Practical Experiences in Applying Savings M&V By Thomas K. Dreessen CEO, EPS Capital Corp. EVO Board Member and Pierre Langlois President, Econoler International

Practical Experiences in

Applying Savings M&VBy

Thomas K. DreessenCEO, EPS Capital Corp.

EVO Board Memberand

Pierre LangloisPresident, Econoler International

EVO Board memberOctober 19, 2005

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Program

13:00-13:10 Introduction 13:10-13:25 Presentation of EVO13:25-14:00 Overview of the International Performance

Measurement & Verification Protocol (IPMVP)14:00-14:45 How to apply IPMVP’s Options in practical ways

14:45-15:00 Break

15:00-15:45 ESCO Strategies for Valuing Savings and Mitigating Related Performance Risks

15:45-17:00 Actual Project Examples in Applying Savings M&V 17:00-17:30 Q&A and Conclusion

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Introduction

Your Trainers:

• Tom Dreessen CEO, EPC Capital Corp.

www.epscapital.com

• Pierre Langlois President, Econoler International

www.econolerint.com

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Introduction

Why Measure and Verify?• Accurately assess energy savings for a project

• Allocate risks to the appropriate parties• Reduce uncertainties to reasonable levels• Monitor equipment performance• Find additional savings• Improve operations and maintenance (O&M)• Verify cost savings guarantee is met• Allow for future adjustments, as needed

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Introduction

• M&V is an evolving science, although common practices exist

• These practices are documented in several guidelines, including– The International Performance Measurement &

Verification Protocol (IPMVP 2001)– FEMP M&V Guidelines: Measurement and

Verification for Federal Energy Projects Version 2.2 (2000)

– ASHRAE Guideline 14: Measurement of Energy and Demand Savings (2002)

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EVO

• Efficiency Value Organization (EVO)www.efficiencyvaluation.org

• Formed in 2004, formerly IPMVP Inc, a non-profit US corporation

• Provides tools to help energy efficiency projects be valued equivalently to new energy supply projects

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EVO

• EVO Vision

A global marketplace that correctly values the efficient use of natural resources and utilizes end-use efficiency options as a viable alternative to supply options

• EVO MissionTo develop and promote the use of standardized protocols, methods and tools to quantify and manage the performance risks and benefits associated with end-use energy efficiency, renewable energy, and water efficiency business transactions

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EVO• Protocols

– Industry Standards

• Training, Certification– Under development

• Building Community, Promoting Efficiency– USGBC - US Green Building Council - LEED– Metering International – Power Measurement - Webinars– APEC - IEEFP– Coming soon - EVO subscriber services

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IPMVP - Overview

• IPMVP stands for International Performance M&V Protocol

• Created by an international committee seeking to reduce uncertainty in M&V

• Developed and managed by EVO, inc.

available freewww.ipmvp.org

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IPMVP - Overview

• IPMVP is a framework of definitions and methods for assessing energy savings.

• IPMVP framework was designed to allow users to develop an M&V plan for a specific project.

• IPMVP was written to allow maximum flexibility in creating M&V plans that meet the needs of individual projects, but also adhere to the principles of accuracy, transparency and repeatability.

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IPMVP - Benefits

• Defines standard approaches to “measuring savings” to reassure clients

• Leads clients and ESCOs to discuss the trade-off between measurement “accuracy” and measurement cost

• Legitimized ESCO projects though International recognition

• Updates M&V state of the art practices through constant evolution

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IPMVP

What IPMVP does not cover

• Operations and Maintenance

• Detailed Metering Specifications, or instrumentation guidance.

• Calculating the Cost of M&V (Balancing the cost and benefits)

• Scientific/Engineering Rationale for adjusting the baseline for non-statistical changes

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IPMVP – Added Value

• Savings verification framework for commercial and industrial energy conservation measures

• Standardizes M&V terminology and defines various M&V options

• Risk management tool that allocates risks between buyer and seller of energy services

• Allows parties to create transparent, repeatable contract terms governing savings settlement

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IPMVP – Other Characteristics

•Translated in more than 10 languages over the last five years

•First Published 1996, and updated frequently

•Broad International Support and Adoption

•World standard

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IPMVP - Documents

• IPMVP Vol. I —Concepts and Options for Determining Energy Savings.

