M&V Part 4: M&V Plan Review

4-2 M&V Plan Review Ø FEMP Documents F M&V Overview Checklist (Phase 2) F Final M&V Plan Checklist (Phase 3) Ø Risk & Responsibility Allocation Ø Option A and Stipulation F Detailed Guidelines Ø Options B / C / D

4-3 Phase 2: Project Development Contractor Responsibilities Ø Develop M&V approach (M&V Overview). Ø Explain and justify approach. Agency Responsibilities Ø Review M&V approach and provide feedback. Phase 1Phase 2Phase 3Phase 4

4-4 M&V Overview Checklist The following items should be described: Ø Project site and measures. Ø What savings will be claimed. Ø M&V approach for each measure. Ø Baseline equipment and conditions. Ø Proposed equipment and conditions. Ø Annual measurement and verification activities. Phase 1Phase 2Phase 3Phase 4 

4-5 Phase 3: Negotiation and Award Contractor Responsibilities Ø Perform Detailed Energy Survey (DES) and document baseline information. Ø Modify M&V plan to satisfy agency needs and desires. Agency Responsibilities Ø Review and Approve M&V Plan. Ø Witness and observe DES. Phase 1Phase 2Phase 3Phase 4

4-6 Final M&V Plan Checklist The following items should be described: Ø Project site and measures. Ø What savings will be claimed. Ø M&V approach for each measure. Ø Details of how calculations will be made, including equations. Ø Baseline equipment and conditions (from DES). Phase 1Phase 2Phase 3Phase 4 

4-7 Final M&V Plan Checklist continued... Ø Post-Installation equipment and conditions. Ø What metering equipment will be used. Ø What annual verification and measurement activities will be performed. Ø Initial and annual M&V costs. Phase 1Phase 2Phase 3Phase 4 

4-8 Risk & Responsibility Allocation How to allocate Risks & Responsibilities? Typically: F Performance: Contractor. F Usage: Agency. F Financial: Shared. M&V approach should focus on: F Verifying performance. F Characterizing usage. F Minimizing uncertainty cost-effectively.

4-9 Cost Effectiveness Ø Need to balance M&V rigor with project risk. F Measure things that need measuring. F Consider required precision. Ø Law of Diminishing Returns applies. Ø 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.

4-10 M&V Costs M&V Rigor M&V Cost Value of information $

4-11 Western Region SuperESPC

4-12 Selection Matrix Simple M&V More Rigorous Uncertainty:HighLow Component LevelAB Whole FacilityCD Warning: This is a gross generalization!

4-13 Simple: Option A Ø Option A is intended to be simple and low-cost. Ø Verifies savings of individual components. Ø Equipment performance is measured. Ø Usage may be measured or stipulated. Ø In some cases, FEMP allows performance stipulation. Option AOption BOption COption D

4-14 Option A and Stipulation Not ‘stipulated savings’! Stipulations shift risk to agency. F OK for usage. F Not OK for performance (some exceptions). Option AOption BOption COption D

4-15 Option A Guidelines Ø Option A most common in SuperESPC. Ø Potential for misapplication. Ø Discusses how to use Option A. Ø Discusses how to apply stipulations. See Detailed Guidelines For FEMP M&V Option A (2002) Option AOption BOption COption D

4-16 Example: LE-A-01 FEMP method for Lighting Efficiency, Option A, method #1 Ø Allows using ‘standard fixture tables’ to determine lighting power instead of measurements (stipulated performance). Ø Usage (operating hours) stipulated. Ø Good for small projects (<$10,000/year) Option AOption BOption COption D

4-17 Stipulation Risk LE-A-01 allows stipulation of both usage and performance parameters. Ø If the stipulated values are wrong, the savings estimates will be wrong. Ø The agency assumes all risk, contrary to the intent of a performance contract. Option AOption BOption COption D

4-18 Stipulation Problem Option AOption BOption COption D

4-19 Stipulation Lessons Ø Guaranteed savings $50,000; $24,000 observed in utility bill. Ø Poorly-defined baseline prevents adequate after-the-fact analysis. Ø Option C methods are not sufficiently accurate to support or reject savings claims. Option AOption BOption COption D

4-20 Example: LE-A-02 FEMP method for Lighting Efficiency, Option A, method #2 Ø Common fixture types measured using a statistically-valid number of measurements (3-6). Ø Operating hours usually stipulated, but can be measured. Ø Good for large projects (>$100,000/yr) Option AOption BOption COption D

4-21 Option A Risk Allocation Ø The contractor should measure performance since they control this. Ø The operating hours may be stipulated. Measuring the operating hours reduces uncertainty and risks to both parties. Ø The agency bears the risk of unrealized savings due to changing schedule or incorrect operating hours. Option AOption BOption COption D

4-22 More Rigorous: Option B Ø Verifies at component level. Ø Requires periodic performance measurements- annual to hourly. Ø Usage can be stipulated or measured. Option AOption BOption COption D

4-23 Option B Risk Allocation Ø Energy use and claimed savings will vary from year to year. Ø The contractor assumes all project risk (performance & usage) since savings are based on measured energy use. Ø The contractor would be wise to include in the M&V plan: F limits on their exposure F methods of adjusting the baseline or usage Option AOption BOption COption D

4-24 Simple: Option C Ø Regression method using existing utility meters. Ø Captures interactions between measures to find total savings. Ø Requires collecting and tracking information that affects energy use: F weather F occupancy F production Option AOption BOption COption D

4-25 Option C Risk Allocation Ø The contractor may not find the savings if less than 15% of the baseline use. Ø The contractor bears all project risk. Ø The agency bears the responsibility of tracking changes that affect energy use. Ø It may take 1 year to determine savings. Ø Weather and other factors will influence savings estimates. Option AOption BOption COption D

4-26 More Rigorous: Option D Computer simulation method of evaluating total building performance. Ø Requires calibration to be useful. Ø Requires measurements to calibrate model. Ø Weather data usually ‘typical’, not real. Option AOption BOption COption D

4-27 Option D Risk Allocation Ø Contractor bears performance risk. Ø Agency bears usage risk (stipulated hours and weather). Ø M&V costs may be high. Ø Short-term measurements and long- term verification still needs to be performed. Option AOption BOption COption D

4-28 Results OptionUsage Risk Performance Risk UncertaintyCost Aagencycontractorhighlow Bcontractor lowhigh Ccontractor mediumlow Dagencycontractorvariablehigh Option AOption BOption COption D Warning: These are gross generalizations! It is possible to shift risks and changes costs.

4-29 Review & Discussion Ø Performance must be verified if guarantee is to have value. Ø Agency often assumes usage risk. Ø Uncertainty is inherent in M&V. Ø M&V costs need to be balanced against project risks.

4-30 Review Questions Ø How do we measure savings? Ø When might an agency accept performance risk?