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Answer by Alejandro Morell (Creara)
ESCO and customer may have different interests in savings calculation so terms must be established in advance of signing any contract. This means that parties should agree on the proper methodology to be used, as defined by a Measurement and Verification (M&V) plan.
The M&V plan should answer two main questions:
- How are savings calculated?
Energy savings can be calculated considering energy consumption before (baseline) and after the implementation of energy saving measures:
(Energy savings) =
(Baseline energy consumption) – (Post-implementation energy consumption) +/- (Adjustments)
The baseline is the energy consumption in a reference period before developing the EPC project.
The Adjustments must reflect changing conditions (e.g. weather conditions, occupancy) between the two energy consumption measurements.
It is important to note that, regarding the calculation, it is necessary to obtain some data that may require the installation and calibration of M&V equipment.
- Who calculate the savings?
In order to facilitate the agreement between the client and ESCO in the sharing of savings, a third party should design the M&V plan and calculate the savings. The entity responsible for establishing the savings calculation also needs to deliver a regular M&V report with the periodic energy savings results.
In some EPC projects, the ESCO designs the M&V plan and calculates the savings. A third party then verifies the calculation and the accuracy of the report.
Generally, an M&V plan should include:
- A clear delineation of the M&V standard selected
- Technical competences of M&V planner
- Deadlines: for M&V plan implementation, M&V equipment installation, M&V reports, et cetera
- Energy saving measures: a description of measures implemented that generates the savings
- Baseline definition: reference period, and parameters for adjustments, et cetera
- Methodology for savings calculation: equations defined, hypothesis considered, data sources for energy consumption (meters, invoices, et cetera) among other considerations
- Measurement specifications: sampling needed parameters to be monitored and the measurement interval
An M&V standard provides the methodology and the minimum content to conduct the savings calculation. The use of a recognized standard increases the certainty and reliability of the savings calculated.
There are different international standards that can be applied to define an M&V plan:
- EVO: International Performance Measurement and Verification Protocol (IPMVP)
- ASHRAE: Guideline 14-2002: Measurement of Energy and Demand Savings
- FEMP: Federal Energy Management Program
- GHG: Protocol for project accounting
IPMVP is the most common standard for EPC projects; it is widely used in US and many countries worldwide (UK, India, China, Spain, et cetera).
IPMVP provides four options for calculating savings (A, B, C and D). The choice of the option to be used in a specific project is a task for the M&V plan designer.