• IPMVP Vol. II — Concepts and Practices for Improved Indoor Environmental Quality

• IPMVP Vol. III– M&V Guidelines for New Construction (under

development)– M&V of Renewable Energy Systems– Standard Protocol for Determining Baseline for Demand

Response Programs (Draft)– Emissions Reduction

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IPMVP – M&V Options

• The IPMVP M&V guidelines group M&V methodologies into four categories : Options A, B, C, and D

• The options are generic M&V approaches for energy and water saving projects.

• Having four options provides a range of approaches to determine energy savings depending on the characteristics of the ECMs being implemented and balancing accuracy in energy savings estimates with the cost of conducting M&V.

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Type #1 Retrofit isolation and whole facility Looks only at the affected equipment or system independent of the rest of the facility; whole-facility methods consider the total energy use while ignoring specific equipment performance.

• OPTION A - Retrofit isolation with measured performance and stipulated operation

• OPTION B - Retrofit isolation with measured performance and measured operation

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Type # 2 : Whole-facility methodLooks globally at the

savings of a whole facility

•OPTION C - Whole building or utility bill comparison

•OPTION D - Calibrated simulation (using simulation tools as Trace, DOE-2, etc.)

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IPMVP – M&V OptionsM&V Option Performance1 and Usage2 Factors Savings Calculation

Option A – Stipulated and Short-Term Measured Factors

Based on a combination of measured and stipulated factors.

Measurements are spot or short-term taken at the component or system level. Stipulated factors are supported by historical or manufacturer’s data.

Engineering calculations, component or system models.

Option B – Continuously Measured and Stipulated Factors

Based on continuous measurements taken at the component or system level when variations in factors are expected.

Spot or short-term measurements may suffice when variations in factors are not expected.

Engineering calculations, component or system models.

Option C – Utility Billing Data Analysis

Based on long-term whole-building utility meter, facility level, or sub-meter data.

Based on regression analysis of utility billing meter data.

Option D – Calibrated Computer Simulation

Computer simulation inputs may be based on several of the following: reasonable assumptions based on historical data gathered at facilities, performance specifications of equipment or system being installed, engineering estimates, spot-, short-term, or long-term measurements of system components, and long-term whole-building utility meter data.

Based on computer simulation model calibrated with whole-building or end-use metered data or both.

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M&V Options - Practical Application

Regardless of the Option followed, similar steps are taken to verify the potential for the installed Energy Conservation Measures (ECMs) to achieve savings

• Step 1: Define the baseline conditions were accurately defined.

• Step 2: Develop Project Specific Measurement & Verification Plan

• Step 3: Verify the proper equipment/systems were installed and are performing to specification.

• Step 4: Verify the equipment/systems continue to have the potential to achieve the predicted savings.

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Basics of M&V

Energy

Time

Baseline

WWHH

Post-Retrofit

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Basics of M&V

Energy

Time

WWHH?

BaselinePost-Retrofit

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Step 1 Define the Baseline• Baseline are define as part of the detailed energy

survey (DES)• Baseline physical conditions (such as equipment

inventory and conditions, occupancy, nameplate data, energy consumption rate, control strategies, and so on) are typically determined during the DES through surveys, inspections, spot measurements, and short term metering activities

• Deciding what needs to be monitored, and for how long, depends on factors such as the complexity of the measure and the stability of the baseline, including the variability of equipment loads and operating hours, and the other variables that affect the load

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Step 1 Define the Baseline (continued)• Baseline data are used to account for any

changes that may occur during the performance period, which may require baseline energy use adjustments

• In almost all cases, after the measure has been installed, one cannot go back and re-evaluate the baseline. It no longer exists!

It is very important to properly define and document the baseline conditions before the measure is implemented.

