M&V Decision Tool Sub-Committee Report

1. M&V Decision Tool Sub-Committee Report • Venkat Kumar • Satish Kumar • FEMP-ESCO Meeting • 6th June, 2002 • Palm Springs, CA

2. Overview • Overview of the Tool • Motivation & Objectives • Conceptual Framework • Illustrative Example • Q&A and Discussions

3. M&V Decision Tool Subcommittee • Aamar Athar, Sempra Energy Solution • Venkat Kumar, Johnson Controls • Terry Sharp, Oak Ridge National Laboratory • Gopal Shiddapur, (NORESCO) • Lia Webster, Nexant, Inc. • Satish Kumar, Lawrence Berkeley National Laboratory

4. Less M&V More M&V X kWh -X kWh 2X kWh -2X kWh 10,000 kWh Energy Savings Uncertainty Range Motivation

5. Objectives • Help provide clarity in: • Baseline Development methods • Energy Conservation Measure modeling methods • M&V methods. • Help select the appropriate M&V Option. • Introduce key M&V topics at an early stage of a project. • Address unique requirements of different projects.

6. M&V Considerations Matrix

7. How to Build the Matrix • Identify key topics at the project level that would affect M&V decisions later. • Prepare an initial list of Objectives & Constraints that will affect the development of the M&V plan for the project • Identify all Objectives & Constraints that are applicable. • A "Yes" response indicates the marked M&V Options are valid. • Attach priority (High Medium or Low) to all the Objectives & Constraints identified earlier. • Add or drop objectives and constraints based on applicability (those marked "No" are dropped) and repeat the above process. • High priority Objectives and Constraints that apply (i.e. :"Yes") have the strongest influence on M&V selection. • Repeat the above exercise (steps 2 through 7) for the proposed ECMs.

8. M&V Plan Development Flowchart

9. Flow Chart Steps • Evaluate project level constraints to determine if a single M&V Option can be used and is desirable for the entire project or if a more custom M&V approach is required for the proposed set of ECMs. Select M&V Option for evaluation. • Evaluate the objectives and constraints of each ECM vis-à-vis the selected M&V Option/s. • Evaluate the Savings Risk associated with the selected M&V Option/s based on risk elements developed from project/ECM reqs. and R/R Matrix. • Estimate the cost of using this M&V Option vis-à-vis savings risks. If a custom approach is being followed for individual ECMs then repeat steps 2 and 3 for each ECM. • If all the M&V requirements are met and the savings risk justify the M&V expenses, proceed with the development of the M&V plan for the project.

10. Sample ExerciseUsing the flowchart to develop an M&V Plan Sample Project Situation Development of Project Specific M&V Considerations Matrix • Identify Project M&V Objectives and Project M&V Constraints Step 1: Evaluate Project Level M&V Objectives and Constraints • Q. - Is there one Option viable for all ECMs? If Yes, select and evaluate option further under Step 2. If not, select and evaluate Options for each ECM. Step 2: Evaluate the Objectives and Constraints separately for each ECM • Q. - Is selected option still viable for ECM? If Yes, proceed to Step 3. If not, go back to Step 1. Step 3: Evaluate the Savings Risk associated with the M&V Option • Q. - Is the level of risk associated with ECM consistent with the M&V Option? If Yes, proceed to Step 4. If not, go back to Step 1 and repeat exercise. Step 4: Estimate M&V Expenses for the overall project • Q. - Do the M&V requirements and the savings risk justify the M&V expenses? If Yes, proceed to Step 5. If not, go back to Step 1 and repeat exercise. Step 5: Write the Project M&V Plan

11. Sample Project Situation - Scenario I • A Federal Government Customer has operations in an office complex of three buildings encompassing 300,000 square feet. Building 1 is metered and Buildings 2 and 3 are not. The utilities are common for all three buildings and are Electricity and Natural Gas. • Customer invites ABC ESCO to develop an ESPC project. During the project kick-off meeting, the ESCO provides a list of "Required Information" to the customer with a request for utility bills, equipment lists, and other facility-related information. Following receipt of the "Required Information" from the customer, the ESCO schedules a discussion with the customer. The discussion focuses on the customer's objectives. The customer says that she is interested in reducing her utility bills, streamlining her lighting inventory, replacing her aging chiller and tower and taking advantage of any infrastructure improvements she might be able to get using the energy cost savings. The ESCO leaves the meeting with an understanding of the broad project objectives and proceeds to conduct the initial survey in the three buildings.

