# Presentation: 233793

## Part 5:  Case Study

- Medical Center in western US (high desert climate — dry summer, sunny winter)
-  A main hospital (270 beds) plus outlying buildings (outpatient, rehabilitation) totaling 1,000,000 square feet (sf) of facility on campus

**Notes:**
This case study discusses a hypothetical project in the western US that engages in a SuperESPC project. Emphasis is placed on project economics and how the savings guarantees relate to M&V. While this facility is not real, it draws on real experiences from other SuperESPC projects and represents a composite project similar to many others. 

## Establish Facility Baseline

|  | Elec., kWh/sf | Gas, therms/sf | Elec., $/sf | Gas, 
$/sf | Total Cost, $/sf |
| --- | --- | --- | --- | --- | --- |
| This Facility | 30.0 | 2.0 | $1.80  | $0.80  | $2.60 |
| National Average of Health Care Facilities* | 
26.5 | 
1.5 | 
$1.60  | 
$0.60  | 
$2.20 |

- * Source: Energy Information Administration, Office of Energy Markets and End Use,
- Forms EIA-871A through F of the 1995 Commercial Buildings Energy Consumption
- Survey. For this table, electricity is valued at $0.06/kWh (blended) and $0.40/therm.

- Annual energy costs are $1,800,000 electricity, $800,000 gas, $2,600,000 total, or $2.60/sf

## Initial Proposal

- Six measures are proposed
- Lighting
- Energy Management & Control System (EMCS)
- Convert air handlers to variable-air volume (VAV)
- Plate-Frame Heat Exchanger for Free Cooling
- Solar Domestic Hot Water
- Run-around loop (heat/cool recovery for OR)
- Electricity costs reduced by 13%; gas costs by 15%; O&M by $5,000.

**Notes:**
After some time, the Initial Proposal is presented to the Site Team. Six measures are proposed that will reduce energy costs by approximately 15%. They are:
Lighting improvements
Installing a modern energy management & control system
Converting the present constant-volume air handlers to variable-air-volume
Install plate-frame heat exchanger that will allow the chiller to be shut down during mild conditions
Adding a solar water heating system
Adding heat recovery to the operating room air handling system that uses 100% outside air.  

## Initial Proposal Finances

- $4 Million investment
- $363,000 savings
- 11 year simple payback; ~ 22 year term

**Notes:**
Total capital investment is on the order of $4 million dollars, less than two years worth of utility costs. Expected savings would be $363,000 per year, a 14% reduction. The simple payback for this project would be 11 years. However, with interest and service phase expenses, this project could not be financed with less than a 22 year term. (SuperESPC allows 25). 

## Initial M&V Approach Proposed

- Option C (utility bill analysis w/ weather adjustment) proposed to meet agency’s desire of measured performance while minimizing M&V costs
- Option C captures interactions between measures, is easy to implement in the short term
- Option C can show* total* project savings but not *individual* measure savings

**Notes:**
To demonstrate the actual level of savings realized, the ESCO developed a model that correlated historic energy use to weather conditions. This model would be used after the project was implemented to analyze the new utility bills, make some adjustments for weather, and from that determine the energy savings. 
This approach is relatively easy to implement and captures savings generated from all six proposed measures. However, the performance of any individual measure cannot be determined- only the aggregate performance of all.

## Option C Regression Model

-   Energy consumption defined as function of weather.

## M&V Overview

- Agency wants reassurance that each measure is performing
- Also, agency predicts major facility changes:
- Changes in patient population and services rendered anticipated over next 20 years
- Buildings being constructed and demolished to provide changing services

**Notes:**
The agency was not comfortable with this approach as they wanted reassurance that each measure was performing as intended. 
Also, the site is predicting that its mission and services will change over time as their patient population ages. Buildings are being constructed or remodeled to serve new functions while older ones are demolished to make way for the new. Additional radiology equipment such as MRI and PET machines also require their own facilities and have significant energy loads. 

