With Better Software, Office Buildings Can Cut Energy Use by 30 Percent

A Techwise Conversation with BuildingIQ CEO Mike Zimmerman

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Steven Cherry: Hi, this is Steven Cherry for IEEE Spectrum’s “Techwise Conversations.”

In the recent U.S. presidential State of the Union address, there were few surprises when it came to energy policy, including its ringing endorsement of conservation. One of the easiest ways to conserve ought to be more efficient use of the energy it takes to heat and light office buildings. After all, they already have control systems for their heating, ventilation, and air-conditioning.

And yet, while a lot has been done to make new buildings highly efficient with new control systems, there’s been, to date, very little effort to help existing control systems in existing buildings wring out the waste. Unsurprisingly, this represents quite an opportunity for clever start-ups, one that the market is now starting to fill.

One of those companies is BuildingIQ, that’s one word, which last month raised US $9 million in a new round of funding. The money came from some big companies in the energy field, including Schneider Electric and Siemens.

My guest today is its CEO, Mike Zimmerman. He came from the Australian VC firm Technology Venture Partners, which specializes in international investments, and has previously worked at Altos Ventures, in Silicon Valley, Bain & Company, and Goldman Sachs. He has an MBA from the Stanford business school and joins us by cellphone from Sydney, Australia, where the company is based, and where, I guess, it’s the middle of the summer.

Mike, welcome to the podcast.

Mike Zimmerman: Thank you. It’s great to be here. Thanks, Steven.

Steven Cherry: Mike, you tell a building it can see a 10 to 30 percent reduction in the energy the HVAC system uses. Spectrum, here in New York, is on one floor of a 41-story office tower, two blocks from the Empire State Building. How would you save us that kind of money? And by the way, our building is freezing cold in the winter on Monday morning, too cold by the middle of the week, and always too cold in the middle of a hot summer day. Can you do something about that too?

Mike Zimmerman: [laughs] Definitely, definitely. That’s not surprising. Look, if I just step back and look at some of the trends in that building energy-management space, I mean, you said it best, first of all, that the cheapest form of energy, or the easiest way to save energy, is actually to conserve existing energy. So there’s lots of things happening with renewable energy and natural gas and things like that, but by far the cheapest way to do anything about the energy problem is just to save more energy.

So buildings that we’re addressing here, about 20 percent of total energy consumption in the U.S. So, you know, huge consumer of energy, and most of them, virtually all of them, are run inefficiently. If I just, as I was saying, look at some of the trends there, basically, probably the last two decades, you’ve seen some automation systems come into being where, you mentioned, you have the air-conditioning and heating and ventilation systems used to be all controlled manually, with valves and air handlers, thermostats in the office, things like that. And what happened in the last two decades were a number of control systems, a whole layer of automation, came in, and companies like Siemens and Schneider and Honeywell, and companies like that, actually put these systems in buildings and started to automate the air-conditioning systems in these buildings.

But those automation systems are basically static and fairly dumb, not targeting any one company in particular there. But they’re very dumb in how they operate, and they’re usually either left in the original settings that they were set up in, or you have to get a person in to actually fine-tune and make any changes to the system if you want to do that, and that’s very cumbersome to do. So most people don’t do that.

Therefore, your building becomes very cool in the winter, becomes very hot in the summer, and you’re generally not as comfortable as you could be. So what our company does is it adds a layer of intelligence on top of the existing control system to run like a very clever autopilot system that runs the building comfortably but does it in the most efficient way possible. It’s a learning system that incorporates predictive analytics, forecasting, and a bunch of outside data, such as weather, energy prices, even the occupancy schedules, to really better tune those control systems so you’re more comfortable and the building owner saves a bunch of energy and money.

Steven Cherry: So a company like Siemens makes control systems for its own HVAC systems—they wrote the original software for them. Wouldn’t it just make more sense for them to write better software now for those same systems, or at least hire your engineers to do it?

Mike Zimmerman: Well, yeah. The software works very closely with those existing systems, but those big vendors are not very good at software, and they don’t always have the expertise to do next-generation things like a startup such as BuildingIQ can do.

And so to date there’s actually been a lot of investment to improve those systems, but they haven’t been able to bring together the pieces that we have, and also haven’t been able to do some of the specific things like the building modeling and the predictive analytics. And so the approach we’re taking is very much to collaborate with them and help them add more value into those systems for their customers.

One of the nice things about our system is that it works with any of those, any of the underlying equipment. So rather than Siemens having to build a system that works only with Siemens equipment, and then Honeywell and the other guys having to do the same, a building owner can use one system to work with everyone.

Steven Cherry: That makes a lot of sense. It does seem a shame, though, because if these companies did this development in-house, they would learn a lot about how to build the best systems for the future. So to what extent do you have to work with the manufacturer of the original HVAC equipment?

Mike Zimmerman: We have to work very closely with them. The equipment does have some standard ways to interface into the equipment. But like all standards, they’re interpreted different ways for certain vendors and certain models. That implementation’s a little bit different, so you do have to work with them. What’s interesting about this round of funding is there’s actually two of the big vendors of the equipment are investing together into the company, so Siemens and Astra Capital is backed by Schneider Electric, amongst others, so this is really Schneider and Siemens basically taking a stake in our company’s outcome, and as a result of that, or in concert with that, we’re working very, very closely with them.