12. Development of Project Specific M&V Considerations Matrix • ECM List - ‘Replacement of Chillers in Central Plant’ and ‘Lighting Retrofit in Bldgs 1,2 & 3. • The ESCO lists the following project level objectives and constraints based on understanding the customer’s needs. • Project M&V Objectives - • 1) Desire to see energy cost reductions on utility bill • 2) Desire to Verify Energy Performance Annually • 3) Track Post-Retrofit consumption and adjust Baseline for Changes • 4) Maximize Infrastructure by using least cost M&V Options, where feasible • Project M&V Constraints - • 1) Historical Utility Data is not available for individual buildings 1, 2 and 3 but available in a combined utility bill • 2) Lack of dedicated building utility meters • 3) High degree of interaction between ECMs • 4) ECMs affect significant portion of Overall Utility Baseline

13. Step 1: Evaluate Project Level M&V Objectives and Constraints • The only Option viable for all ECMs appears to be Option C, since Project Objectives 1 & 3 need to be satisfied. Objective 2 can be satisfied, however Objective 4 will not be necessarily satisfied. All constraints are overcome.

14. Step 2: Evaluate Objectives and Constraints separately for each ECM Chillers System ECM: ECM Objectives - 1) Desire to see energy cost reductions on utility bill -->> need to operate chiller(s) efficiently on operating efficiency curve 2) Desire to Verify Energy Performance Annually -->> verify maintenance is getting done; verify operating sequences; check efficiencies using data collected and efficiency curve 3) Track Post-Retrofit consumption and adjust Baseline for Changes -->> compare baseline facility cooling load or ton-hrs with actual ton hrs 4) Maximize Infrastructure by using least cost M&V Options, where feasible -->> Consider Option C for 'complex' the first two years and Option A on the chiller system, thereafter for the duration of the term.

15. Step 2: Evaluate Objectives and Constraints separately for each ECM Lighting Upgrade ECM: ECM Objectives - 1) Desire to see energy cost reductions on utility bill -->> need to monitor lighting usage hours and measure sampled kW during post-installation M&V 2) Desire to Verify Energy Performance Annually -->> verify lighting system is being maintained and review replacement logs 3) Track Post-Retrofit consumption and adjust Baseline for Changes -->> compare baseline facility operating hours with actual operating hours 4) Maximize Infrastructure by using least cost M&V Options, where feasible -->> Consider Option C for the 'complex' for the first two years and thereafter, Option A verification includes review replacement log for lamps and ballasts to ensure replacements are of comparable efficiency

16. Step 3 - Evaluate savings risk elements associated with M&V Options 1) Operating Hours - Contractor bears risk for efficient operation and efficiency of operating equipment. Government bears risk for changes to operating hours. Contractor reconciles changes through documented baseline adjustments. 2) Environmental/Process Loads - Government bears risk for weather related cooling and heating load fluctuations and mission related process load fluctuations. Contractor reconciles changes through documented baseline adjustments. 3) Building Occupancy and Major Changes to Facilities - Government bears risk for changes in occupancy and major changes to the facilities, e.g. addition of people, equipment etc. contributing to additional heating and cooling loads. This will be apparent through the chiller data gathered reflecting unexpected changes to the cooling load and through gas meter data reflecting unexpected changes to consumption.

17. Step 3 cont’d- Evaluate savings risk elements associated with M&V Options 4) Savings Risk associated with Performance of O&M, Repair & Replace: If contractor has responsibility for performance of O&M, R&R then the only considerations are the performance period costs and their impact on term. If government bears responsibility for performance of O&M, R&R, then the savings risk becomes an issue of contractor defining the govt's obligations and ensuring that the govt is fulfilling its obligations 5) Degradation of Savings - Two years of Option C M&V including annual verification may be adequate to identify uncertainties in savings. Contractor bears the risk for the first two years. If the guaranteed savings are realized, and a review of the baseline adjustments indicates nothing unexpected, the issue of degradation of savings is understood to be a non-factor. If there are two years of savings shortfalls, then the government can decide to modify the M&V plan and ask for Option C to be continued for the remainder of the term or some additional period.

18. Step 4 - Do M&V Objectives and Savings risk justify M&V Expenses? • M&V Expenses are estimated as follows: • $10K for post-installation M&V • $25K for Perf Period Years 1 & 2 to do Option C M&V • $10K for Perf Period Years 3 thru' end of term to do Option A M&V • If the answer is Yes, write the M&V Plan • If the answer is No, revisit the project level objectives & constraints (Step 1). Assess changes needed. Revisit the ECM level objectives and savings (Step 2) and assess changes needed. Based on these changes, conclude on new M&V Options redoing Steps 1, 2, 3 and 4.

19. Sample Project Situation - Other Scenarios • Scenario II: If the Project Objective (1) to see energy reductions on utility bill is deemed unnecessary for the level of risk and associated M&V costs, then Option C can be modified to Option B for both ECMs. Steps 2, 3 and 4 repeated for the change in Project Objectives. • Scenario III: There is no pressing desire for the customer to see energy reductions on the energy bills. The scope of the project is such that the ECMs affect a small portion of the overall utility baseline. Now Option C is not as effective in verifying that savings are being delivered and ensuring performance of the equipment, (verified continuously or periodically) is more important. The answer to question in Step 1 is “No, there isn’t one M&V Option which is viable for all ECMs”. An assessment on an ECM by ECM basis is required. Steps 2, 3 and 4 are repeated for the changes to Project Objectives and Constraints and the ECM Objectives and Constraints.