M&V Part 1: D.O. Review

1-2 Your Instructor Mark Stetz, P.E. Ø Worked with FEMP since Ø Serves as FEMP’s M&V Specialist. Ø Contributed to FEMP M&V Guidelines, Detailed Guidelines, and more. Ø Contact Information:

1-3 M&V Workshop Goals Part 1: D.O. Review F M&V in the Four Phases Part 2: Risk Assessment F Risk Assessment and Allocation Part 3: FEMP M&V Methods F Methods and Applications Part 4: M&V Plan Review F Checklist, FEMP M&V Methods

1-4 DO M&V Overview Ø Legal Stuff & Definitions Ø Purpose of M&V Ø M&V in the Four Phases F Contractor Responsibilities F Agency Responsibilities

1-5 Legal Stuff & Definitions Sections C.4, H.23, and H.24 of the IDIQ require the following submittals: Ø M&V Overview Ø Site-Specific M&V Plan Ø Detailed Energy Survey Ø Risk / Responsibility Matrix Ø Commissioning & Post-Installation Reports Ø Annual M&V Reports

1-6 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: F Describes intended approach. F Purposely lacks detail. F Intended as a starting point for negotiation. The overview allows the agency and the contractor to develop a satisfactory M&V plan. Legal Stuff

1-7 Site Specific M&V Plan The Site Specific M&V Plan includes: F What will be done (and when). F How will performance be verified. F Who will conduct these activities (and when). F How will savings be calculated. F How will performance be adjusted to account for varying conditions. Legal Stuff

1-8 Detailed Energy Survey The Detailed Energy Survey defines the baseline of the facility, which consists of: F Energy use and cost history. F Equipment list and measured performance. F Factors that influence energy use. F Operations and maintenance costs. If this information is not documented, it is lost. It cannot be determined after installation. Legal Stuff

1-9 Responsibility Matrix The Responsibility Matrix describes how the contractor will address risk factors that affect savings and project economics. These are broadly characterized as: F Equipment Performance F Facility Usage and Operations F Financial and Economic Responsibility Matrix drives M&V Plan. Legal Stuff

1-10 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

1-11 Post-Installation M&V Report The contractor submits the Post- Installation M&V Report after the project has been installed and commissioned. It includes: F Project description. F List of installed equipment (as-built). F Performance measurements. F Expected savings for the first year. Legal Stuff

1-12 Annual Performance Reports The contractor submits Annual Performance Reports to demonstrate that savings have occurred. They should include: F Project description. F Performance measurements. F Realized savings for the year. F Comparison to the guaranteed amounts. Legal Stuff

1-13 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. F M&V quantifies the benefits. F M&V allocates risk between parties. F M&V supports the guarantee.

1-14 Savings SuperESPC recognizes two types of savings: Ø Energy Cost Savings Ø Energy-Related Cost Savings Purpose of M&V

1-15 Energy Cost Savings Ø Reductions in energy use Ø Reductions in peak demand Ø Reductions in energy rates Ø Shifting time-of-use to lower cost periods Ø Converting to less expensive fuels Ø Self-generation (and cogeneration / CHP) Ø Reduced water use Purpose of M&V

1-16 Energy-Related Cost Savings Energy-related cost savings are primarily due to reduced O&M expenses: Ø Parts & labor costs. Ø Emergency repair costs. Ø Equipment replacement costs. Cost savings must come from existing budgets! Purpose of M&V

1-17 SuperESPC is Guaranteed Savings Contract Year SavingsSavings Actual Estimated Guaranteed Actual saving will fluctuate, but should always be greater than the guaranteed amount.

1-18 You Need M&V Because... Savings are guaranteed, but actual savings fluctuate every year. Ø Without M&V, how do you know the guarantee is being met? Ø M&V verifies guarantee is met. Ø Is contractually required (IDIQ). “What you don’t measure, you can’t manage.” (Jack Welch, former GE CEO) Purpose of M&V

1-19 When Do You Need M&V? Before DO Award: F Predicts energy savings potential for a project. F Cost savings are used to justify the project. F Both parties must understand and agree on the M&V strategy. After DO Award: F Ensures that the government only pays for realized savings. Purpose of M&V

1-20 M&V During the Four Phases PhaseAgency ActivityESCO Activity 1. PlanningConsider 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 1Phase 2Phase 3Phase 4

1-21 Phase 1: Planning What are project motivators? F Infrastructure upgrade. F Want to reduce energy and O&M costs. F Want to comply with EO What does M&V need to accomplish? F Monitor equipment performance. F Find additional savings, improve O&M. F Enforce guarantees. F Satisfy law. Phase 1Phase 2Phase 3Phase 4

1-22 Agency Responsibilities Define project goals in terms of: F Energy cost savings F Energy-related cost savings F Equipment upgrades Define M&V Requirements: F Total energy & cost savings F Equipment performance F Long-term verification These will be part of the DO-RFP! Phase 1Phase 2Phase 3Phase 4

1-23 Phase 2: Project Development Contractor Responsibilities Ø Complete Responsibility Matrix. Ø Develop M&V Overview. Ø Explain and justify approach: F What will be measured? F What will not? F How will agency be protected? F How will contractor prove performance? Phase 1Phase 2Phase 3Phase 4

1-24 Agency Responsibilities Ø Discuss planned physical or operational site changes with contractor. Ø Provide energy use and rates to contractor. Ø Review Responsibility Matrix, M&V Overview & assumptions. Ø Provide critical comments and feedback. Ø Engage PF or 3 rd party support. Phase 1Phase 2Phase 3Phase 4

1-25 Phase 3: Negotiation and Award Contractor Responsibilities Ø Modify Responsibility Matrix and Initial M&V Plan to satisfy agency needs and desires. Ø Complete Site Specific M&V Plan. Ø Perform Detailed Energy Survey and document baseline information. M&V Plan drives DES activities. Phase 1Phase 2Phase 3Phase 4

1-26 Agency Responsibilities Ø Review M&V Plan and estimated savings. Ø Provide critical comments and feedback. Ø Approve Final M&V Plan. Ø Participate in and witness DES activities. Ø Engage PF or 3 rd party support. Phase 1Phase 2Phase 3Phase 4

1-27 Phase 4: Implementation Contractor Responsibilities Ø Commission measures. Ø Submit Commissioning and Post-Installation M&V Reports. Ø Submit Annual M&V Reports. Phase 1Phase 2Phase 3Phase 4

1-28 Agency Responsibilities Ø Witness M&V activities and observe commissioning. Be involved! Ø Approve Commissioning and Post- Installation reports. Ø Conduct specified O&M activities. Ø Review Annual Reports. Ø Engage PF support. Phase 1Phase 2Phase 3Phase 4

1-29 Review and Discussion Ø Benefits from SuperESPC are only known after project implementation. Ø Savings guarantees are only as good as the M&V supporting them. Ø The Agency sets the M&V goals; the ESCO implements the plan.

1-30 Review Questions Ø Why is M&V needed? Ø Who is responsible for M&V?