The Lens: The Energy Spreadsheet Must Die

Hey gamechangers!

Welcome to The Lens, a monthly-ish recurring series where I unpack the strategy and context behind the news in as few bullet points as possible.  For past editions, check out Vol. 1, Vol. 2, Vol. 3, Vol. 4, Vol. 5, and Vol. 6.

For Volume 7, let's build on Volume 5’s Introduction to Energy Program Management.

Enjoy!

Last week, I wrote:

Today’s best practices for decarbonizing a building are archaic, typically involving site visits and clipboards and spreadsheet models and simple payback napkin math that doesn’t value carbon. Software technology for decarbonizing buildings has been around forever, but it’s fragmented and often disconnected from the core business.

And you let me get away with it without explaining myself. Thank you, because today is that explanation.

Imagine a prestigious American university with a very ambitious climate action plan to get to zero carbon emissions. They own hundreds of buildings. By 2040, they plan to retrofit each of them to use as little energy as possible, convert each to 100% electric, and procure renewable energy for the remaining electric consumption.

Now imagine a large office REIT. They have an equally ambitious target that’s earned them a top ESG rating. They also own hundreds of buildings. Their retrofit plan is similar.

These two organizations are leaders in their industries. If we’re going to mitigate climate change, we need a lot of building owners to follow them. And that’s exactly what’s happening. All across the economy, large corporates are setting similar targets.

But what else do our University and our REIT have in common? They both told me directly that their current plan and process to get to their target is “suboptimal”, “inefficient”, “not streamlined”, “fragmented”, “disconnected from the rest of the business”, and “lacks transparency”.

To understand today’s “suboptimal” process, picture this... The sustainability committee meets monthly to go over a massive projects spreadsheet. Picture something like this:

But picture it for hundreds of buildings... now you’re starting to grasp the complexity. And the inadequacy.

This committee is made up of representatives from siloed parts of the organization: Engineering, Operations, Capital Planning, Sustainability, and Finance (and probably some external consultants). Before the meeting, an engineer or sustainability manager scrambles to get the unruly spreadsheet under control and up to date. Since the last meeting, projects have been added, approved, funded, updated, removed, and commented on by other committee members.

Updating the spreadsheet requires pulling project information from several different sources, including energy audits, word of mouth, the CMMS, retrocommissioning study reports, M&V reports, FDD software, capital planning software, and more. As we’ll see, the entire decarbonization journey requires navigating disconnected, but slightly overlapping, software tools.

Let’s stick to the meeting though: During each monthly meeting, the team reviews spreadsheet for queued projects, ongoing projects, and completed projects. Everybody (who is able to attend this month) has comments, obstacles, and questions from their own unique lens:

• Controls engineer: That project can’t be done because we’d need a controller upgrade first. Is that upgrade in the budget?
• Local facility manager: How will that  project affect our IAQ score?
• Finance manager: What are the non-energy benefits of that project? What value would it have to our core business?
• Sustainability manager: What are the tradeoffs between water and energy?
• Accounting: Is that completed project really saving what we thought it would?
• Procurement: Have we received the three mechanical bids we need for that upcoming project?

The meeting ends without answering many of these questions. Without the answers, the success of the carbon reduction program is left up to human judgement and status quo. There’s maybe a few action items for everyone—and then everybody returns to their primary job.

I see two massive issues here. First, decarbonizing a portfolio of buildings is going to require a more strategic approach that’s more integrated into the core business. Leaving decarbonization relegated to a meeting and a spreadsheet isn’t going to work and it’s missing the point. It’s now a core business issue and needs to be treated as such. But we’re going to set that aside today.

Second massive issue: Once organizations are ready to get serious, there’s a huge hole here that software can and should fill. But it’s not as simple as creating a SaaS product to replace “the spreadsheet”. As Packy McCormick wrote last year, Excel will never die, but it can be replaced for certain use cases if the alternative is better. And better is what we need to make decarbonization realistic.

For the rest of this post, let's unpack the big gap in the market, what better might look like, and what products are on the market today to help.

So what does that huge hole look like? Let’s unpack that.

The journey from target-setting to data collection to reporting to benchmarking to projects to M&V to maintaining performance at zero carbon requires switching between many fragmented tools and processes.

I’ve been using a new framework I call The Bubble Chart to explain the landscape. On the Y-axis, it’s describes which stakeholders are the primary users of the tool: Portfolio level vs. Site level. On the X-axis, it plots the tools on top of that energy or carbon management journey, describing what step or steps they’re designed to help with.

Let’s start at the portfolio level. (Company logos are used as examples and are not meant as endorsements. There are many alternatives in each bubble.)

Most organizations have most of these tools in place today. If you try and draw out the data pathways for a given organization, you’ll likely find a total spaghetti mess. Here’s an example from one organization I interviewed:

But then the site level teams have all these other software tools for energy management, asset management, M&V, and maintaining and improving performance.

And those are just the existing energy-related silos! In the middle there is our gap. Our portfolio level tools help us get the first half of the journey done. Our site level tools help with some of the 2nd half. In the messy middle is where the opportunity lies.

So what might better-than-excel look like?

In this fragmented world, I think better means filling that gap in the middle: developing projects, making investment decisions, and executing projects. Like I said in Volume 5, that’s where Energy Program Management software can come in. But what are the keys to winning the race to fill the gap?

Don’t create another silo

It sure would be nice if all these tools were working off the same source of truth. Picture adding a new submeter into that spaghetti mess above. How would all the other tools know what it’s measuring, where it’s located, etc? Today, a human would need to manually onboard that device into every siloed tool.

