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. Gary Thompson of Siemens Financial Services explores “Smart buildings as a Service’ – solutions that harness the savings from reduced energy consumption and 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 annum.

Non-domestic buildings are responsible for between 10% and 15% of carbon emissions, so reducing their consumption makes a considerable contribution to the healthiness and attractiveness of urban environments.

Smart buildings have the potential to save approximately 15% to 25% on energy costs and this saving should be a goal for both private and public sector building owners as they seek to generate savings on behalf of shareholders and taxpayers. Otherwise, every day that goes by represents lost savings and lost smart building benefits.

Smart buildings are defined as those that use advanced technology to achieve a series of benefits. 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 buildings – whether in the public sector or commercial – which give buildings a “central nervous system” that balances and reconciles competing interests such as energy minimisation, occupant comfort and grid stability.

This allows building infrastructure to play a major role in supporting the mission of the organisation – and sometimes the whole community – when air-quality monitors, traffic tracking and other smart community technologies are mounted on the building. It helps drive top-line results by providing optimal environments, increasing equipment uptime and reliability, and lowering operating costs. All of this is achieved while using advanced analytics to measure, record and report building system efficiency.

smart buildings

Understanding the benefits of smart buildings is one thing; finding practical, affordable and sustainable ways of achieving smart building conversion is another. Where it is difficult for an organisation to justify prioritising capital investment, there is a temptation to do nothing. But every day that a building has not been converted to “smart” is a day in which money savings have been foregone, unnecessary natural resources have been consumed and social benefits have not been delivered to citizens and employees.

Pioneering landlords and owner-occupiers are therefore increasingly looking to solutions whereby the supplier of a “service” such as smart building conversion deploys financial techniques that remove the need to devote their own capital, bundling the smart building conversion into a monthly fee across an agreed upon contractual period. Smart building conversion still delivers attractive cost and capabilities benefits that organisations wish to benefit from, even if they are reluctant to invest their capital to this end.

In other words, they are increasingly looking 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” – sometimes called “servitisation”.

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 building’s owner – public or private. Research from SFS has estimated the value of smart building conversion that could conservatively be enabled through self-financing in the UK.

smart buildings

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 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.

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 that allow organisations to capitalise on the many benefits of smart buildings with low or zero net cost. By putting off smart building conversion, associated savings are lost and benefits to occupants remain unrealised.

Download the full report here:

Gary Thompson

UK Sales Director – Siemens Industries and Markets

Siemens Financial Services

Tel: +44 (0)1753 434126

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