# Presentation: 277308

## Miami, FloridaJanuary 13-14, 2004

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

## M&V Part 1: D.O. Review

## Your Instructor

- Mark Stetz, P.E.
- Worked with FEMP since 1997.
- Serves as FEMP’s M&V Specialist.
- Contributed to FEMP M&V Guidelines, Detailed Guidelines, and more.
- Contact Information:970-385-4932	mstetz@nexant.com

## M&V Workshop Goals

- _Part 1: D.O. Review_
- M&V in the Four Phases
- _Part 2: Risk Assessment_
- Risk Assessment and Allocation
- _Part 3: FEMP M&V Methods_
- Methods and Applications
- _Part 4: M&V Plan Review_
- Checklist, FEMP M&V Methods

## DO M&V Overview

- Legal Stuff & Definitions
- Purpose of M&V
- M&V in the Four Phases
- Contractor Responsibilities
- Agency Responsibilities

## Legal Stuff & Definitions

- Sections C.4, H.23, and H.24 of the IDIQ require the following submittals:
- M&V Overview
- Site-Specific M&V Plan
- Detailed Energy Survey
- Risk / Responsibility Matrix
- Commissioning & Post-Installation Reports
- Annual M&V Reports

## M&V Overview

- The _*M&V Overview*_ (a.k.a. Initial M&V Plan) is submitted as part of Initial Proposal. It is not a complete plan, but:
-  Describes intended approach.
-  Purposely lacks detail.
-  Intended as a starting point for negotiation.
- The overview allows the agency and the contractor to develop a satisfactory M&V plan.

**Legal Stuff**

## Site Specific M&V Plan

- The _*Site Specific M&V Plan*_ includes:
- What will be done (and when).
- How will performance be verified.
- Who will conduct these activities (and when).
- How will savings be calculated.
- How will performance be adjusted to account for varying conditions.

**Legal Stuff**

## Detailed Energy Survey

- The _*Detailed Energy Survey*_ defines the _*baseline*_ of the facility, which consists of:
-  Energy use and cost history.
-  Equipment list and measured performance.
-  Factors that influence energy use.
-  Operations and maintenance costs.
**If this information is not documented, it is lost. It cannot be determined after installation. **

**Legal Stuff**

## Responsibility Matrix

- The _*Responsibility Matrix*_ describes how the contractor will address risk factors that affect savings and project economics. These are broadly characterized as:
- Equipment Performance
- Facility Usage and Operations
- Financial and Economic
- Responsibility Matrix drives M&V Plan.

**Legal Stuff**

## Commissioning Plan & Report

_*Commissioning*_ is the process of making a project or measure work.
- Hardware installation alone does not ensure proper operation- many projects require calibration, programming, and adjustment after installation.
- In some cases, this process is more important than the hardware itself.

**Legal Stuff**

## Post-Installation M&V Report

- The contractor submits the *Post-Installation M&V Report* after the project has been installed and commissioned. It includes:
-  Project description.
-  List of installed equipment (as-built).
-  Performance measurements.
-  Expected savings for the first year.

**Legal Stuff**

## Annual Performance Reports

- The contractor submits *Annual Performance Reports* to demonstrate that savings have occurred. They should include:
-  Project description.
-  Performance measurements.
-  Realized savings for the year.
-  Comparison to the guaranteed amounts.

**Legal Stuff**

**Notes:**
It is useful to include documents and supporting calculations electronically as a CD-ROM with the data and supporting calculations. 

## Purpose of M&V

- Performance Contracting is an arrangement where the exact benefits are only known afterwards.
- There is an element of risk related to the uncertainty of the delivered benefit.
- M&V quantifies the benefits.
- M&V allocates risk between parties.
**M&V supports the guarantee.**

## Savings

- SuperESPC recognizes two types of savings:
- Energy Cost Savings
- Energy-Related Cost Savings

**Purpose of M&V**

## Energy Cost Savings

- Reductions in energy use
- Reductions in peak demand
- Reductions in energy rates
- Shifting time-of-use to lower cost periods
- Converting to less expensive fuels
- Self-generation (and cogeneration / CHP)
- Reduced water use

**Purpose of M&V**

## Energy-Related Cost Savings

- Energy-related cost savings are primarily due to reduced O&M expenses:
- Parts & labor costs.
- Emergency repair costs.
- Equipment replacement costs.
*Cost savings must come from existing budgets!*

**Purpose of M&V**

## SuperESPC is Guaranteed Savings

**1  2  3  4  5  6  7  8  9  10  11  12  13  14****	****	****Contract Year**

**Savings**

- Actual
- Estimated
- Guaranteed

- Actual saving will fluctuate, but should always be greater than the guaranteed amount.