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Step 2 Develop Project Specific M&V Plan

The project specific M&V plan includes project-wide items as well as details for each ECM, including:

• Details of baseline conditions and data collected• Documentation of all assumptions and sources of

data• What will be verified• Who will conduct the M&V activities • Schedule for all M&V activities

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Step 2 Develop Project Specific M&V Plan (continued)

The project specific M&V plan includes project-wide items as well as details for each ECM, including:

• Details of engineering analysis performed• How energy savings will be calculated• Utility rates and how they will be used to calculate cost

savings• Detail any operations & maintenance (O&M) cost savings

claimed• Define O&M reporting responsibilities• Define content and format of all M&V reports (Post-

Installation, Commissioning, and periodic M&V)• How & why the baseline may be adjusted

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Step 3: Verify the proper equipment/ systems were installed and are performing to specification.

• Post-installation verification is conducted to ensure that proper equipment/systems were installed, are operating correctly, and have the potential to generate the predicted savings

• The verification is accomplished through commissioning and M&V activities

• Commissioning of installed equipment and systems is required

• Commissioning assures that the building systems perform according to the design intent.

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Step 3: Verify the proper equipment/ systems were installed and are performing to specification.

• After commissioning is completed, the post-installation measurement and verification activities specified in the M&V plan are implemented

• Verification methods may include surveys, inspections, spot measurements, and short-term metering

• The results of the commissioning and M&V activities are presented in a Post-Installation M&V Report

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Step 4: Regular-Interval Verification During the Performance Period

• Verify that the installed equipment/systems have been properly maintained, continue to operate correctly, and continue to have the potential to generate the predicted savings

• Frequent verification activities can be appropriate. This ensures that the M&V monitoring and reporting systems are working properly, it allows fine-tuning of measures throughout the year based on operational feedback, and it avoids surprises at the end of the year

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Higher precision means higher cost

• SamplingLarge quantity of equipment to measure means higher cost

• ApproachMeasuring power and hours of operation need better equipment

• FrequencyChecking the savings monthly implies added cost

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Complexity of the process

Co

st o

f M&

V/S

avi

ngs

Savings

M&V cost

Simple1 timecheck

Monthlycheck

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ESCO Strategies - Valuing Savings & Mitigating Related Performance

Risks• The primary purposes of M&V is to reduce

performance risk to an acceptable level, which is a subjective judgment based on the parties’ priorities and preferences.

• In performance contracts, risks are allocated between the ESCO, Owner & Financier.

• In performance contracts, M&V:– is critical to success of project– maximizes the persistence of savings over contract term– verifies the savings achieved and valued in contracts

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Risks• The right level of M&V is determined by

degree of savings certainty:– Projects with high degree of certainty require minimal

M&V– Projects with low degree of certainty require more M&V

• Factors that affect cost and level of M&V:– Value and level of uncertainty of estimated savings– Complexity of efficiency equipment installed– Amount and value of equipment installed– Number of interactive effects– Availability and capability of an existing controls system

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Risks• Typical M&V procedures for an ESCO

contract are:– Define general M&V approach for inclusion in the

contract– Define site-specific M&V plan for project being

installed– Define pre-installation baseline energy– Define post-installation system and use– Conduct M&V activities as set forth in contract– Calculate energy & operating savings over term

of the contract– Calculate dollar savings and payments due to

ESCO

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Risks• Calculating Energy Savings:

Baseline energy use - Post-installation energy use = Energy savings

• Baseline represents level of energy that would have been used if new equipment had not been installed - can be affected by a variety of factors:– Changes in building equipment, schedule,

occupancy, operations or maintenance procedures, etc.

– Unusually mild or severe winter

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Risks• The ESCO “Performance Risk” equates to a

Savings Guarantee to Owner or Financier that the total cost to implement the project will be “paid-from savings”.

• Key areas of the Performance Risk are:– Savings shortfall– Savings persistence– Technical problems– Customer performance (data, maintenance,

payment, etc.)