That’s where I think an Independent Data Layer should come in.

One tool that manages the connections between all the other tools. Most of which have some notion of users, sites, utility meters, interval meters, non-meter assets, insights, projects, and tasks. Those notions need to be united if there’s going to be a comprehensive view of the projects needed to get to zero carbon.

Of course, the alternative to an IDL is a comprehensive overlay with an application marketplace. Both of these provide the two other major benefits. First, you can switch any of the siloed tools out and not break the whole system. Second, they’re ideally not energy-specific platforms, so it’d pull all these energy-focused applications out of the energy silo.

Connect the site & portfolio teams

In my interviews, there was one lightbulb moment I just can’t get out of my head. The VP of Sustainability said that she sends the local facility managers a monthly email with their updated energy score and she expects them to act on that email.

Trust me: that’s never going to work. As another interviewee said, “the portfolio and site teams want different things”. A successful decarbonization program requires both to get what they want.

Even if you layer in the IDL, there’s still a big chasm between portfolio-level goals and site level execution to reach those goals. An Energy Program Management application has the potential to close that gap.

Based on my interviews, I see several ways an application like this can add value:

• Help portfolio-level stakeholders with creating an actual plan to get to their carbon target. A plan is made up of projects and a deadline for getting those projects done.
• Modeling potential projects to understand what’s possible and reduce savings uncertainty.
• Creating a place where all stakeholders can collaborate (outside of the monthly meeting).
• Make it easier to populate projects and keep them updated. Right now, populating project spreadsheets requires energy audits and site visits. There is a better way.
• Help site-level stakeholders see the projects they should be doing. The de facto stance that operators take local engineers and property managers take is that they’ve done it all. They've picked all the low hanging fruit, everything's done. And it's never the truth. They should see not only the projects that are possible, but also the projects their peers have already done.
• Reduce dependence on rockstar individuals. Today, it’s ******being left up to individuals to recommend projects individually and individually to approve all projects. If the rockstars get busy or leave or retire, progress stalls.
• Defining the decarbonization process within the organization. If the massive excel spreadsheet is a projects database, this adds the workflow required to make it produce results.

Now, you might be reading this and wondering... why can’t we just use a general project management tool like Basecamp, Asana, Monday.com, etc? Obviously some organizations will use whatever tools they already manage projects in and it will improve thing. But I think that’d be leaving a lot of process optimization on the table. Next, let’s explore why I think this should be a specialized app for decarbonizing real estate.

Tailor it to the business

This last section is where I think most of the innovation needs to occur, so I’m not going to act like I have it figured out. The successful application in this category will figure out how to get their software integrated into core operating processes.

Real estate organizations have many ways to do projects today:

• A task assigned to a technician on a white board in the facilities office
• A work order assigned in the CMMS to a service provider to be completed on their next monthly site visit
• A small project that’s funded out of the local OpEx budget
• A planned renovation or retrofit that’s funded out of CapEx (local or portfolio)
• An performance contract executed by an ESCO

For each type of project, there are standard procurement processes, investment criteria, standards to be met, preferred vendors, different layers of review and stamps of approval, varied sources of funding, etc. The software needs to integrate with where/how the work already gets done in the most efficient way. Given the inefficiencies and silos at the heart of real estate operations today, this might be an impossible task.

With a little hope, let’s walk through a few concrete examples of tailoring decarbonization to the core business:

• Uniting it with both the existing capital plans AND the preventative maintenance plans. Imagine an inefficient chiller is due to be replaced at the end of its useful life in two years and that replacement cost is already in the budget. That would be a nice piece of information to know when you’re planning a project that involves upgrading that chiller. Same thing with small tasks: can the technician do them when he’s on his PM site visit?
• Calculating an accurate return on investment. The era of energy-only ROI calculations is f*cking dead, friends. Decision-makers need to see decarbonization projects in more specific terms. Does the ROI calculation take the triple-net leases into account? What will the project do to the value of the building? Will this project earn us more than the opportunity cost of that capital invested elsewhere?
• ESG is not just about energy. Although decarbonization is the headliner, organizations have broader ESG goals that are no longer just about energy. Can you show the impact on IAQ of that energy project? If so, it might get approved faster. How about the impact on water and waste?
• Don’t just expect everyone to log in. As an interviewee told me, “our chief engineers don’t do well in new software environments.” So rolling out a new platform is risky. Even if the software is integrated in with how the work gets done today, change management needs to include more than just software integration. I’m talking about aligning organizational incentives... how are those chief engineers being compensated or rewarded for the change they need to make?

Sound easy, right?! 🙈

To conclude, let’s talk about the vendor landscape. It’s not a totally blank space... there are a few existing vendors targeting this opportunity. I break them down into the following categories:

• Excel-like SaaS product with energy-only functionality (E.g. GRITS, Buildee)
• Excel-like SaaS product plus some integration with other steps on the journey, but still in an energy silo (Aquicore, Bractlet, Audette, FDD tools with project tracking functions like Clockworks and SkySpark, Setmetrics)
• Tech-driven ESCOs and Energy Program Management platforms that have a software product but they package it with the implementation (E.g. Sparkfund, Redaptive, Gridium, etc)

I don’t know of any comprehensive overlay solutions that tracks projects across all ESG categories and are integrated in with other jobs to be done. One that can put sustainability in context with all the rest of the things each stakeholder cares about. Do you?

That’s all for this month’s edition of the Lens.

Let us know what you think on Nexus Connect.