar, microgrid, storage), net metering etc.
(Source: Navigant Consulting)©2014 Navigant Consulting, Inc. All rights reserved.

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HOW BUILDINGS FIT INTO THE ENERGY CLOUD
Industry transformation and new opportunities for interoperable buildings
IoT ENABLED BUILDINGS
(Source: Navigant Consulting)
Real-time information & automation
Grid response: utility programs or
customer-directed load management
Integration of traditional building
systems, enterprise software, new
energy assets
Improved bottom line, sustainability,
shareholder & stakeholder
satisfaction
IoT = Platform for Data BEMS = Information for Action
Managed
Services
Connected
Occupants
Business
Intelligence
Full Resource
Optimization
Enterprise
Awareness

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WHAT BARRIERS STILL EXIST?
OPEN
SECURE
SaaS
SCALABLE
EXISTING
SYSTEMS
GATEKEEPERS
COST
DIVERSE
GOALS
TECHNOLOGY HURDLES
PEOPLE HURDLES
(Source: Navigant Research)
Customer Obstacles: Vendor Solutions:

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IOT BUSINESS MODEL FRAMEWORK
Devices
Apps
Services
Product
Platform
Ecosystem
Transactional
Transactional
or Recurring
Recurring
Offering Revenue Value Capture
Set the right price
Provide personalization
and network effects
Create a solution
IoT Stack

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CLOUD COMPUTING SERVICES
• Cloud-computing generally operate under three standard models: Infrastructure as
a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS)
• Success of these models is driving a shift towards “Everything as a Service”
Cloud Computing as a Service models
(Source: Navigant Research)
Server Storage
Operating
System
Software
Infrastructure as
a Service (IaaS)
Server Storage
Operating
System
Software
Platform as a
Service (PaaS)
Server Storage
Operating
System
Software
Software as a
Service (SaaS)
= Provided by vendor
= Provided by customer
Niche Focus
Breadth Focus

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TECHNOLOGY ENABLING VALUE-ADDED LIGHTING
• LED system upgrades open the door for a wide range of service relationships, from
those that simply optimize lighting to serve the needs of a space, to those that use
lighting as a platform for providing targeted, location-specific information to retail
shoppers
LaaS Technology Spectrum
(Source: Navigant Research)
Increasing Complexity
Sensors and
Controls
LED Lighting
Networked
Lighting
Systems
Cloud
Services
Visual Light
Communication

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TRADITIONAL LIGHTING VALUE CHAIN
• The building owner ultimately makes the purchasing decision and is the primary market actor
• The electrical contractor, subcontracted by the general building contractor, is responsible for
electrical systems installation—including lighting
• The distributor stocks and sells lighting products to contractors and end-users
• The systems integrator is responsible for creating the control riser and commissioning the
system once it is installed
Lighting Value Chain
B
u
i
Lighting
Distributors
Control
Software
Control
Hardware
Lighting
Manufacturer
Systems
Integrator
Installers
Building Owner
and Operator
(Source: Navigant Research)

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LEDS ARE CHANGING THE NATURE OF LIGHTING
• Lamps sold as replacements for existing lamps
that have reached the end of their life are a
substantial portion of annual unit sales
• The longer lifespans of LEDs will lead to overall
declines in the global lamp and luminaire markets
Average Lamp Life by Technology
(Sources: Navigant Research, U.S. Department of Energy)
$-
$5,000
$10,000
$15,000
$20,000
$25,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
($Millions)
Incandescent Halogen
T8+T5 T12
CFL & Misc. Fluorescent HID
LED
- 10,000 20,000 30,000 40,000 50,000 60,000
Incandescent
Halogen
Compact
Fluorescent
Linear
Fluorescent
HID
LED
(Hours)
Lamp Revenue by Lamp Type, World Markets: 2014-2023
(Source: Navigant Research

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SERVICES IN LIGHTING ARE NOT NEW
• The range of services falling under the Lighting as a Service (LaaS) umbrella
definition draw many models
- ESCOs pioneered the business model of delivering energy efficiency upgrades as a service
through performance contracts
- The solar PV market uses power purchase agreements (PPAs) to sidestep upfront cost
hurdles
• LaaS is charting new territory by leveraging the physical location of luminaires and
networked lighting system features
Professional
Services
Auditing
Project
Management
Commissioning
Network Design
Maintenance
Services
Lifecycle
Maintenance
System
Optimization
Data Analytics
Managed
Services
Turnkey Service
Arrangements
Other Services
Financing
Third-Party
Ownership
Value-added
Services

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LIGHTING AS A SERVICE (LAAS)
• Service arrangements do not represent new business models or disruptive market
developments
• Some companies provide a continuum of offerings, others simply layer additional
services ono the equipment they sell
• The common thread among the definitions is that there is a long-term engagement
and predictable flow of payments from end user to service provider
Lasts between
approximately 2 and 12
years
The vendor or a third
party can own the
equipment
Lighting equipment
gathers and manages
data to inform decisions
May include technical,
maintenance, or other
services
Some form of long-term
third-party management
relationship

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THE LAAS SPECTRUM
• Services falling under the lighting as a
service (LaaS) definition span from
basic services to advanced services
- Basic service agreements address lighting
upgrades alone and do not span into the
realm of network-driven, cloud-based data
services
- Advanced service agreements include
Long-term lighting system management
agreements and can include financing
• The advanced side of the spectrum
captures service arrangements that
expand into the new world where
leveraging the position of networked
lighting equipment to gather and
manage data can inform actions or
decisions
Spectrum of Service Arrangements
Deemed LaaS
(Source: Navigant Research)

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BENJAMIN FREAS
Principal Research Analyst
202.481.7304
benjamin.freas@navigant.com