Trying to reduce energy consumption and cost for a facility typically begins with an energy audit or assessment, with a goal of helping the building owner to understand how to make the building more efficient. The audit typically nets out to a short list of items the building owner can make investments in that have a relatively short-term, simple payback. This list is usually a list of energy conservation measures, or what's often know in the industry as an ECM. An ECM list generally includes things like lighting upgrades and controls, building management system re-commissioning, maintenance and upgrades to HVAC systems, and even changes in refrigerants. Historically, both lighting and HVAC are primary targets, given that both are well understood and can produce a combined cost savings of 10-20 percent or more of the energy consumption of a building annually.

Today, with all the hype around IoT, we have clients asking about leveraging IoT to make the building smarter and more efficient. The toughest question we get asked is how much energy will IoT save if we implement it? Sometimes this goes as far as how much water and gas might it save? This is where IoT starts to look a lot like any other ECM. Clients want to attach a building savings number in percentage and understand the payback for making the investment. The interesting thing is that IoT is more of an in-direct approach to understanding building behavior. It adds a very significant real-time element to your operations and allows you to actually get out in front of issues. 

Unexpected cost, system repair and unplanned downtime can all easily be avoided. So it is difficult to give it a number, and even more difficult to guarantee a number contractually. This creates an interesting dilemma because, used correctly, it could save a tremendous about of money depending on the client use case and relationship to their business and operational considerations. Yet, in other opportunities, it may not provide as strong an impact on actual cost but instead provide a level of insight and information that its considered strategic or beneficial, creating new value to the business that is worth the investment.

I often use a metaphor to help clients understand this. It's similar to a heart rate monitor, that helps you know if things are good or bad but cannot necessarily fix any heart issues. So, if you are having a heart issue, the metering and monitoring was helpful to know in advance, got you to the hospital in time and avoided a potentially serious and negative outcome. Although the sensor only monitored heart rate, it added huge value to the person wearing it.

IoT is similar to this, because, like an ECM, it is a physical upgrade to the facility by adding in sensors for telemetry, gateways, data aggregation for processing, and analytics. It captures and enriches facility data to help tell the story of what's happening at many levels in the building. Often sensors are considered cheap, under $200 dollars, the same with gateways and data service plans. Fully instrumented, however, with security and easily 50-100 points of monitoring in a typical medium or larger commercial office building, this can rapidly grow to $100K-$300K per site for hardware and installation. Even more so for industrial manufacturing due to the complexity and integration with process and controls that might be needed. Not all equipment can be self-installed, especially anything working with electrical mains and electrical equipment sub-metering, which is more essential for monitoring electrical consumption. That's exclusive of storing and processing the data into something useful, which adds even more cost to an IoT program. Bottom line, IoT is not always as cheap as advertised. This makes it even more important to know what you are investing in and how to create value from it.

Personally, I don't like to put a value of more than 3-5% on savings generated from IoT, primarily because its greatest strength is in influencing employee behavior that leads to savings potential. This potential exists, but often needs discovery within a business to determine the more relevant ways to extract it based on people, systems, infrastructure, process and the multitude of things that make up the uniqueness of any business.

This is why I see IoT as the new ECM. Like many other energy conservation measures, it can produce savings, but unlike many other well known ECM approaches, it does need careful consideration to ensure it produces the return and value a company expects.