Feature


Smart start for smart buildings


The benefits of smart buildings are well recognised but organisations in the public and private sectors are under pressure to focus their capital on other investments. In this article Gary Thompson, Siemens Financial


Services explores “Smart buildings as a Service”; solutions that harness the savings from reduced energy consumption and use the savings to fund the upgrades that make buildings “smart”.


The movement in the digital transformation of buildings is experiencing strong growth with the sales of smart-building technology predicted to grow in the region of 30% per annum1


responsible for between 10% and 15% of carbon emissions2


. Non-domestic buildings are ; smart buildings have the


potential to save approximately 15% to 25% on energy costs and Facilities Management (FM) companies are now under pressure to help their clients make energy efficiency progress in buildings. Smart buildings are defined as those that


utilise advanced technology to achieve a series of benefits3


. These include: improving


building performance in such areas as energy, operations, security, and comfort; lowering the costs of equipment installation, operations, and service; and generating significantly higher user-satisfaction rates. To meet these goals, all smart buildings require the intelligent infrastructure that digitalisation enables. Data from these smart-building systems


give a facility’s infrastructure a brain and a voice. This data is put to work through smart controls for which give buildings a “central nervous system” that balances and recon- ciles competing interests such as energy min- imisation, occupant comfort, and grid stability. This allows building infrastructure to play a major role in supporting the mission of the organisation when air-quality monitors, traffic tracking and other smart community tech- nologies are mounted on the building. It helps drive top-line results by providing optimal environments, increasing equipment uptime and reliability, and lowering operating costs. FM companies are under pressure to help


their clients identify and implement solutions where energy efficiency can be improved in a


08 fmuk


financially sustainable way. Therefore, they are increasingly looking to work with suppliers of smart-building conversion which can deploy financial techniques that remove the need to devote working capital, bundling the smart- building conversion into a monthly fee across an agreed-upon contractual period. In other words, they are increasingly look-


ing for ways to pay for outcomes – in this case energy savings and other smart-building advantages. In the case of smart buildings, this is leading to the rise of a concept called “Smart Buildings as a Service”4


– sometimes


called “servitization.” With the help of their FM providers, landlords and owner-occupiers are conserving their capital for growth and improvement initiatives and are choosing to let integrated technology-service-finance companies fund the digital transformation of their buildings. There are a variety of modern financing models that allow this to happen, but the most attractive of these involves smart solutions partners that are able to do this at low or zero net cost for the build- ing’s owner – public or private. Research reveals the significant value of smart-building conversion – that could conservatively be enabled through self-financing – for commer- cial buildings ($1,611m), hospitals ($521m) and government buildings ($1134m)5


. Using smart financing techniques, the


integrated solutions provider introduces technology and systems to create intelligent buildings that deliver a clearly predictable level of energy savings. The reduction in


Gary Thompson.


energy costs is then harnessed to effectively fund the cost of conversion. While the level of energy reduction will vary depending on external climate, cost of power and other factors, in most cases the savings can be reliably reflected in a financing structure to deliver self-financing smart-building upgrades anywhere in the world. The solutions provider agrees a building-conversion contract with the owner over a predetermined period, after which the owner benefits from ongoing reduced energy consumption, along with all the other added benefits of smart buildings. The building owner has had to put no capital at risk and has conserved their own funds for strategically important development activities – whether in commercial growth or improved public services. Furthermore, such smart financing


solutions offer FM companies an opportunity to integrate these funding models into their service offering. In doing so, FM companies can leverage the provider’s knowledge and financing expertise to provide an appropriate energy finance solutions for their end customers. With budgets under pressure, some CFOs


may assume that investment in smart-building conversion is unachievable. The reality, however, is that financing techniques now exist which allow organisations to capitalise on the many benefits of smart buildings with low or zero net cost. Building landlords and owners are looking to their FM providers to help them make this transition.


1 Markets and Markets, Smart Building Market by Type (Building Automation Software, Services), Building Type (Intelligent Security System, Building Energy Management System, Infrastructure Management, and Network Management System), and Region – Global Forecast to 2022, June 2017; Orbis Research, Global Smart Building Market Research Report and Forecast to 2018-2023, Feb 2018


2 See for instance: Committee on Climate Change, various; World Bank Group, Cities and Climate Change, 2010 3 Source: Siemens Building Technologies 4 See, for instance: ITEA, BaaS “Building as a Service” as technical enabler for future building automation ecosystems, 2016 5 Smart start for smart buildings, 2018


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