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RisksPossible Solutions:• Savings shortfall

– Utilize multi-level savings estimate review process

– Fix long-term maintenance, M&V and other ESCO costs

• Savings Persistence:– Establish calculation methodology during

feasibility stage– Implement M&V plan at beginning of

construction– Isolate Savings Measures from total bill

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RisksPossible Solutions (continued):• Technical Problems:

– Ensure proper pass-through to contractors and vendors

• Customer Risk – include in contract:– Clearly defined baseline, savings calculation

methods, M&V protocol, and maintenance responsibilities

– Short timeline for providing energy bills– ESCO’s ability to bill estimated savings if bills not

provided– ESCO’s ability to self-perform maintenance and

charge owner for work and any related lost savings

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Actual M&V Project – Commercial Building in Canada – Econoler

International

PROJECT SUMMARY (US$)Cost to

Implement

1 Lighting System $ 900,000 $ 202,000 4.52 Energy Efficient Motors 350,000 62,000 5.63 Ventilation & Cooling System Controls 1,000,000 296,000 3.44 Energy management & training 55,000 40,000 1.4

TOTALS $ 2,305,000 $ 600,000 3.8

# Savings Measure Annual Savings

Payback Years

Training and energy management were also part of the project.

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International

• Project implemented in 2000• Annual use of the building constant for the

baseline duration and for the duration of the project

• The energy bill of year 1999 $2.5 million

• The energy bill of year 2001 $1.9 million

• Savings $0.6 million

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International

M&V Approach (OPTION C)

• Whole building/plant approach using main electric utility meter data

• Measurement done based on the baseline developed

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InternationalThis approach is appropriate:

• Large-scale project

• Important energy saving (20% or more)

• All parameters affecting energy usage can be clearly identified (baseline and after implementation)

• Adjustments factors are simple

• Individual measurement not required

• Soft savings measures included (training, awareness)

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International

Advantages of using OPTION C• The entire installation• Interactive effects between EE measures

Disadvantages of using OPTION C

• More expensive than option A or B because based on monthly calculation

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International

Accuracy/Cost:

• % of project cost: 5-15%

• Accuracy: ± 5-10% (annual)

• Accuracy: ± 20% (monthly)

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Actual M&V Project – Hospitalin USA - EPS Capital Corp.


Implement

1 Water $ 559,000 $ 254,000 2.22 Lighting 1,076,000 406,000 2.73 Steam System 419,000 329,000 1.34 Power Factor 25,000 11,000 2.35 Sterilizers/DHW 26,000 4,000 6.56 Chiller Plant 2,381,000 246,000 9.7

TOTALS $ 4,486,000 $ 1,250,000 3.6

# Savings Measure

Annual Savings

Payback Years

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M&V Approach = OPTION “A”

• Actual Before/After Measurements at Installation

• Stipulated Usage Factors

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Savings Measure Item Measured

Level Measured

Item(s) Stipulated (based on post actual)

Water Gallons Sample Toilets = # Flushes

Showers = # & Time

Lighting kW Sample Hours of Use (based on actual logged use)

Steam Traps Steam Loss Sample Extrapolated Actual

Power Factor Utility Bill 100% Annual Savings

Sterilizer Steam Loss 100% Annual Savings

Chiller Plant kW/Ton 100% Ton Hours

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Appropriateness of M&V Approach:• Large facility with continuous variable conditions• Actual Before/After Measurements verify savings• Control system in place verified stipulated usage• On-going measurement not required – verified

equipment in place and operating.• High-level reconciliation to utility and system

usage

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Advantages of using Option A:• Cost effective for hospital variables• Actual savings verified with statistically

valid samples• Easy to administer

Disadvantages of using Option A:• Not 100% accurate• Not reconciled to total utility usage• Does not track on-going facility changes

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Actual M&V Project – Textile Mill

in India - EPS Capital CorpPROJECT SUMMARY (US$)