## Option C Issues

-   Energy consumption must be significantly reduced     to see savings (~ ±20%)
-   Facility conditions must be stable

**Notes:**
To determine savings, the new energy consumption must always be compared to a baseline. In this case, the baseline is a mathematical model that estimates or predicts what the energy consumption would have been if the energy measures were not installed. Two issues:
1) Models developed are typically accurate to no better than 10%- that is- the ‘true’ energy consumption is within 10% of the estimated value. It is very difficult to improve on this. If the expected energy savings is 13% of the current energy use, the uncertainty in the savings estimate is very large. In the example above, the savings are the difference between the blue line and the red. However, the real energy savings could be between 3% (13% - 10%) to 23% (13% + 10%) of the current energy use. This range is too great to be of much value.  
2) The new energy use will include the energy used by the new buildings and the energy not used by the old. Changes to the campus must be taken into account and the post-retrofit energy use adjusted for these changes. Over 15 years, this may be very difficult or impossible to do reliably. 

## Stage 3- Negotiate Proposal

- Initial Proposal only discussed M&V overview
- ESCO and agency agree to desired measures, finalize M&V approach, and negotiate price
- ESCO conducts Detailed Energy Survey (DES) in order to better define baseline and estimate savings
- During DES, more measurements will be taken and additional savings opportunities will be sought

**Notes:**
The Initial Proposal fostered a lot of discussion about the merits and problems with the measures and with the M&V approach. Now the site and the ESCO need to begin negotiating what is really expected from this project and from the M&V efforts. 
the ESCO conducts a Detailed Energy Survey with extensive measurements and monitoring. This will more clearly establish the baseline conditions and facility performance as well as potentially uncover additional opportunities. 

## Final Proposal

- ESCO completes Detailed Energy Survey
- ESCO submits Final Proposal
- Three measures proposed
- Lighting
- EMCS
- Convert air handlers to VAV and install variable-speed drives (VSDs)
- Electricity costs reduced by 15%, gas by 5%, O&M by $10,000

**Notes:**
The ESCO completes the Detailed Energy Survey and includes that information in the new proposal. Only the first three measures were included this time in an effort to reduce the SPB and contract term. 

## Final Proposal Finances

- $2.4 million investment
- $322,000 savings
- 7.5 year simple payback, ~ 15 year term

**Notes:**
The project has been scaled back and now represents a $2 million capital investment that will generate $322,000 in savings. At 7.5 years SPB, the contract term should just fit within 15 years. 

## Revise M&V

- Option C approach does not suit agency for three reasons:
- Does not verify performance of individual measures
- Difficult to implement when new buildings are added and old ones removed
- Difficult to implement when occupancy and/or mission are not stable
- Option D (modeling) considered too difficult
- Some combination of Options A & B (end-use measurement) to be explored instead

**Notes:**
Now the site and the ESCO negotiate the M&V approach. While Option C is capable of capturing savings from all three measures, its usefulness is limited by the factors discussed previously. The site was uncomfortable not having some measure-level verification. 
Option D - computer simulation modeling- can provide measure-level performance, but the calibration and model development effort were considered too difficult to implement. 
Since the site wants some measure-level reassurance, Options A & B (end-use metering) is the desired approach. 

## Risk & Responsibility

- Energy use measured via Option C includes changes to equipment performance *and* other variables.
- ESCO is guaranteeing savings based on equipment *performance.*
- The number of patients and weather affect *usage.*
- How shall these responsibilities be allocated?

**Notes:**
Any discussion of M&V requires discussing project risks and responsibilities. In performance contracting, risk is associated with uncertainty in the savings estimates as well as the small probability that the savings will not materialize. Many factors influence how a project works once it has been installed. The two primary factors are performance and usage. Performance describes how much less energy a piece of equipment uses to perform a certain task, usage describes how much or how often that equipment is used. 
the ESCO is guaranteeing the savings based on known equipment performance and presumed operating hours / conditions. If the equipment fails to perform as intended, then the savings will not materialize and the ESCO will be responsible for making it right. 
If the site changes the hours or schedules in a way that reduces equipment usage, savings will also not materialize. In this case, it is the site that was responsible for the change and the ESCO should not be at risk. 
Option C M&V approaches do not differentiate between usage and performance, and so it is difficult to assign responsibility for unrealized savings. 

