Director, Market Analysis, NextEnergy
Recently, the Environmental Entrepreneurs hosted an event here at NextEnergy focused on opportunities in clean energy in Michigan. As part of our work for the Clean Energy Roadmap, we were tasked with mapping the clean energy assets in the state, which is helping us to identify strengths in the clean energy ecosystem. But to understand the market strengths, one has to dig into the market drivers for clean energy, and it is nearly impossible to discuss energy policy without also discussing the EPA’s Clean Power Plan (also known as Section 111d of the Clean Air Act).
These new rules are pushing coal power plant closures in Michigan and as a result, are increasing concerns about energy shortages in Michigan. While this does not mean we can expect the lights to go out, it does raise questions as to how much energy may cost in the future. This is helping to push innovation in the energy efficiency market, as companies look to either cash in on the future energy needs in the state, or conversely hedge against future energy costs.
The energy efficiency building technology work that NextEnergy has done for the Clean Energy Roadmap revealed several interesting facts:
• Michigan has a robust installer network that is actively using energy efficiency as a marketing tool and there are multiple installers with this mindset in almost every Michigan town
• The building automation technology providers and integrators are a small but potentially mighty sector in the state
• The state’s energy policy is up in the air at the moment with many moving parts
Through our research for the Clean Energy Roadmap, we uncovered a total of 1,822 installers who have self-identified as providing some energy efficiency technologies, such as energy efficient HVAC systems. This provides a robust base for getting the equipment into buildings and homes. The bulk of these installers are currently HVAC installers, because that’s where the incentives currently reside. However, there are electrical contractors, insulation contractors, window and door installers, and other contractors as well.
Within building automation (BA), Michigan does not have a large number of companies with product offerings. However, where Michigan lacks in quantity, it makes up for in innovation and breadth. Some of the companies are doing input devices, such as sensors, while others offer software or software as a service (SAAS) to manage building operations or energy consumption. In the bigger picture, the market for building automation is growing rapidly (as security, energy, and lighting systems are getting tied together in one management system). The communication nodes, the modems and other technology that talk to each other in BA systems, are expected to grow at a compound annual growth rate of 13% through 2021, according to Navigant Research. And the combination of current players, technology developers, and a robust overall software, sensors, and controls sector (with 82 companies playing in the BA and a tangential markets), Michigan is well positioned to grow with the sector overall.
Michigan Companies in the Building Automation Ecosystem
Finally, with the state legislature wrestling with replacing PA 295, a number of proposals from both the house and senate would potentially eliminate the renewable portfolio standard and let the energy optimization sunset. However, with the push from the Clean Power Plan to close plants, the need for energy efficiency, and the potential that the political process doesn’t move forward leaving the current law in place, is likely to push cost competitiveness with other energy resources such as new natural gas combined cycle plants and renewable energy. As the BA systems can work with demand response programs, the value proposition gets even better, regardless of what the end game is in the political arena.
The BA market in Michigan, while not large yet, is well poised to join the robust and growing market capitalizing on key trends in the state’s energy markets. In 2011, BCC Research claimed that the global energy efficiency market has grown from a $61.8 billion industry in 2005, to an estimated $311.7 billion in 2015. That is an enormous market for those that compete in energy efficiency. How can individual companies stay on top of these trends? A great first step is tying the multiple components together: get installers trained and up to speed on your benefits, get your software to work with demand response programs (can you do something with OpenADR signals?), and stay current on how energy efficiency and demand response will be incorporated in potential new laws.
It’s still a little bit of the Wild West in the BA market and the related energy efficiency markets, but Michigan’s small market clearly has some cowboys and cowgirls ready for the ride.
Contact Dave Hurst: firstname.lastname@example.org