**Notes:**
Performance contracting financing is a ‘pay for savings’ arrangement. An initial investment made by the ESCO is designed to reduce utility bills,providing sufficient savings so that the ESCO can be paid from the savings during the performance period. After the performance period, the agency (customer) realizes all savings. In a guaranteed savings arrangement such as the ESPC program, M&V is used to show that savings meet or exceed the guaranteed amounts. 

## You Need M&V Because...

- Savings are guaranteed, but actual savings fluctuate every year.
- Without M&V, how do you know the guarantee is being met?
- M&V verifies guarantee is met.
- Is contractually required (IDIQ).
- “What you don’t measure, you can’t manage.” (Jack Welch, former GE CEO)

**Purpose of M&V**

## When Do You Need M&V?

- _Before DO Award:  _
- Predicts energy savings potential for a project.
- Cost savings are used to justify the project.
- Both parties must understand and agree on the M&V strategy.
- _After DO Award: _
- Ensures that the government only pays for realized savings.

**Purpose of M&V**

## M&V During the Four Phases

| Phase | Agency Activity | ESCO Activity |
| --- | --- | --- |
| 1. Planning | Consider project motivation. |  |
| 2. Project Development | Review M&V Plan,
Review Risk & Responsibility Matrix.  | Develop Initial Proposal,
Develop Initial M&V Plan and Risk & Responsibility Matrix. |
| 3. Negotiation and Award | Evaluate M&V Plan(s).
Witness DES and M&V activities. | Perform Detailed Energy Survey,Develop Baseline,Refine M&V Plan.  |
| 4. Implement DO | Witness M&V activities. Review and approve reports. | Commission Project,Submit Post-Installation Report,Submit Annual Reports  |

## Phase 1: Planning

- _What are project motivators?_
- Infrastructure upgrade.
- Want to reduce energy and O&M costs.
- Want to comply with EO 13123.
- _What does M&V need to accomplish?_
- Monitor equipment performance.
- Find additional savings, improve O&M.
- Enforce guarantees.
- Satisfy law.

**Phase 1**

- Phase 2

- Phase 3

- Phase 4

## Agency Responsibilities

- _Define project goals in terms of:_
- Energy cost savings
- Energy-related cost savings
- Equipment upgrades
- _Define M&V Requirements:_
- Total energy & cost savings
- Equipment performance
- Long-term verification
- _These will be part of the DO-RFP!_

**Phase 1**

- Phase 2

- Phase 3

- Phase 4

## Phase 2: Project Development

- _Contractor Responsibilities_
- Complete Responsibility Matrix.
- Develop *M&V Overview*.
- Explain and justify approach:
- What will be measured?
- What will not?
- How will agency be protected?
- How will contractor prove performance?

## Agency Responsibilities

- Discuss planned physical or operational site changes with contractor.
- Provide energy use and rates to contractor.
- Review Responsibility Matrix, M&V Overview & assumptions.
- Provide critical comments and feedback.
- Engage PF or 3rd party support.

## Phase 3: Negotiation and Award

- _Contractor Responsibilities_
- Modify Responsibility Matrix and Initial M&V Plan to satisfy agency needs and desires.
- Complete Site Specific M&V Plan.
- Perform Detailed Energy Survey and document baseline information.
- M&V Plan drives DES activities.

## Agency Responsibilities

- Review M&V Plan and  estimated savings.
- Provide critical comments and feedback.
- Approve Final M&V Plan.
- Participate in and witness DES activities.
- Engage PF or 3rd party support.

## Phase 4: Implementation

- _Contractor Responsibilities_
*Commission* measures.
- Submit Commissioning and Post-Installation M&V Reports.
- Submit Annual M&V Reports.

## Agency Responsibilities

- Witness M&V activities and observe commissioning. *Be involved!*
- Approve Commissioning and Post-Installation reports.
- Conduct specified O&M activities.
- Review Annual Reports.
- Engage PF support.

## Review and Discussion

- Benefits from SuperESPC are only known after project implementation.
- Savings guarantees are only as good as the M&V supporting them.
- The Agency sets the M&V goals; the ESCO implements the plan.

## Review Questions

- Why is M&V needed?
- Who is responsible for M&V?

**Notes:**
Answers:

1) Energy services and/or the promise of lower utility costs.

2) Energy cost savings and Energy-related cost savings.

3) Any two of the following:
Energy Prices
M&V Costs
Operating Hours
Loads
Weather
User Participation
Equipment Performance