We’ve announced in the last year a partnership with Johnson Controls, who’s one of the other big vendors of equipment. We announced a partnership and how we’re going to integrate with them, and we are working with even other vendors, like Honeywell and Trane, to integrate our systems as well. Probably the underlying thing to say is that your average building owner, especially if they own a portfolio of buildings, is going to have all different types of equipment in that portfolio. So one building in a portfolio might have a Siemens building management system, the next one will have a Honeywell system, the next one will have a Johnson Controls system. So a vendor having just built its own software, it’s only going to have an impact for that portfolio owner in one or two of those buildings.

Steven Cherry: And is it mainly skyscrapers and office parks? What’s your market here?

Mike Zimmerman: It’s all commercial buildings, and so, yeah, a big chunk of the market is large office buildings. But in addition to that, there’s other places we’ve worked and had really good impact: enclosed retail malls, hospitals, universities, pretty much any kind of tenanted area. The target market is all commercial buildings—and a big chunk of that are the office buildings and skyscrapers—but in addition to that, it includes retail malls, hospitals (at least the non-acute-care part of hospitals), universities, public buildings. There’s actually a huge market, I think, for us. As we scope it out, there’s about 10 billion square feet of addressable commercial buildings in the U.S. that we could target about $26 billion in annual spend in energy, and we think we could drop anywhere from 10 to 30 percent of that.

Steven Cherry: China has an overheated economy for more than a decade and some huge building complexes that were built very quickly, without a lot of sophistication, and presumably with a lot of energy waste. Is there a big opportunity there as well?

Mike Zimmerman: There is. Like a lot of things in China, you have to be able to navigate that opportunity and balance the opportunity against the risk there. So China is forecast to have about 30 000 new skyscrapers over the next 20 years. There are cities that you and I have never heard of, or at least that I have never heard of, that have millions of people in them, and office towers being built, and a huge push for energy efficiency, but you need to be able to work within the existing regulations. The equipment vendors aren’t all the same, and you need to be able to find the right partners to go into that market. But just as an absolute opportunity, it’s enormous.

I mean, the other thing there with the government mandates is if they tell you to reduce energy use by 10 percent, you’re going to do that, and you need to find a way to do that effectively. So government regulation is probably a little bit of a bigger driver over there than in other markets.

Steven Cherry: Now, you’re based mainly in Sydney, and BuildingIQ got its start in 2009, with some work that was done for a government research group. It seems this is an area where Australia is in the forefront.

Mike Zimmerman: Australia is very progressive in the area of building-energy management. They have been very ahead of the market in terms of something called “building labeling,” which is akin to, if you go into Best Buy or Circuit City, you know, they have the Energy Star ratings on the appliances and other equipment. Well, they do that for buildings here, so any time you lease or buy a building, on the advertising they disclose what the energy use is, and there are other things that they’ve done also to really drive energy efficiency in the buildings.

And here in the market, there’s a view from building owners that, if your building is not green, you’re actually going to have a less-valuable property. You’re going to have lower-quality tenants. Leases are going to turn over more quickly. And you’ll be able to get less rent. So there’s been a huge push for energy efficiency in the building space, and that makes this a great breeding ground for our technology and some of the early pilots that we did. Our R&D team is all based here in Sydney, but our executive team is all based in the U.S., where we have offices in San Mateo, [Calif.], and New York.

Steven Cherry: We mentioned that you raised $9 million recently in new funding. The startup company Nest, which makes intelligent thermostats, also in January, it raised $80 million in additional funding. Is the consumer market way ahead of the industrial one?

Mike Zimmerman: No, it’s not. Actually, a lot of the early smart metering and the pressures to manage energy and just manage facilities more efficiently really started out in the commercial and the industrial space and has only recently come into the consumer space. I mean, Nest is a very interesting company. We are like a Nest for commercial buildings, or Nest is like a BuildingIQ for residential buildings. The thing about Nest is that they’re building a piece of hardware, so they’ve got to get out and touch every home, which is very expensive. So if they can continue to execute and get demand across the market, they’re going to do fabulously well. Very interesting company, very interesting product.

Steven Cherry: Mike, it seems crazy the market hasn’t picked this low-hanging fruit when it comes to office buildings. Then again, it also seems crazy the U.S. only recently raised fuel-efficiency standards for cars, so I guess better late than never. So thanks for jumping into that market, and thanks for joining us today.

Mike Zimmerman: No problem. Thank you. It’s my pleasure, and I appreciate the time.

Steven Cherry: We’ve been speaking with BuildingIQ CEO Mike Zimmerman about retrofitting smart energy-saving controls into existing energy-wasting office buildings.

For IEEE Spectrum’s “Techwise Conversations,” I’m Steven Cherry.

This interview was recorded Thursday, 14 February 2013.
Segment producer: Barbara Finkelstein; audio engineer: Francesco Ferorelli

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