# Presentation: 686461

## Miami, FloridaJanuary 13-14, 2004

- Introduction to Energy Savings Performance Contracting (ESPC) and DOE Super ESPCs

## M&V Part 4: M&V Plan Review

## M&V Plan Review

- FEMP Documents
- M&V Overview Checklist (Phase 2)
- Final M&V Plan Checklist (Phase 3)
- Risk & Responsibility Allocation
- Option A and Stipulation
- Detailed Guidelines
- Options B / C / D

## Phase 2: Project Development

- Contractor Responsibilities
- Develop M&V approach (M&V Overview).
- Explain and justify approach.
- Agency Responsibilities
- Review M&V approach and provide feedback.

## M&V Overview Checklist

- _The following items should be described:_
- Project site and measures.
- What savings will be claimed.
- M&V approach for each measure.
- Baseline equipment and conditions.
- Proposed equipment and conditions.
- Annual measurement and verification activities.

- 

## Phase 3: Negotiation and Award

- _Contractor Responsibilities_
- Perform Detailed Energy Survey (DES) and document baseline information.
- Modify M&V plan to satisfy agency needs and desires.
- Agency Responsibilities
- Review and Approve M&V Plan.
- Witness and observe DES.

## Final M&V Plan Checklist

- Project site and measures.
- What savings will be claimed.
- M&V approach for each measure.
- Details of how calculations will be made, including equations.
- Baseline equipment and conditions (from DES).

- 

## Final M&V Plan Checklist

- continued...
- Post-Installation equipment and conditions.
- What metering equipment will be used.
- What annual verification and measurement activities will be performed.
- Initial and annual M&V costs.

- 

## Risk & Responsibility Allocation

- How to allocate Risks & Responsibilities? Typically:
- Performance: Contractor.
- Usage: Agency.
- Financial: Shared.
- M&V approach should focus on:
- Verifying performance.
- Characterizing usage.
- Minimizing uncertainty cost-effectively.

## Cost Effectiveness

- Need to balance M&V rigor with project risk.
- Measure things that need measuring.
- Consider required precision.
- Law of Diminishing Returns applies.
- Typically, initial M&V costs will be 3% to 15% of the capital cost; annual M&V costs will be 3 – 15% of the savings.

## M&V Costs

**M&V Rigor**

**M&V Cost**

**Value of information**

**$**

## Western Region SuperESPC

## Selection Matrix

|  | Simple M&V | More Rigorous |
| --- | --- | --- |
| Uncertainty: | High | Low |
| Component Level | A | B |
| Whole Facility | C | D |

**Warning: This is a gross generalization!**

## Simple: Option A

- Option A is intended to be simple and low-cost.
- Verifies savings of individual components.
- Equipment performance is measured.
- Usage may be measured or stipulated.
- In *some* cases, FEMP allows performance stipulation.

## Option A and Stipulation

***Not ‘stipulated savings’!***
- Stipulations shift risk to agency.
- OK for usage.
- Not OK for performance (some exceptions).

## Option A Guidelines

- Option A most common in SuperESPC.
- Potential for misapplication.
- Discusses how to use Option A.
- Discusses how to apply stipulations.
- See _Detailed Guidelines For FEMP M&V __Option A_ (2002)

## Example: LE-A-01

- FEMP method for _L_ighting _E_fficiency, Option _A_, method #_1_
- Allows using ‘standard fixture tables’ to determine lighting power instead of measurements (stipulated performance).
- Usage (operating hours) stipulated.
- Good for small projects (<$10,000/year)

## Stipulation Risk

- LE-A-01 allows stipulation of both usage and performance parameters.
- If the stipulated values are wrong, the savings estimates will be wrong.
- The agency assumes all risk, contrary to the intent of a performance contract.

## Stipulation Problem

## Stipulation Lessons

- Guaranteed savings $50,000; $24,000 observed in utility bill.
- Poorly-defined baseline prevents adequate after-the-fact analysis.
- Option C methods are not sufficiently accurate to support or reject savings claims.

## Example: LE-A-02

- FEMP method for _L_ighting _E_fficiency, Option _A_, method #_2_
- Common fixture types measured using a statistically-valid number of measurements (3-6).
- Operating hours usually stipulated, but can be measured.
- Good for large projects (>$100,000/yr)

## Option A Risk Allocation

- The contractor should measure performance since they control this.
- The operating hours may be stipulated. Measuring the operating hours reduces uncertainty and risks to both parties.
- The agency bears the risk of unrealized savings due to changing schedule or incorrect operating hours.

## More Rigorous: Option B

- Verifies at component level.
- Requires periodic performance measurements- annual to hourly.
- Usage can be stipulated or measured.

## Option B Risk Allocation

- Energy use and claimed savings will vary from year to year.
- The contractor assumes all project risk (performance & usage) since savings are based on measured energy use.
- The contractor would be wise to include in the M&V plan:
- limits on their exposure
- methods of adjusting the baseline or usage

## Simple: Option C

- Regression method using existing utility meters.
- Captures interactions between measures to find total savings.
- Requires collecting and tracking information that affects energy use:
- weather
- occupancy
- production

## Option C Risk Allocation

- The contractor may not find the savings if less than 15% of the baseline use.
- The contractor bears all project risk.
- The agency bears the responsibility of tracking changes that affect energy use.
- It may take 1 year to determine savings.
- Weather and other factors will influence savings estimates.

## More Rigorous: Option D

- Computer simulation method of evaluating total building performance.
- Requires calibration to be useful.
- Requires measurements to calibrate model.
- Weather data usually ‘typical’, not real.

## Option D Risk Allocation

- Contractor bears performance risk.
- Agency bears usage risk (stipulated hours and weather).
- M&V costs may be high.
- Short-term measurements and long-term verification still needs to be performed.

## Results

| Option | Usage Risk | Performance Risk | Uncertainty | Cost |
| --- | --- | --- | --- | --- |
| A | agency | contractor | high | low |
| B | contractor | contractor | low | high |
| C | contractor | contractor | medium | low |
| D | agency | contractor | variable | high |

**Warning: These are gross generalizations!**
**It is possible to shift risks and changes costs.**

## Review & Discussion

- Performance must be verified if guarantee is to have value.
- Agency often assumes usage risk.
- Uncertainty is inherent in M&V.
- M&V costs need to be balanced against project risks.

## Review Questions

- How do we measure savings?
- When might an agency accept performance risk?

**Notes:**
Answers

1) Performance: ESCO. Usage: Agency. 

2) No. A building addition external to the project would not require a baseline adjustment.

3) Yes. A building addition within the boundary would require adjusting the baseline to account for the increased load.