Practical Experiences in Applying Savings M&V By Thomas K. Dreessen CEO, EPS Capital Corp. EVO Board Member and Pierre Langlois President, Econoler International EVO Board member October 19, 2005 www.efficiencyvaluation.org

Program 13:00-13:10 Introduction 13:10-13:25 Presentation of EVO 13:25-14:00 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 www.efficiencyvaluation.org

Introduction Your Trainers: Tom Dreessen CEO, EPC Capital Corp. www.epscapital.com Pierre Langlois President, Econoler International www.econolerint.com www.efficiencyvaluation.org

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 www.efficiencyvaluation.org

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) www.efficiencyvaluation.org

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 www.efficiencyvaluation.org

EVO EVO Vision EVO Mission 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 Mission To 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 www.efficiencyvaluation.org

EVO Protocols Coming soon - EVO subscriber services 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 www.efficiencyvaluation.org

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 free www.ipmvp.org www.efficiencyvaluation.org

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. www.efficiencyvaluation.org

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 www.efficiencyvaluation.org

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 www.efficiencyvaluation.org

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 www.efficiencyvaluation.org

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 www.efficiencyvaluation.org

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 www.efficiencyvaluation.org

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. www.efficiencyvaluation.org

IPMVP – M&V Options 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 www.efficiencyvaluation.org

IPMVP – M&V Options Type # 2 : Whole-facility method Looks 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.) www.efficiencyvaluation.org

IPMVP – M&V Options www.efficiencyvaluation.org

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. www.efficiencyvaluation.org

Basics of M&V Savings WWHH Baseline Energy Post-Retrofit Time www.efficiencyvaluation.org

Basics of M&V WWHH? Savings Baseline Post-Retrofit Energy Time www.efficiencyvaluation.org

M&V Options - Practical Application 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 www.efficiencyvaluation.org

M&V Options - Practical Application 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. www.efficiencyvaluation.org

M&V Options - Practical Application 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 www.efficiencyvaluation.org

M&V Options - Practical Application 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 www.efficiencyvaluation.org

M&V Options - Practical Application 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. www.efficiencyvaluation.org

M&V Options - Practical Application 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 www.efficiencyvaluation.org

M&V Options - Practical Application 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 www.efficiencyvaluation.org

M&V Options - Practical Application Higher precision means higher cost Sampling Large quantity of equipment to measure means higher cost Approach Measuring power and hours of operation need better equipment Frequency Checking the savings monthly implies added cost www.efficiencyvaluation.org

M&V Options - Practical Application Savings Monthly check Cost of M&V/Savings Simple 1 time check M&V cost Complexity of the process www.efficiencyvaluation.org

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 www.efficiencyvaluation.org

ESCO Strategies - Valuing Savings & Mitigating Related Performance 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 www.efficiencyvaluation.org

ESCO Strategies - Valuing Savings & Mitigating Related Performance 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 www.efficiencyvaluation.org

ESCO Strategies - Valuing Savings & Mitigating Related Performance 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 www.efficiencyvaluation.org

ESCO Strategies - Valuing Savings & Mitigating Related Performance 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.) www.efficiencyvaluation.org

ESCO Strategies - Valuing Savings & Mitigating Related Performance Risks Possible 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 www.efficiencyvaluation.org

ESCO Strategies - Valuing Savings & Mitigating Related Performance Risks Possible 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 www.efficiencyvaluation.org

Actual M&V Project – Commercial Building in Canada – Econoler International Training and energy management were also part of the project. www.efficiencyvaluation.org

Project implemented in 2000 Actual M&V Project – Commercial Building in Canada – Econoler 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 www.efficiencyvaluation.org

Actual M&V Project – Commercial Building in Canada – Econoler International M&V Approach (OPTION C) Whole building/plant approach using main electric utility meter data Measurement done based on the baseline developed www.efficiencyvaluation.org

Actual M&V Project – Commercial Building in Canada – Econoler International This 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) www.efficiencyvaluation.org

Advantages of using OPTION C Actual M&V Project – Commercial Building in Canada – Econoler 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 www.efficiencyvaluation.org

Accuracy: ± 5-10% (annual) Accuracy: ± 20% (monthly) Actual M&V Project – Commercial Building in Canada – Econoler International Accuracy/Cost: % of project cost: 5-15% Accuracy: ± 5-10% (annual) Accuracy: ± 20% (monthly) www.efficiencyvaluation.org

Actual M&V Project – Hospital in USA - EPS Capital Corp. www.efficiencyvaluation.org

Actual M&V Project – Hospital in USA - EPS Capital Corp. M&V Approach = OPTION “A” Actual Before/After Measurements at Installation Stipulated Usage Factors www.efficiencyvaluation.org

Actual M&V Project – Hospital in USA - EPS Capital Corp. Savings Measure Item Measured Level Measured Item(s) Stipulated (based on post actual) Water Gallons Sample Toilets = # Flushes Showers = # & Time Lighting kW Hours of Use (based on actual logged use) Steam Traps Steam Loss Extrapolated Actual Power Factor Utility Bill 100% Annual Savings Sterilizer Chiller Plant kW/Ton Ton Hours www.efficiencyvaluation.org

Actual M&V Project – Hospital in USA - EPS Capital Corp. 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 www.efficiencyvaluation.org

Actual M&V Project – Hospital in USA - EPS Capital Corp. 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 www.efficiencyvaluation.org

Actual M&V Project – Textile Mill in India - EPS Capital Corp www.efficiencyvaluation.org

Actual M&V Project – Textile Mill in India - EPS Capital Corp M&V Approach = OPTION “B” Before/After Measurements Continuous Monitoring based on actual usage www.efficiencyvaluation.org

Actual M&V Project – Textile Mill in India - EPS Capital Corp Savings Measure Item Measured Level Measured How often Item Measured Pocket Ventilation Pre-heat Steam 100% Continuous Pumping Power Reduction kW/kWh Refining Power Reduction Wastewater Aeration Steam Condensate On-site Power Generation www.efficiencyvaluation.org

Actual M&V Project – Textile Mill in India - EPS Capital Corp 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 www.efficiencyvaluation.org

Actual M&V Project – Textile Mill in India - EPS Capital Corp 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 www.efficiencyvaluation.org

Actual M&V Project – Steel Mill in Russia - EPS Capital Corp www.efficiencyvaluation.org

Actual M&V Project – Steel Mill in Russia - EPS Capital Corp M&V Approach = OPTION “B” Before/After Measurements Continuous Monitoring based on actual usage www.efficiencyvaluation.org

Actual M&V Project – Steel Mill in Russia - EPS Capital Corp 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 Furnace Burner & Controls Fuel/MT of steel Ore Separation Roller Screens www.efficiencyvaluation.org

Actual M&V Project – Steel Mill in Russia - EPS Capital Corp 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 www.efficiencyvaluation.org

Actual M&V Project – Steel Mill in Russia - EPS Capital Corp 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 www.efficiencyvaluation.org

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. www.efficiencyvaluation.org

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 www.efficiencyvaluation.org

Download IPMVP Volumes: President Econoler International EVO Join us today: www.efficiencyvaluation.org Download IPMVP Volumes: www.ipmvp.org Contact us: Tom Dreesen CEO EPS Capital Corp tkd@epscc.com Pierre Langlois President Econoler International planglois@econolerint.com www.efficiencyvaluation.org