## Responsibility Apportionment

- ESCO should be responsible for factors that they control — equipment performance
- ESCO should *not* be responsible for factors they don’t control — weather, patient load, or facility schedules
- See R&R Matrix for further discussion

## Final M&V Plan

- Option C abandoned
- M&V approach changed to Options A & B to satisfy agency desire to verify each ECM
- Options A & B considerations
- Assign responsibility for performance to ESCO:
- Absolves ESCO for unrealized savings due to usage changes
- Keeps M&V costs reasonable

**Notes:**
The final M&V plan drops the Option C / Whole Facility approach for the reasons discussed previously. the ESCO has proposed end-use metering of individual measures to verify the performance of each. 
Option A measures some parameters once or twice and stipulates (estimate without measurement) the rest. Very simple and inexpensive to implement, but only as good as the reliability of the stipulated values. 
Option B measures all energy flows on a periodic or continuous basis to capture the performance and usage of a particular item. This requires more effort and cost compared to Option A, but offers more reassurance that a measure is working properly. 
Both methods A and B allow the ESCO to document and guarantee equipment performance while allowing the site to assume the responsibility for other factors. 

## Final M&V Plan (cont’d)

- Measure parameters that ESCO controls:
- Equipment performance (kW, supply temps...)
- Stipulate parameters (Option A) that agency controls or no one controls:
- Operating hours (Agency controls)
- Patient occupancy (No one controls)
- Weather conditions (No one controls)
- Long-term measurements (Option B) assure long-term performance of EMCS and VAV system

**Notes:**
The ESCO has proposed to measure the parameters for all installed equipment over which they have control. This includes power demand in kW for motors and lighting and air supply temperatures for the air handlers. 
the ESCO is going to stipulate the parameters that they do not or cannot control such as lighting operating hours or weather conditions. Patient occupancy affects schedules and building usage, which the ESCO cannot control. 
Unlike Option A, Option B is a long-term M&V method that will assure persistence of savings. 

## M&V Costs

- M&V costs are balanced against project risks
- Risk level is based on the level of cost savings and uncertainty in the savings estimate
- Annual M&V costs should be less than 10% of annual savings (rule-of-thumb only)

| Measure | Annual energy savings | Annual M&V cost should not exceed: |
| --- | --- | --- |
| Lighting | $208,000 | $20,800 |
| EMCS | $62,000 | $6,200 |
| VAV | $52,000 | $5,200 |
| Total | $322,000 | $32,200 |

## Lighting M&V

- Lighting accounts for $208k of savings, 60% of project
- Savings from lighting projects can be reliably estimated with minimal measurements
- Annual fixture power measurements will not improve savings estimates
- Need to minimize M&V cost — savings can be applied to M&V costs elsewhere
- Option A is appropriate despite large savings because risk is low

**Notes:**
Lighting is often a suitable application for Option A approaches because of the ease and accuracy that savings can be estimated. Long-term measurements will not improve the reliability of the savings estimates and so would not be a good use of resources. 

## Lighting: Option A (LE-A-02)

- ESCO proposes LE-A-02: Measured fixture power
- Power measured once on a sample of common existing fixture types before and after retrofit
- Hours stipulated based on schedules for each usage group (office, exam, patient room...)
- Measuring hours during DES will reduce uncertainty but adds cost
- Heating and cooling load interactions stipulated based on engineering calculations
- Long-term activity: annually inspect to see that T-8s and electronic ballasts still present and functional

**Notes:**
FEMP method LE-A-02 (Lighting Efficiency, Option A, with metering) was chosen as the best compromise between cost and risk. 
Fixture power measurements of a sample (3-6) of different fixture types will be taken in the baseline case and after installation of the new fixtures. The difference between the two measured values is the performance aspect that the ESCO is responsible for.
The usage parameter is the operating hours. These will be estimated (and stipulated) by assigning annual operating hours for major space types based on typical schedules. Inaccuracies in these values will affect the reported savings. These should be estimated very carefully. Even better, some short-term measurements of operating hours could (should) be made and used. 
Lighting energy reductions also reduce air-conditioning load and save additional air-conditioning energy. Conversely, they also increase the heating load, thus the negative numbers for gas energy savings on the lighting measure. These interactions are impossible to measure directly, but they can be estimated reasonably well using published engineering methods. 

