Energy and sustainability software firm Envizi is one of a number of Australian companies that have found a niche in the US market leveraging a growing appetite for efficiency in the North American commercial real estate sector, at the same time as more private finance starts to move into the energy efficiency and renewable asset sectors.
In the US Envizi recently announced a strategic partnership with RealFoundations, a professional services firm with over 10,000 commercial properties on the books, which will offer Envizi products to clients as part of its managed energy services offering.
The products include tools to help optimise the energy use of commercial real estate assets through advanced data capture, energy management, analytics and reporting.
Envizi chief executive David Solsky spoke to The Fifth Estate to explain some of the differences between the US and Australian markets.
For instance in the US the market for energy efficiency is not being driven by federal legislation like it is in Australia, he says. Instead, key drivers include building-specific legislation at the city level, such as in New York and Seattle. These cities are becoming far more stringent with efficiency laws and at setting targets.
There are also some states, such as California, implementing legislation focused on carbon emissions.
In the US the big challenge, Solsky says, is scale, as well as the diverse political landscape across city and state governance. The initiatives implemented so far, however, have created a groundswell, as has the end of suppressed energy prices.
“The US market and US corporations don’t necessarily like to do things because of legislation. They have a commercially focused and pragmatic approach,” he says.
Energy prices in the US were for many years suppressed due to shale oil augmenting supplies for generation, and also the GFC keeping prices low.
Getting North America to embrace energy efficiency and energy management has been harder in a declining energy price environment.
Another element that has impacted on the market is the money flowing through the public utility corporations that legislate prices charged by the retailers and networks. The PUCs have been providing funds to drive efficiency programs and demand response programs to stave off rising costs of network upgrades, Solsky says.
This has created an “incentive-driven environment”. Consumers are waiting for the funding from PUCs instead of implementing initiatives themselves.
By comparison, in Australia the past seven to eight years of rising prices and the fact there is less “free money” for upgrades, coupled with a more onerous legislative environment, has generated efficiency activity.
Solsky says the Australian commercial real estate market is also smaller, and therefore more competitive, with asset owners “jockeying for leadership in sustainability”.
This is why his company has been able to build its business successfully in Australia, but until recently found the US market more difficult.
Another hurdle the company faced was that many of the products have a carbon emissions management and sustainability reporting focus.
“That didn’t have a strong business case in the US.”
The energy management products, released late last year, are the new strategy for that market. He says the company is now seeing much stronger growth in its sales pipeline in the US, and the partnership with RealFoundations also creates strong growth potential.
“It gives us a platform through them to take energy management solutions to companies with a large number of assets.”
The company also worked with RealFoundations to customise the platform to be attuned to the US market.
Solsky says the energy management solutions would deliver sustainability gains as a co-benefit, in terms of carbon emissions reduction. The platform will also deliver cleaner and more robust data for reporting on Energy Star, GRESB and/or CDP.
The commercial real estate sector in the US has a strong focus on net operating income, so even aspects such as increases in Energy Star ratings and therefore increased property value are regarded as secondary gains, he said.
When the product initially launched in Australia late last year, pilots in 4.5 and five-star NABERS buildings delivered a saving of between 8-10 per cent in energy use, largely through better detection of waste and fault detection.
“Most organisations can save between 10 and 15 [of energy use] per cent just through better data and information to eliminate energy waste.”
A number of the firm’s long-standing Australian clients are now starting to invest in and adopt some of the energy modules, he says. These are all commercial real estate sector clients that were already using CO2 reporting and sustainability reporting products, and almost all of them are reporting to either GRESB or CDP.
There are also a growing number of clients in the health sector that are undertaking CDP reporting. Along with education, the health sector in Australia is proving a sound market.
“They are both significant owner occupiers. [Health and education] are becoming more focused on energy management because the benefit flows straight to the bottom line.”
Solsky says that in the past six to nine months, more private finance has been moving into these sectors, as financial institutions start to understand the energy efficiency and renewable asset classes.
Other Australian based players in the US market include Building IQ, which recently announced a strategic partnership with the US based AMP Technologies, and Switch Automation. Both have been profiled in The Fifth Estate.