Among the global factors contributing to climate change, buildings have long played a substantial role, responsible for 40% of global greenhouse gas emissions. Yet, within this challenge lies an extraordinary opportunity – the prospect of turning buildings into a part of the solution.

Through the strategic implementation of energy optimization technology, demand response programs and other grid services, we can not only mitigate the environmental impact of buildings but also chart a course toward a more sustainable future.

This blog post outlines the current state of small and medium commercial buildings, dissects the barriers hindering their transformation and highlights the path towards realizing their full potential as virtual power plants (VPPs) – a “new utility” shaping the energy landscape.

The State of Small and Medium Commercial Buildings

To comprehend the magnitude of the challenge and the transformative potential, we must first examine the state of small and medium commercial buildings:

  • A Big Slice of the Energy Pie: The built environment currently shoulders 40% of global emissions and nearly 30% of global energy consumption, according to the International Energy Agency.
  • Smaller Buildings Matter: Over 90% of commercial buildings in the U.S. are smaller than 50,000 square feet. These smaller buildings are often overlooked despite their sheer numbers, creating a significant gap in energy efficiency programs.
  • Record Temperatures: Recent years have witnessed record-breaking temperatures and extreme weather events, emphasizing the urgency of addressing energy consumption in buildings.

Barriers to Being a Part of the Solution

While the potential of small and medium commercial buildings to contribute to a greener future is immense, several barriers obstruct their participation:

  • Difficulty Enrolling: The complexity of enrolling buildings in energy optimization programs and demand response initiatives discourages many building owners from participating.
  • Lack of Advanced Metering Infrastructure (AMI): Access to AMI data is crucial for effective energy management, yet significant gaps in infrastructure exist outside certain regions.
  • Slow Access to AMI Data: Even in regions with AMI, slow access to data hampers effective peak demand management, hindering informed decision-making.
  • Lack of Financial Incentives: Unclear return on investment often deters building owners from investing in energy optimization technology.
  • Time-of-Use (TOU) Rate Conflicts: Conflicts between TOU rates and demand response windows present challenges for effective participation in demand response programs.

What Needs to Change

To overcome these barriers and unlock the potential of small and medium commercial buildings, several fundamental changes are essential:

  • Real-Time and Automated Options: Building owners need access to real-time energy data and automated solutions, including smart thermostats, automated demand response systems and intelligent building management systems.
  • Innovative Financing Models: Collaborative financing models with utility companies, incentives and low-interest loans are essential to encourage energy-efficient upgrades.
  • Increased Awareness: Education campaigns must highlight the revenue opportunities and cost savings associated with energy optimization and grid participation.
  • Regulatory Shifts: Regulatory changes enabling Distributed Energy Resources (DERs) to participate in grid services are crucial for small and medium commercial buildings to contribute effectively.

The End Game: Buildings as Virtual Power Plants

The ultimate goal is transforming buildings into VPPs or a “new utility.” VPPs, comprising an aggregated network of hundreds or thousands of sites, leverage the potential of various devices to support the grid. Components can include electric vehicles, heat pumps, HVAC equipment, batteries, plug loads and industrial mechanical equipment. When flexibly managed, these elements can provide the same energy services as traditional power plants.

Conclusion: A Green and Sustainable Future

Small and medium commercial buildings hold the key to reshaping our energy landscape. We can harness their latent energy potential by addressing barriers through technological advancements, innovative financing, awareness campaigns and regulatory changes.

Now is the time to pivot towards a greener and more sustainable world, with our buildings at the forefront of this transformative journey.