## Lighting M&V Comments

- Agency accepts usage risk by using estimated operating hours
- Risk can be reduced by measuring operating hours during DES
- Measuring fixture power pre- and post-retrofit provides more reliable savings estimates than using lighting wattage tables
- Interactive heating and cooling effects estimated using the method of Rundquist
- Rundquist, “Calculating Lighting and HVAC Interactions," *ASHRAE Journal* 35, no. 11 (1993).

**Notes:**
If the site accepts the estimated hours that are stipulated, they are accepting the risk that savings may not materialize should the stipulated hours be incorrect. If they are concerned about this risk, the ESCO could (should) measure the operating hours in a sample of spaces to reduce this risk by capturing current operating hours. 
Had LE-A-01 (Lighting Efficiency, Option A, no measurement) been proposed, fixture powers would have been taken from a standard table of typical lighting powers. While less expensive to do this, the table values may not accurately represent what is actually installed at the hospital. The proposed savings are great enough to justify measuring the fixture powers instead of estimating them. 
ASHRAE has published methods of calculating additional air-conditioning savings and heating penalties resulting from lighting upgrades, which was used. 

## VAV M&V

- Convert constant-volume dual-duct system to VAV dual-duct system
- VSDs used to control air flow
- VAV/VSD project performance dependant on design quality and commissioning; makes them “riskier” projects
- Energy savings of $52,000/yr suggests some monitoring warranted

**Notes:**
The existing air handling system provides a constant volume of air no matter how much heating and cooling is needed. A variable speed drive (VSD) will allow the system to supply less air by operating and reduced motor speeds resulting in substantial energy savings.
The VAV conversion will take credit only for the reduction in fan energy use. Energy savings from reduced heating and cooling loads are claimed under the EMCS measure. The performance of a VAV/VSD project can vary dramatically since a VFD can operate at full speed without realizing energy or demand savings. The performance of this type of ECM will be affected by how well it is designed and commissioned, which makes it ‘riskier’.  

## VAV: Option B (GVL-B-01)

- Parameters measured (1x) during DES _(Baseline)_
- Air flow
- Fan power
- Fan schedule
- Parameters monitored (continuously) w/EMCS _(Post-retrofit)_
- Fan power
- Fan speed (proxy for air flow)
- Fan schedule

**Notes:**
During the DES, the fan power, speed, and schedule will be measured briefly to determine the appropriate values for the baseline fan power and operating hours. 
In the post-retrofit case, the EMCS will monitor and record the fan power and actual operating hours. This makes the M&V approach GVL-B-01. 

## VAV: Option B (cont’d)

- Fan energy savings based on difference between baseline power and monitored power
- Using EMCS for monitoring reduces M&V equipment cost

**Notes:**
For the VAV measure, ONLY the fan power savings will be claimed. The existing fan power measurement and baseline operating schedule serves as the baseline; the EMCS recorded power value and operating hours are the post-retrofit usage; the difference is the savings. 

All credit for the heating and cooling savings are claimed in the EMCS measure to prevent double-counting the savings. 

## VAV: Monitor Fan Performance

## EMCS M&V

- HVAC energy use fluctuates with weather
- EMCS performance depends on commissioning, sensor calibration, and maintenance
- EMCS savings difficult to estimate without taking measurements
- EMCS’s are “riskier” projects — long-term measurements preferable to stipulated values
- Energy savings of $62,000/yr suggests some monitoring warranted

**Notes:**
An EMCS provides better control of heating and cooling systems, but heating and cooling loads are still variable because these loads are driven by weather conditions. 
Installing an EMCS alone is not sufficient to provide better control and energy savings- it needs to be commissioned (programmed & tuned) to optimize the HVAC system operation. The EMCS only serves as a tool to control other equipment- its benefit is being able to implement optimized control strategies that reduce energy use. 
This makes EMCS measures ‘riskier’ projects because their benefit is derived from the programming that goes into them. It is also much more difficult to estimate the savings ahead of time since this detailed information is not available until the system is actually installed and commissioned. 
Also, EMCS systems do require preventative maintenance for optimum performance. Sensors drift out of calibration, actuators break, things happen. Performance measured today will not be the same ten years hence. Long-term monitoring and maintenance will be necessary to assure and verify savings persistence. Fortunately, the EMCS has the capability to monitor itself without too much additional effort required. 

