Welcome to The Lens, a 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.
Volume 4 is a special edition focused on small buildings. If you enjoy this, stay tuned, because itās a preview of next weekās member gathering and a whitepaper Iām working on sponsored by Keyframe Capital.
Enjoy!
What happened?
In the last year, A LOT has happened in the world of small building (<50k square feet) controls and energy management. Here's a non-conclusive list of examples...
75F, Passive Logic, David Energy, and Redaptive all raised new rounds of funding and all have at least some focus on unlocking the small buildings market.
The small buildings market is quite huge AND quite pivotal to the whole climate change mitigation thing. As I said on LinkedIn, these buildings consume ~50% of U.S. commercial building energy consumption, but less than 10% have controls and analytics.
Frankly, thatās because most of us ignore the market (for good reasons). When I was an energy management consultant, we had a rule: we donāt touch portfolios under 2 million square feet. Most of your businesses are the same. You need a certain size building and/or portfolio to make the customer acquisition costs and project development costs pencil out. If youāre an ESCO, youāre likely even more stringent than the rest of us. If youāre a controls provider, your stuff is likely too complicated and too expensive.
Context
Underneath the headlines, there are several trends Iām seeing. Iām going to keep these to three technology-related trends. To get the rest of them, ya gotta wait for the whitepaper.
First, connected thermostats are unlocking innovation by allowing software to sit on top of them. Since packaged rooftop units dominate the small buildings landscape, this applies to a surprising amount of the market. David Energy installs a smart thermostat for free, then enrolls the building in Con Edās demand response program. The utility payments are split between the company and the owner. Win-win. Encycle is doing something similar, except their advanced supervisory control manages energy, not just demand.
Second, utilities are (slowly) creating new market structures for technology and service providers to aggregate non-affiliated small buildings and monetize their grid benefits. Con Ed and Duke Energy above are examples. PG&Eās pay-for-performance and on-bill financing programs are other examples. With FERC order 2222 on the horizon, this will continue to spread throughout the country. If you look closely, a new method for automating the measurement & verification (M&V) process and software platform is needed to allow this to scale. A leading example is NMEC and Recurveāwhat Matt Golden described in our podcast together.
Finally, innovative controls providers are attempting to remove the barrier to entry for those at this small buildings end of the controls market. Passive Logic wants to provide a no-code interface to design, procure, and install the whole BASā¦ so anyone can do it. J2 Innovations wants to simplify the install using the concept of templating systems, reusing/sharing the integration work across projects, and using setup wizards (like when you turn on an iPhone the first time). 75F is similar with their reliance on Haystack tagging to automate much of the process.
To discuss these and more, join us at next weekās Pro member gathering, where Joe Aamidor and I will discuss VC investments, partnerships, and acquistions from the first half of 2021.
To dive deeper into small buildings, stay tuned for our upcoming whitepaper sponsored by Keyframe Capital.
Welcome to The Lens, a 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.
Volume 4 is a special edition focused on small buildings. If you enjoy this, stay tuned, because itās a preview of next weekās member gathering and a whitepaper Iām working on sponsored by Keyframe Capital.
Enjoy!
What happened?
In the last year, A LOT has happened in the world of small building (<50k square feet) controls and energy management. Here's a non-conclusive list of examples...
75F, Passive Logic, David Energy, and Redaptive all raised new rounds of funding and all have at least some focus on unlocking the small buildings market.
The small buildings market is quite huge AND quite pivotal to the whole climate change mitigation thing. As I said on LinkedIn, these buildings consume ~50% of U.S. commercial building energy consumption, but less than 10% have controls and analytics.
Frankly, thatās because most of us ignore the market (for good reasons). When I was an energy management consultant, we had a rule: we donāt touch portfolios under 2 million square feet. Most of your businesses are the same. You need a certain size building and/or portfolio to make the customer acquisition costs and project development costs pencil out. If youāre an ESCO, youāre likely even more stringent than the rest of us. If youāre a controls provider, your stuff is likely too complicated and too expensive.
Context
Underneath the headlines, there are several trends Iām seeing. Iām going to keep these to three technology-related trends. To get the rest of them, ya gotta wait for the whitepaper.
First, connected thermostats are unlocking innovation by allowing software to sit on top of them. Since packaged rooftop units dominate the small buildings landscape, this applies to a surprising amount of the market. David Energy installs a smart thermostat for free, then enrolls the building in Con Edās demand response program. The utility payments are split between the company and the owner. Win-win. Encycle is doing something similar, except their advanced supervisory control manages energy, not just demand.
Second, utilities are (slowly) creating new market structures for technology and service providers to aggregate non-affiliated small buildings and monetize their grid benefits. Con Ed and Duke Energy above are examples. PG&Eās pay-for-performance and on-bill financing programs are other examples. With FERC order 2222 on the horizon, this will continue to spread throughout the country. If you look closely, a new method for automating the measurement & verification (M&V) process and software platform is needed to allow this to scale. A leading example is NMEC and Recurveāwhat Matt Golden described in our podcast together.
Finally, innovative controls providers are attempting to remove the barrier to entry for those at this small buildings end of the controls market. Passive Logic wants to provide a no-code interface to design, procure, and install the whole BASā¦ so anyone can do it. J2 Innovations wants to simplify the install using the concept of templating systems, reusing/sharing the integration work across projects, and using setup wizards (like when you turn on an iPhone the first time). 75F is similar with their reliance on Haystack tagging to automate much of the process.
To discuss these and more, join us at next weekās Pro member gathering, where Joe Aamidor and I will discuss VC investments, partnerships, and acquistions from the first half of 2021.
To dive deeper into small buildings, stay tuned for our upcoming whitepaper sponsored by Keyframe Capital.
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