Cost toImplement

1 Pocket Ventilation Pre-heat $ 100,000 $ 45,000 2.2

2 Pumping Power Reduction 892,000 318,000 2.83 Refining Power Reduction 882,000 267,000 3.34 Wastewater Aeration Power Reduction 110,000 33,000 3.35 Steam Condensate Optimization 696,000 312,000 2.26 On-site Power Generation Upgrade 2,320,000 790,000 2.9

TOTALS $ 5,000,000 $ 1,765,000 2.8

Savings Measure

Annual Savings

Payback Years

#

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in India - EPS Capital CorpM&V Approach = OPTION “B”

• Before/After Measurements

• Continuous Monitoring based on actual usage

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in India - EPS Capital CorpSavings

MeasureItem

MeasuredLevel

MeasuredHow often Item

Measured

Pocket Ventilation Pre-heat Steam 100% Continuous

Pumping Power Reduction kW/kWh 100% Continuous

Refining Power Reduction kW/kWh 100% Continuous

Wastewater Aeration kW/kWh 100% Continuous

Steam Condensate Steam 100% Continuous

On-site Power Generation kW/kWh 100% Continuous

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in India - EPS Capital CorpAppropriateness of M&V Approach:

• Large facility with continuous variable conditions

• Actual Before/After Measurements verify savings

• Savings isolated from total energy costs• On-going measurement required to verify

savings based on changing process operations• High-level reconciliation to utility and system

usage

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in India - EPS Capital CorpAdvantages of using Option B:• Savings correlate with process changes• Actual savings verified with metered usage• Less performance risk for customer

Disadvantages of using Option B:• Expensive to install and monitor meters • Not reconciled to total energy costs• Difficult to establish baseline loads for varying

process and energy consumption levels

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Actual M&V Project – Steel Millin Russia - EPS Capital Corp


Implement

1 Variable Speed Drives on Slurry Pumps $ 1,000,000 $ 300,000 3.3

2 Dry Magnetic Separators 2,500,000 1,225,000 2.03 Furnace Burner and Control Upgrades 4,500,000 1,800,000 2.54 New Roller Screen Technology 1,000,000 175,000 5.7

TOTALS $ 9,000,000 $ 3,500,000 2.6

Savings Measure

Annual Savings

Payback Years

#

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M&V Approach = OPTION “B”

• Before/After Measurements

• Continuous Monitoring based on actual usage

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Savings Measure

Item Measured

Level Measured

How often Item Measured

VSDs on Slurry Pumps kW/kWh 100% Continuous

Dry Magnetic Separators Iron Ore Yield & kW/kWh

100% Continuous

Furnace Burner & Controls Fuel/MT of steel

100% Continuous

Ore Separation Roller Screens

kW/kWh 100% Continuous

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Appropriateness of M&V Approach:

• Large facility with continuous variable conditions

• Actual Before/After Measurements verify savings

• Savings isolated from total energy costs• On-going measurement required to verify

savings based on changing process operations• High-level reconciliation to utility and system

usage

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Advantages of using Option B:• Savings correlate with process changes• Actual savings verified with metered usage• Less performance risk for customer

Disadvantages of using Option B:• Expensive to install and monitor meters • Not reconciled to total energy costs• Difficult to establish baseline loads for varying

process and energy consumption levels

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Conclusions

• EVO’s IPMVP can play an important role in the development of the ESCO concept in Asia, in order to provide expertise and credibility to M&V activities.

• Measurement of savings is key because it is the “ROI” (Return On Investment) for energy efficiency.

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Conclusions

• Carefully crafted M&V strategies are a key tool to managing performance risks in projects.

• The final M&V selected should balance need for accuracy with cost to install/perform.– More complex measures may require more

complex and expensive M&V methods to determine energy savings

– M&V costs should not exceed 3-5% of project cost

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EVOJoin us today:

www.efficiencyvaluation.org

Download IPMVP Volumes:www.ipmvp.org

Contact us:

Tom DreesenCEO EPS Capital Corp

[email protected]

Pierre LangloisPresident Econoler International

[email protected]