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Justifying Energy Upgrades

Part 1: Six Steps Help Justify Building Energy Upgrades

Part 2: To Win Funding For Energy Efficiency Projects, Think Like A CFO

Part 3: M&V Done Right: Tips For Measuring And Reporting Energy Efficiency Results

Part 4: Facility Energy Management Produces Real Financial Benefits

M&V Done Right: Tips For Measuring And Reporting Energy Efficiency Results

By Richard G. Lubinski - December 2013 - Energy Efficiency

energy efficiency, m&v, measurement and verification, performance contracts


6. Measure the project results. Senior management expects conservative assumptions and expects that the project's performance will be measurable. Projections of energy savings in kWh, therms, and kilogallons of water/sewer should be conservative based on an accurate model of the impact of the energy efficiency project. Senior executives expect facility managers to measure and report energy efficiency project results using utility bills, utility meter data, or submeter data. This process is called measurement and verification, or M&V. The idea is to report the actual energy savings compared to the projected savings.

To be successful for the long term and get future energy projects funded, facility managers need to meet or exceed projected energy savings levels. Therefore energy savings estimates should be conservative. Those conservative savings projections should be reviewed and supported by an independent third party like a certified energy manager (CEM). The Association of Energy Engineers can help you locate a certified energy professional in your area. Visit www.aeecenter.org/custom/cpdirectory/index.cfm. Company investments and M&V should not depend upon an interested party such as the vendor making the proposal. If the energy consumption numbers are valid, then the dollar value of the energy savings will take care of itself. Any increases or decreases in energy unit values are separately reported, so the consumption and dollar value are both reported.

Energy savings are real and measurable. This is the heart of the M&V of any energy savings project. Facility managers should avoid using vendor-generated cash-flow projections that add estimated operational savings to savings derived from a reduction in energy use. Again, estimated staff savings are often exaggerated in cash-flow projections by parties in interest.

Falling Down on Follow Up

Only 29 percent of FMs said that they always monitor energy use following upgrades and report the results to top management.
(Source: BOM Survey)

Great care needs to be exercised about including operational savings and avoided capital cost as part of the projected cash flow. Some performance contracting proposals classify operational and capital cost avoidance as stipulated savings — that is, savings that both parties agree in advance are real and therefore not part of the project's actual utility cost savings. Facility managers need expert energy and legal advice before entering into any long-term Energy Savings Performance Contract (ESPC) or other guaranteed energy savings agreement. Even a contract reference to the International Performance Measurement & Verification Protocol (IPMVP) does not automatically protect a company in this complicated long-term contract relationship.

Regular M&V reporting of energy savings projects results is a part of the project and a part of its expense. Internally, management will be interested in seeing whether the facility manager's projection of cash flow is being achieved or not. If the vendor's projection of cash flow is used, it becomes the projection of the facility manager who promoted the project.

It is during M&V reporting that the facility manager begins to appreciate the value of conservative energy-saving assumptions. Over time, some factors change, such as occupancy, hours of operation, production level, heating and cooling degree days, buildings or floors opening and closing, etc. Ideally the M&V data will reflect raw data with no adjustment factors. Another version of the same M&V report can include adjustments based on the building's traditional energy use pattern and its energy balance. For example, a 10 percent increase in cooling degree days does not increase the total electrical consumption by 10 percent because it has no impact on lighting, plug loads, and in general energy use by most motors. Again, the company's interests are best served if the M&V report is prepared or at least audited by an independent third party certified energy manager (CEM).




Justifying Energy Upgrades

Part 1: Six Steps Help Justify Building Energy Upgrades

Part 2: To Win Funding For Energy Efficiency Projects, Think Like A CFO

Part 3: M&V Done Right: Tips For Measuring And Reporting Energy Efficiency Results

Part 4: Facility Energy Management Produces Real Financial Benefits


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