## EMCS O&M Savings

- Existing EMCS is old and pneumatic, needs frequent repair or adjustment
- O&M savings of $10,000 based on existing service contract of 100 person-hours at $50/hr plus $5,000 in parts per year
- This service contract will be eliminated with the replacement of pneumatics with new electronic components
- ESCO will assume O&M (and therefore performance) responsibility for new system

**Notes:**
The site originally used the ESCO as its service contractor for the current EMCS. This was an outsourced fix-price contract of $10,000 dollars per year that provided a minimum level of parts and labor. Funding for this service contract is a line-item in the facility O&M budget.
Acceptance of the SuperESPC contract will result in termination of the existing service contract resulting in elimination of this line item. There is no ambiguity as to the O&M cost or the budget it is paid from. This makes it simple to determine the baseline O&M expense and it can be claimed as savings since it comes from a real budget item that will be eliminated. 
Service for the new EMCS will be included as part of the performance period expenses that the ESCO will charge as part of the new contract. 

## EMCS: Option B (GVL-B-01)

- Parameters measured (1x) during DES _(Baseline)_
- Fan schedule
- Air temperatures (outside, mixed, hot & cold deck)
- Air flow quantities and duct static pressure
- Parameters monitored (continuously) w/EMCS _(Post-retrofit) _
- Fan motor power
- Fan speed (proxy for air flow)
- Air temperatures (outside, mixed, hot & cold deck)
- Duct static pressure

**Notes:**
The EMCS measure will take credit for the savings resulting from reduced heating and cooling loads in the air-handler system. Heating and cooling loads are driven by weather conditions. Therefore, method GVL-B-01 (Generic Variable Load , Option B, type 1) is the appropriate M&V approach for this measure. 
During the DES, the constant-volume fan operating schedule, air supply volumes, and duct static pressure will be measured briefly. Return, outside, mixed, and supply air temperatures will also be monitored for several days to determine what air flow ratios and supply temperature schedules are presently used. This will serve as a model of the baseline system performance against which savings will be determined. 
In the post-retrofit case, the EMCS will be used to both monitor and control these same parameters (air volume and temperatures). 

## EMCS: Option B (cont’d)

- Savings based on reduced:
- heating loads and cooling loads due to temp reset and reduced air flow
- reduced outside air heating and cooling loads
- EMCS monitors itself — minimal additional equipment required, but extra effort will be required to collect and process data and to periodically calibrate sensors

**Notes:**
Savings will be based on the temperatures, supply air volume, and outside air damper position recorded by the EMCS. Savings from the EMCS will be based on the baseline airflow and operating temperatures in order to capture all allowable savings. (That includes the two boxes on the right on the EMCS/VAV chart shown previously.
Additional equipment will not be required to measure the system performance, but it will be necessary to collect, archive, and process the data collected from the EMCS. 

## M&V Costs – Final M&V Plan

- Annual M&V costs less than rule-of-thumb maximum amounts
- Lighting has minimal annual cost as little effort is required

| Measure | Annual energy savings | Annual M&V Annual Cost |
| --- | --- | --- |
| Lighting | $208,000 | $2,000 |
| EMCS | $62,000 | $12,000 |
| VAV | $52,000 |  |
| Total | $322,000 | $14,000 |

- Note: ESCOs rarely present M&V cost in this manner. DO-3 shows total annual M&V costs, not per measure.

## Phase 4 — Implementation

- Agency approves construction design and schedule
- ESCO begins construction
- ESCO commissions each measure
- Agency witnesses commissioning
- Agency approves and accepts each measure
- Agency witnesses M&V activities
- ESCO submits post-installation report and first-year savings estimate for each measure

**Notes:**
With the DO signed, the ESCO can begin to proceed with the project. The site reviews construction plans and schedule for approval. the ESCO can then begin construction. 
As each measure is completed, it is commissioned to ensure optimum performance. A site representative witnesses the commissioning and accepts each measure as complete. 
Upon acceptance of each measure, the ESCO submits a post-installation report with the measured performance values and expected savings for the coming year. 

## Performance Period

- ESCO collects (remotely) and reviews EMCS data monthly
- ESCO performs annual site activities
- ESCO submits annual M&V reports
- Agency reviews and approves reports
- Agency pays ESCO
- Agency enjoys energy cost savings, improved comfort, reduced O&M headaches

**Notes:**
During the balance of the contract term (14 years), the ESCO will collect and review data from the EMCS to use in their M&V reports. This data is transferred via a modem to the the ESCO office to reduce travel expenses. 
the ESCO performs M&V functions continuously to assure performance. 
The end result is that the agency has the benefit of improved comfort and operating convenience of their new systems as well as reduced O&M headaches related to older, unreliable equipment. 

##  Long-Term M&V Activities

- Lighting: Inspect fixtures annually
- EMCS: Calibrate sensors, verify routines, collect, analyze data and estimate savings
- VAV: EMCS collects load data. Analyze data and estimate savings
- Annual reporting and true-up
- Was the guarantee met?
- If not, why not? What corrective actions are needed?

**Notes:**
The ESCO must still conduct some annual M&V activities on-site to verify that systems still have the potential to perform. Lighting fixtures are inspected to ensure that T8s and electronic ballasts are still installed, EMCS sensors and actuators are calibrated and tested. 
An annual M&V report is generated that shows the actual energy savings and compares them to the guaranteed savings amount. So long as the actual savings exceed the guaranteed amounts, the ESCO is entitled to full payments as listed in the contract. 

## Annual M&V- Lighting 

- Annual inspections confirm presence of proper equipment (T8s, ballasts) and operation to verify *potential to perform*
- Lighting savings based on stipulated hours and powers measured at installation

**Notes:**
Lighting is an Option A approach that requires no long-term measurements. Annual activities are limited to periodic inspections to confirm the presence of the correct equipment. 
Savings are based on stipulated hours. If the site changes the operating schedule of the lights, the actual savings will change but the reported values will not. 

## Annual M&V- EMCS

- Data collected from EMCS on monthly basis, reviewed for completeness, and archived
- Energy use based on schedules, delivered air temperatures, outside air used
- Procedures from M&V plan used to adjust heating and cooling energy use to reflect what would have occurred during typical year

**Notes:**
The ESCO collects data from the EMCS via a modem and imports it into their computer systems where it is reviewed for glitches and problems. 
This data is fed into computer models (spreadsheet templates) so that the actual energy savings can be calculated. 
The savings are adjusted to reflect what the savings would have been in a ‘typical’ year and that value is compared to the guaranteed savings amount. This accounts for changes in weather that might otherwise cause the savings to be less than the guaranteed amount. 

## Annual M&V- VAV

- Post-retrofit air flow and fan power data obtained from EMCS
- Post-retrofit fan energy based on measured power
- Heating and cooling loads calculated based on measured air flow and temperature
- Adjust to TMY

**Notes:**
Similar to the EMCS, the collected fan power and airflow data are used to determine the VAV savings. This information is fed into computer models (spreadsheet templates) so that the actual energy savings can be calculated. 
Like the EMCS, the heating and cooling savings are adjusted to reflect what the savings would have been in a ‘typical’ year and that value is compared to the guaranteed savings amount. This accounts for changes in weather that might otherwise cause the savings to be less than the guaranteed amount. 

## M&V Lessons Learned

- M&V Option A on lighting reduces cost without significantly increasing risk
- Allocate M&V dollars where needed most — reduced lighting M&V cost can be applied to EMCS & VAV
- M&V Option B on EMCS and VAV assure long-term performance through continuous *measurement*
- Agency education allowed them to make intelligent choices

**Notes:**
To reduce M&V costs, Option A was used on the lighting measure. This does not expose the site to increased risk since the savings can be reliably estimated. M&V efforts not expended on lighting M&V can be applied to the other two measures. 
The VAV and EMCS measures are ‘riskier’ projects that deserve long-term monitoring to assure continued performance. 
By negotiating with the ESCO, the site was able to learn what was important to them and what the ESCO could provide in a cost-effective manner. This allowed the selection of an M&V approach that cost-effectively satisfied the need for risk mitigation.